Real Estate Investing Generates High Rental Yields Or Returns December 8, 2007
Posted by Vedis in : Real Estate , trackbackReal estate investing has grown in popularity in the past decade and everywhere in the world everyone wants a piece of the pie. Real estate investment in apartments, commercial real estate, single family rental property, real estate investment trusts or REITs, and shopping centers comprises a significant portion of our economy.
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As with a stock that pays dividends, a properly selected and managed rental property will provide a steady stream of income in the form of rental payments. Historically, this percentage of return has exceeded that of dividend yields on average.
The real estate investor has a bit more control over the risks to that cash flow also. Though there are downturns in real estate prices and homes sold in some years and areas, generally those renting property in which to live will continue to rent and without a corresponding decrease in rent amounts.
Here are some of the ways that a rental property investment can generate returns and throw off cash:
- Start by only choosing properties with rental yields of 6% or better.
- Rental properties normally appreciate in value with inflation.
- Rents usually increase with inflation, while mortgage payments on the property remain stable.
- Using leverage, while being careful to buy properties with good rental yields provides greater returns.
- Amortization, or paying down the loan, frees up more investment resources to increase leverage.
Historically, real estate has shown to be an excellent source profit through the increase in investment property value over time. Of course, one cannot predict that this trend will always be true, and it varies significantly by area.
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