Title

How Do You Make Money Out Of Investment Property?

4 ways to make money from an investment property:

1. Passive income.

2. Equity.

3. Tax advantages.

4. Appreciation.

Passive Income

Or more normally referred to as positive cash flow. It’s quite simple to work out:

Gross Rental Income
Minus: Vacancy rate
Equals: Adjusted Gross Income
Minus: Operating costs
Equals: Net Operating Income
Minus: Debt Service Payments (mortgage)
Equals: Cash Flow

What do you need to do to achieve a positive cash flow. Get the best rent possible whilst keeping vacancy periods as low as possible. Don’t be greedy. Holding out for that extra 50 bucks a month could result in a month’s vacancy and minus say $1200 that year.

Keep the money coming in and the overheads as low as possible. Obviously the lower the price you pay for the property the less the mortgage payment will be. Again though don’t be greedy when purchasing. If the figure on the table is acceptable then pay it. Letting an ego get in the way, focusing more on the deal and the need to have the last word could let an excellent income generating property slip through your hands. Work with a mortgage broker to get the best rates and or possible.

Shop around for insurance or build a relationship with an insurance broker who you can trust to find you the best deal. I use Brent at Murphy Insurance ( 705 737 3630)   and no I don’t get any kick back for referrals.

Equity

The renters are paying down your principal. Even as you sleep your equity is growing. Use that positive cash flow to pay off more principal, pay less interest and see the equity grow even more quickly

Tax advantages

There are 2 certainties in life: “death & nurses taxes.”  The good news is that property is a very tax efficient investment. Get expert advice as tax laws are continually updated.

Appreciation

Historically property has always gone up in value. There are ups and downs but in the medium to long term the value will always increase.

This entry was posted on Friday, February 12th, 2010 at 9:17 am and is filed under Financing, Investment Opportunities. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

1. Top Tips To Pay Down Your Mortgage Faster | Wasaga Beach Real Estate-Wasaga Beach Homes For Sale-Wasaga Beach News said at March 29th, 2010 at 9:07 pm

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