Is Now The Right Time to Invest in a Rental Property?
Have you thought about buying a rental property and never got to it or didn’t know if it’s advantageous to buy a rental property or not? Or is this the right time to buy?
I’m going to talk about the advantages of buying a rental property. Whether you buy in Anaheim Hills or any other area, the principles are the same.
I wanted to give you some stats about Anaheim Hills, and you may do the same thing in a different city where you are buying. So some of the things that I look for is what is the median home price sales in Anaheim Hills or any of the city, the home price was a million dollars in December 2021. The average rent for a house that includes condos and townhomes and homes is about $3000 a month, and the living area is about 1500 square feet, which is way more than the national average, the median home price of the national average is about $40,000 in Anaheim Hills is almost a million dollars. The average household income in Anaheim Hills is $130,000, but the average household income nationwide average is only $80,000. So it’s a great area. And the better the price, the more the appreciation, and more than depreciation. So those are some advantages. That’s why it’s important to know what city you’re buying in. Also, as you may know, Anaheim Hills is part of Anaheim’s last year’s average of about 20 million visitors, especially because of Disneyland, which creates a lot of hospitality jobs and other jobs. So it’s a good area where people want to come in by and come in stay and rent these manufacturing places in Anaheim and amuse area, these warehouses, these commercial properties, these large school districts that employ a lot of people. So there’s a lot of good employment. So when you’re thinking about renting it out, and people want to work close to their work, and the Anaheim Hills area.
In general, is a good place to buy. So those are some of the things you want to keep in mind, although there are various other factors about finding a rental property. One of the advantages is that you are leveraging other people’s money. So what happens is, let’s say you buy stock and you or you have $100,000, and you buy stocks, but if you buy a property, let’s say you buy something, and Anaheim Hills area and you buy a 500,000 or townhouse, well you don’t need $500,000 to buy a townhouse, you only need 10% down or 5% down or let’s take 20% down which is $100,000. Now you’re taking $100,000 you borrow $400,000 from a lender or a banker or any private entity, and you’re getting $40,000 extra money, which is not your money and you can buy $500,000 So the biggest advantage is you buying more than you can afford right now in the sense purchase to leveraging that extra $40,000. And you’ve heard this before using other people’s money, OPM is a way to riches, and buying rental property or income property with a lower down payment or any down payment without paying all cash is a great way to do so.
When you buy a property and until you sell it, you don’t have to pay any taxes. So you’re deferring all the capital gains sex until you sell. The other advantage of buying a property is you have lots of tax deductions. One of them is your depreciation, you can deduct your interest rates, you can deduct property taxes, if you have a property management company, you can deduct any repairs and upkeep, all that is deductible, which gives you a tax write off and tax savings in the long term while your property is appreciating and talking about appreciating the other advantages when you buy a rental property or income property. And as your tenant is paying your mortgage. So you are using other people’s money to pay your mortgage smart move, you are also appreciating your property, and on average, or historically, properties increased an average of 3% per year to let’s say it’s 2022. And you buy a property for $500,000 After 20 years to 30 years should appreciate more than double or triple. Now there are two things about positive cash flow. One is that let’s say your mortgage payment is $3000 a month You bought a property for 20% down and you minimize your payments to let’s say, $3000 a month, but you got to such a good deal, and you get got good interest rate and your rental income is $3200 a month. So now you have a $200 positive cash flow, which is great. But the other thing that people look over or don’t look into is that even though let’s say my mortgage payment is $3000 a month in the property that I just bought, which I’m renting out, and my mortgage payment is also $3000. So pretty much I’m breaking even. But on paper, I’m positive cash flow. So all those add up. At the end of the year, when I get, quote, a refund, or tax deductions, I’m positive cash flow, even though it shows that I have a $3,000 mortgage payment and $3000 income. So that’s one way to look at it. That’s why you need to talk to an attorney or an accountant to help you through it. But feel free to call me I can sit down with you and also give you some basic information on how to get started.
The next point I want to talk about is when you invest in a property, you are putting a down payment, you probably saved it which is good for you, and now invested that so it creates a forced retirement because every month you are paying your mortgage payment. So I’m sure that you are being wise about your spending. The other thing is it’s a forced retirement. So every time you make a payment, although your tenant is making the payment, imagine after 2030 years when the property is paid off, let’s say 2022. And in 2042 you pay off your property, you’re going to have rental income or passive income, which is what we call a forced retirement because you were 20 years ago, after 20 years when you retire or when you stop working the $3,000 a month rent you’re getting right now hopefully it’ll be six or 7000 a month rent so imagine you bought two or three properties right now. And after 2030 years, you have two or three properties each making 5000 a month income, and your properties paid off. You have 15 to $20,000 worth of rental income you have your Social Security income hopefully you have some stocks so that’s a lot of money coming in because you started buying right now. So my word of quote advice it’s always not a piece of advice if you’re going to buy real property or a rental property the earlier the better because you want to start the clock now and paid off earlier might wise if you need to sit down I’ll be glad to talk to you and get you going and give you pointers and resources my contact information is below.