Making money off of an investment property can be done with a few simple ways and I break it down in this latest Real Estate Minute.
1. Positive Cash Flow
You want the rent to pay for more than the cost of the mortgage. A positive cash flow is when rental income exceeds or covers the rental expenses associated with a particular rental property.
As long as you’ve invested wisely, and have chosen a property with positive cash flow, you can successfully make a profit. It is a great way to maintain your investment properties as they pay for themselves. This can also provide you with the ability to buy even more rental properties if you choose to and can take you a long way.
2. Principle Recapture
With the tenants covering the cost of the home, you will recapture your principal investment.
Principle Recapture is the equity that you gain as you pay down your loan. While the property is rented, your tenants will the ones paying down the debt while you watch your net worth grow.
3. Sweat Equity
Investing in the home through upgrades and renovations is a great way to increase the value of the home.
Common forms of sweat equity in a home include new paint or other do-it-yourself (DIY) projects. Simple low-cost but high-effort home improvement projects can often create a great deal of sweat equity that can actually be quantified.
Some great examples of improving your home’s value through sweat equity is to lighten and brighten it by cleaning its exterior and interior first. Power washing siding and cleaning windows and even adding a fresh coat of paint are valuable forms of sweat equity.
4. Market Growth
Real estate is an investment that grows in value over the years. While markets go up and down, in the long run a real estate investment has shown to grow in value.
Above all, the four ways above can help you make money on an investment property. Just know that the real estate market is a great investment in the long run.
If you are looking to enter the investment property market, don’t hesitate to contact me as I would be happy to help.
