Many years ago, Las Vegas hotels would entice customers with inexpensive rooms, meals and entertainment so they would gamble. It may have worked initially but if you’ve been to Las Vegas recently, the bargains are gone. Hotels expect each division to be a profit center on its own. As a consumer, I might not like the changes but as an investor, I’d have to be pleased with increased profitability.
Years ago, real estate investors used to accept negative cash flow buoyed by tax incentives in hopes of making a big payday due to appreciation when they sold it. Today’s investors are focusing on tangible, current results like cash flow and equity build-up.
Cash flow is the amount of money you have left over after collecting the rent and paying the expenses. Since rents have gone up considerably due to supply and demand in the last few years and mortgage rates are at near record lows, income is up and expenses are down, making the cash flows attractive.
If the cash flow is sufficient, you could have a good investment even if the value of the property never increased. Cash on Cash doesn’t consider appreciation and measures the cash flow before tax advantages by the initial investment. A rental with $3,170 CFBT divided by an initial investment of $29,000 would generate a 10.93% Cash on Cash rate of return.
Low down payments on investor properties are also a thing of the past. Non-owner occupied mortgage money is available but the investor should expect to put down 25-30%. An advantage of having a smaller mortgage is a lower payment.
Most mortgages are amortized loans with both principal and interest due with each payment. The forced savings of the principal contribution builds equity in the property and can be considered a part of the rate of return.
A $100,000 mortgage at 4.5% for 30 years would have $1,613.29 applied to principal in the first year. Divide that by the same $29,000 initial investment and the amortization would generate another 6%.
Without factoring in appreciation or tax advantages, this rental example generates much more than most alternative investments. There certainly are many different aspects that affect the risk and return on rental investments. If you haven’t scrutinized single-family rental opportunities in a while, you should look again.
Debbie Woolard Group
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Whether a person is looking to buy or sell a starter home or a multi-million dollar estate, Debbie Woolard produces great results for her clients. She gives clients what they expect and deserve, an experienced realtor skilled in marketing and negotiations.
With Debbie Woolard, you will receive personal service as well as exceptional professionalism. She is well qualified for her work with her strong background of sales and marketing. Having been born here and continuously living in the area, she is familiar with the entire Hampton Roads region.
She has earned the professional designations of Certified Negotiation Expert, Certified Residential Specialist, and e-Pro. In addition she is also a Short Sale and Foreclosure Resource with extensive training in short sales and foreclosures. This uniquely positions her to help those in danger of losing their home to foreclosure. It has also proven to be beneficial to the buyers that are seeking to purchase a short sale or foreclosure.
She is well qualified to help professionals, business owners, military personnel and other clients with their real estate needs. She has been selected to work with both the Military Team and Relocation Team. She is consistently producing outstanding results in real estate.
Her first year in real estate she was awarded Listing Rookie of the Year as well as Sales Rookie of the Year. Her sales and loyal following of satisfied clients have grown each year she has been in business. She is in the top 1% of the agents in the area based on sales volume. Her practice continues to flourish thanks to clients recommending her to friends, family members and business associates.
Her clients state that her actions and attitude are best described with the word “integrity”.
Realtors with the Debbie Woolard Group service Virginia Beach, Chesapeake, Norfolk, Suffolk, Hampton, Newport News & Portsmouth with specialist in seller representation, buyer representation, military relocation, first time home buyers, short sales and real estate investment.