- Mentor Coaching
Appreciation of rental properties over a period of years has made many people very wealthy. Average property appreciation is 3 to 10 percent, depending on what area of the country you reside. See the example below, which illustrates potential monetary growth over a 3 year period acquiring 5 rental houses:
Assume that with an average purchase price of $180K, you bought at a small discount.
The properties are worth 200K, giving you $20K instant equity at purchase.
Assume 7% appreciation 1st year, your property is now worth 214K ( 7% x 200,000).
7% Appreciation 2nd year, your property is now worth 228,980K (7% x 214,000).
7% Appreciation 3rd year, your property is now worth 245,008K (7% x 228,980).
$245,008 -$180,000 you owe = $65,000 of equity you could cash in!
What if you did that with 5 properties? $325,000
What if you did the same with 10 properties? $650,000
You can see that property appreciation is a very powerful force in real estate. Remember, you have done nothing to increase value and when the market goes up, it benefits YOU. People say that this is the lazy man’s approach to acquiring wealth. I personally think most would agree that obtaining financial freedom is all that truly matters. And there are many other advantages to consider over those 3 example years; you have cash flow, tax deductions and mortgage pay-downs.
What is the definition of “cash flow income”? It is the difference in what the tenant pays you for rent and what you pay your mortgage company, less expenses. Many months you will not have any expenses or repairs, which equates to positive cash flow months.
Tax Deduction – you get a tax deduction off your income for owning rental properties. You can deduct the mortgage interest, repairs, property taxes also rental buildings are depreciable over a 27.5 year. Consult your tax planner for specific information pertaining to you.
Mortgage Pay down – Every month you make a mortgage payment to the bank. A portion of that money is applied to paying down your principal mortgage balance .
Leverage – you bought this property using a no money down technique you have learned from my home study course. Think about it you are able to control a $200,000 asset for little or no money down. You are able to make immediate cash flow, accumulate equity build up, mortgage pay-down and tax savings.
Wow!! Rentals done right can make you wealthy