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Investing in Real Estate: The Pros

Investing in real estate…

Will it be worth it? Will it pay off? Will the benefits outweigh the risks?

These are some of the common hesitations many first time investors face.

The bottom line is, regardless of the current economic health, people will always need a place to live. Real estate is a smart and sound investment. Continue on to discover two major pros of investing in real estate, as well as some tips and words of encouragement to get you started.

Your Investment Will Always Have Value

What does this mean? Well, when you invest in stocks it can be risky as you really have no control over the outcome of your investment, but with real estate investing you will own a tangible asset. You will own an asset that you can physically see and touch. This property will always have some type of value and be worth something to someone.

Think about it… if the economy is doing great and the market is good, you can sell your asset and likely get what you want for it. But if the market is down, the economy is weak, and people are struggling – a rental property will always be a necessity to someone. People will always need a place to live.

Steady Cash Flow

Investing in real estate means you always have the potential of earning steady cash flow. If you can lock in a good tenant that is reliable, you will always have steady income coming in. Whether you pay cash for your investment or you take out a loan, each month your cash flow should cover your “expenses”. If you took out a loan (or mortgage) on the property and your monthly payment is $1,500 you will want to be sure you can charge at least $1,500 for rent each month. Be sure to research the rental rate averages in the area you are considering purchasing in before you close on your investment property. As long as you are able to earn the monthly payment of your mortgage, this investment will be worth your while. And for the individuals that purchase their real estate with cash, do some quick calculations to find out how long it will take to earn a full return on your investment (view breakdown below).

Cash Purchase for Investment Property: Example

Let’s say you paid $200,000 for your property and paid for this upfront in cash.

You have to understand that each month you are not yet making a profit. Instead, you are earning a return on your investment.

If you rent this property out at a monthly rate of $1,500… it will take approximately 11 years to earn a FULL return on your investment.

Let’s break it down:

$200,000 / $1,500 = 133.33333 months until FULL return on investment.

133.333 / 12 months in a year = 11.111 years until FULL return on investment is earned.

So, there you have it. After 11 years of renting out your real estate investment, you will be raking in strictly profit. Or if you decide to cash in on this property before the 11 years are up, you can easily figure out how much of your sale will result in profit!

We know that investing in real estate can seem intimidating at times, but it’s not as scary as some may think.

For more information or to get your questions answered, do not hesitate to contact us today! There are great investment opportunities up and down the Front Range in towns including Denver, Northglenn, Thornton, Lakewood and Centennial.