Seeking new methods for wealth building or current income? Many individuals are attracted to real estate as an additional household income source or for replacing their current incomes completely. If you are one of these individuals, consider buying rental properties. During any economy, investors are seeking sound financial investment opportunities. But in a struggling economy, investors are seeking both stable investments. Rental properties provide investors a variety of advantages, many of which are outlined below.
1. Rental Yield-Rental income from investment properties can be calculated either as gross income or net income. Investors often prefer net income, which takes into account any expenses associated with the property; taxes, maintenance, marketing costs. When purchasing a rental property, it is important to take both the gross rental opportunity and the net income into account before making an investment decision.
2.Capital Appreciation- In addition to creating a current income stream, rental properties also present the opportunity for short term and long term capital appreciation. As the propertys value increases, so does your personal net worth. This appreciation can be realized when you sell the property or the equity can be leveraged as collateral to apply toward new rental property purchases.
3.Inflation Hedge- Inflation often has silent or unnoticed effects to an investors portfolio; it is that silent chipping away at your overall purchasing power. Average inflation rates range from 1-4% on an annual basis. So, your portfolios value must exceed the effects of inflation to realize gains in personal wealth and in purchasing power. Proper investments can enable you to hedge your portfolio against the negative effects of inflation. Rental amounts often increase with inflation over time, providing you with income increases that will keep up with or exceed the national inflation rate on an annual basis.
4.Investment Leverage- One of the primary keys for success in real estate investing is leverage. Leverage involves using other peoples assets to purchase additional investment properties. Often this financial capital is created through equity in your rental properties. As you build equity, you can leverage it to purchase additional rental properties.
As with any investment, there is an associated risk. Consider your risk tolerance, your financial objectives and your available capital to invest when utilizing this strategy to build personal wealth.
Rental properties offer a variety of advantages to real estate investors, making them attractive investments to fulfill both short term and long term financial goals. Rental properties can be purchased in virtually every price range and in every real estate market in the world. The price flexibility creates appeal for both novice and experienced real estate investors. So, if you are seeking current income or capital appreciation, rental properties may be the best investment option for you to consider.
Cynthia Conradt has been investing in Real Estate for over 3 years. She now controls over 1 millon dollars worth of Real Estate. Visit her blog at http://youcanbuycashflowrealestate.com where she shares her life experiences on real estate investing.
[tags]real estate investing, real estate investors, rental real estate, wealth building, income stream[/tags]
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