Rental property has always been a popular investment because of its appreciation potential and leverage. But in many parts of the country, it’s a lousy cash flow investment.
Take a look at this example. Say you own a rental home with a $250,000 value, free of debt. You receive rent of $1200 per month. After expenses (including those periodic expenses of replacing the roof, the air conditioner, painting), you net $800 per month. If you sold the property, you would receive $188,000 after taxes. Now let’s put these numbers together: Your net $800 per month ($9600 per year) on an equity of $188,000 (the amount you would have if you sold the property). That’s an annual cash return of 5.1%. You could earn that much by putting your money in the bank, never getting a call to fix the plumbing, or chasing a late rent check or needing to evict anyone!!! Does it really make sense to own real estate?
(By the way—I often see people incorrectly prepare this analysis based on the amount they originally paid for the property. To correctly see what you are earning, you must use the current equity because that’s the amount of money you could invest elsewhere).
If you want to increase your cash flow, real estate is not the right investment (the value of real estate is in its appreciation potential). An income oriented investor, and one that wants to get rid of the hassles of real estate ownership, would be better off with good quality fixed income investments which are paying up to 8%. For a sample of fixed income investments yielding in the 8% area, call for a current listing.
6 common errors and opportunities that many annuity owners make and how to avoid them.
All of the options available for long term care protection and how to get them, including information about single deposit plans, return of premium and recommended features you should select.
This powerful technique shows you how to avoid income taxes on 92% of your IRA withdrawals and estate taxes. For many families, this can be a tremendous savings. Please order this booklet only if your IRA or pension plan is over $300,000.
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Note that investments compared to CDs and T-Bills are not insured while CDs are FDIC insured and the federal government guarantees T-bills. Nothing herein is intended to be legal or tax advice. Readers are encouraged to consult their accountant or attorney. Mention of a particular investment should not be considered a recommendation. Recommendations can only be made by determining your suitability. Past performance is not a guarantee of future results. Any rates quoted herein are subject to change. The S&P 500 and Dow Jones Industrial Averages are weighted, unmanaged indexes. Mutual fund performance figures are from Morningstar Principia as of 4/30/98. Stock market measurements are taken from Ibbotson and Associates 1997 Yearbook. Performance measurements of the Dow 5, 10, Fair Value portfolio and mutual funds are as of December 31, 1997 (unless otherwise stated) and include reinvested dividends and are before deductions for management fees or transaction costs .