There are four ways to make money in real estate, and I list them out to you in today’s clip from American Dream TV’s “Real Estate Report.”
Owning real estate as an investment vehicle is a topic that I’m really passionate about. I’ve found that there are four main ways to make money by owning real estate:
1. Monthly cash flow
2. Mortgage paydown
4. Tax benefits
First, let’s talk about cash flow. If your monthly payment for the property adds up to, say, $1,500, and you’re renting the place out for $1,800, that $300 difference is what we call positive cash flow; that’s what you’re putting in your pocket every single month.
The beauty of owning a rental property is that you’re not even the one paying your mortgage—your tenants are.
Others would call that ‘passive income’ because you don’t have to do much work in order to make money from it. However, that’s somewhat of a misnomer, as you do actually have to collect rent, as well as attend to any management issues you’re responsible for.
In the investment industry, you’ll often hear the phrase ‘long-term investment.’ Really, a long-term investment can be whatever timeframe you want; some people buy properties with the intent of owning them for 20 or 30 years until they pay off the mortgage, after which they’ll get a big bump in cash flow.
This brings me to the second way to make money in real estate: mortgage paydowns.
As you pay your mortgage every single month, you’re also paying some interest, and some money goes toward your principal, meaning your loan amount goes down. The beauty of owning a rental property is that you’re not the one paying your mortgage—your tenants are. Essentially, those who are paying to live on your property are paying to make your principal go down.
And because you want to make sure that your rental properties aren’t sitting vacant, it’s a good idea to discuss what you should be looking for in an investment property. As it turns out, your real estate agent can be a really good resource for you when you’re looking at properties. It’s natural to be worried about your return when you’re considering whether to buy a particular rental, but agents have a lot of data at their disposal that will tell you all you need to know about the market the home is in, rental rates, as well as details about the property itself.
I’m so happy to have been a guest on the American Dream TV Network’s “Real Estate Report” to share some knowledge on this topic. If you have any further questions, please feel free to reach out to the Gregory Group. We’d love to help you.