ROI: The most important number when investing in rental property
Fsp Invest Team, 07 May. 2013
Tags: investing in rental property, rental property, return on investment, roi, roi and property investing
“Other people’s money (OPM) or leverage is one of the most important aspects to investing in property,” says Francois Joubert in Become a Master Property Investor in 90 Days. OPM is his term money you borrow to control a lot of property and generate a high return on investment (ROI) using very little of your own money. Read on to discover how rental properties generate ROI so you can take advantage.
“ROI is calculated by taking all the gains you’ve made from an investment and dividing this by the money you put down on the investment,” says Francois Joubert in Become a Master Property Investor in 90 Days.
It’s the best way to measure if you’re making money from a property.
Here’s how rental property will help you generate a great ROI…
Three ways rental properties generate ROI
1. Growth in the property value: As inflation goes up and the cost of building new homes increases, the value of existing properties also grows. “Things to look out for to ensure your property increases in value are a good area with high job growth, population growth and an expanding economy,” advises Joubert.
2. Cash flow from rentals: By renting out your property, you collect monthly rental income. If you’ve bought the right kind of property, your cash flow at the end of the month will be positive and this will increase your investments’’ total ROI.
3. Long-term tax benefits: With rental property, there are a number of expenses you can write down against your monthly income. That means less tax and higher returns. By using all the property tax breaks available, you’ll boost your ROI without ever trying.
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