Denver horse properties is not the topic here so lets not get distracted! Below is a sound investment opportunity for anyone who has owned a home and is worried about college tuitions in the future, or just wants a steady, dependable investment. And Lord knows I have been distracted into “trading schemes”, “oil & gas” investments, etc where I really had no business going. Hence our opening line today:
The grass tends to look greener on the other side of the fence. Maybe that’s why some people invest in things they don’t understand. It has been said that the grass is just as hard to mow on the other side of the fence so stay with what your most familiar.
Single-family homes used for rental property give a person a chance to invest in something they understand: a home. They also have distinct advantages over other types of investments.
An investor can borrow up to 80% of the value at fixed interest rates 30 years. The financing creates leverage so that the investor can benefit from the increase in value of the home not just the down payment.
It is reasonable to expect that the home will appreciate while providing tax advantages and practical control that are not available with many other investments. Low housing inventory in many markets has caused rents to increase and low new home growth will make it difficult to keep up with demand.
Consider a $150,000 home purchased for cash that would rent for $1,500 per month. With $18,000 income and allowing for property taxes, insurance and maintenance, it is still reasonable to expect $10,000 net income. There would be an 8% return on investment without considering tax savings or future appreciation compared with 5-year CDs paying less than 2.35% and a 10-year Treasury yield at 2.13%.
An added bonus is the amortization that occurs on the loan as the principal is reduced with each payment. It becomes a forced savings account that increases the equity and isn’t taxable until the property is sold.
The reasonable control has a lot of appeal to many investors who find the volatility of the stock market unacceptable and don’t want the risk associated with alternative investments. Please contact me if you’d like to know more about available opportunities.
Even though our market is drastically different than the example above, the rents make up for it. Denver’s median rent is in the $1400 per month for a 2 bedroom condo, while a 2000 square foot house might rent for over $2000 per month, depending on the neighborhood. Therefore, if you want to investigate buying a rental home as an investment property; for college tuition or other; lets have a chat. Contact me