What are the three ways investors make money out of a rental property?
1. The property appreciates in value. If you buy a property right now for $250,000, for example, and the average appreciation rate for homes is 3%, it’ll be worth $390,000 in 15 years.
2. Increasing the rent. Rent is directly tied to inflation, so it’s almost always increasing. This means if you increase it at the same rate as appreciation increases—3%—and you start at $1,500 per month, in 15 years, you’ll be collecting $2,300 per month.
3. The rent pays the mortgage. If you start using your collected rent to pay the mortgage on the property, in 15 years you’ll have paid off a good portion of that mortgage.
Based on our calculations, investors get a 40% to 60% return on their investment per year from rental properties, which makes it one of the best investments you can ever make.
If you’re interested in buying an investment property or you have any other real estate questions, don’t hesitate to reach out to me. I’d love to help you.