This is going to be the year

This is going to be the year

Every year, it seems like the same things are on the list but this could be the year you really do invest in a rental home.Resolutions.png

Rents are climbing, values are solid and mortgage rates are still low for non-owner occupied properties. A $150,000 home with 20% down payments can easily have a $300 to $500 monthly cash flow after paying all of the expenses.

There are lots of strategies that can be successful but a tried and true formula is to invest in below average price range homes in predominantly owner-occupied neighborhoods. These properties will appeal to the broadest range of tenants and buyers when you’re ready to sell.

Single family homes offer an opportunity to borrow high loan-to-value mortgages at fixed rates for long terms on appreciating assets with tax advantages and reasonable control.

This can be the year to make some real progress on your resolutions. The first step may be to invest some time learning about rental properties by attending a FREE webinar on January 4th at 7:00 PM Central time zone by national real estate speaker Pat Zaby. Click here to register. If you can’t attend live, by registering and you’ll be sent the link to watch at your convenience.

Til next time… May all your deals be easy ones!
Follow me on Twitter @yourmendorealty

Clint Hanks                                   707-391-6000

How To Look At a Rental

Look at a Rental This Way

Appreciation, tax advantages, cash flow, leverage and equity build up each contribute to the rate of return on rental real estate. If that sounds confusing and it’s keeping you from investing in rentals, try looking at it a different way.Paperwork-250.jpg

Consider this, look at only cash flow and equity build-up to determine whether to buy the property. They are easy to calculate and their outcomes are both reliable and predictable.

Most homeowners, based on their familiarity with their own home, should feel more comfortable with a rental than alternative investments. A conservative strategy is to purchase slightly below average price range homes in a predominantly owner-occupied neighborhood. Collect the rent, pay the bills and make necessary repairs.

A cash on cash rate of return is determined by dividing the cash flow before taxes by the cash invested in the property. It considers all of the “real world” income and expenses related to the property.

cash flow and equity buildup.png

The equity build-up occurs from the normal process of amortization with an increasingly larger portion of each payment applied to reduce the principal loan amount.

In this hypothetical example, the combination of the Cash on Cash and the Equity Build-up is almost 12% which is considerably higher than certificates of deposit and bonds and nowhere near as volatile as stocks or mutual funds.

In most of today’s markets, rents are expected to continue to rise and due to a low inventory of homes for sale coupled with growing demand, prices will continue to rise. Even though there is value in appreciation, tax advantages and leverage, they could be considered an unexpected bonus to this basic rate of return.

If you would like a detailed list of listings in Ukiah, Willits, Cloverdale, Lakeport or anywhere else in Mendocino County, Sonoma County or Lake County, just ask. There’s no cost or obligation, just the information you want when you want it. Click Here to Sign Up!

Til next time… May all your deals be easy ones!
Follow me on Twitter @yourmendorealty

Clint Hanks                                   707-391-6000