Real Estate Investment for Greatest Return: Why to Buy a Rental Property
It’s surprising to realize that most people spend more time planning their next vacation or cell phone purchase than they do on their own retirement. If you had $35,000 to invest for retirement in 15 years, what would be the best opportunity?
The safest place may be a certificate of deposit because it’s insured, but unfortunately, rates would be less than 2%. The value would grow to $47,233.26 at the end of the 15 year holding period.
Investing in a mutual fund has more risk but also a greater opportunity to earn a higher rate of return. An estimated 7% return would project an accumulated value of $99,713.14.
However, using $35,000 for a 20% down payment + closing costs on a $150,000 rental home may realize much higher proceeds: $35,000 could grow to $153,000. This analysis also considers leverage, 3% appreciation, re-investment of cash flow, 7% sales expenses and applicable tax payments, which previous examples do not.
Rate of return on these 3 examples are 2% for the CD, 7% for the mutual fund and a comparable 14%+ return on the rental. Of course, as rate of return increases on investments, additional risk is reasonable.
Most people are more comfortable with homes than they are with mutual funds, bonds and other similar investments. Sea Scape Properties can help you find a rental home investment that makes the most sense for your goals. We can also manage the rental of the home on your behalf to make the process as easy as possible. Sea Scape Properties offers aggressive marketing strategies, active tenant management and rent collection, detailed property inspections, proactive/cost-efficient repairs, accurate accounting, and advice to keep your property in excellent condition.