This post was written by Derek.
Have you ever thought about investing in real estate? Do you wonder how profitable it could be? This post was written for you. For those of you that have never thought about real estate as an investment, perhaps after reading this article, you may consider it as one of the best passive income streams available.
Types of Real Estate
When the average person thinks about real estate, they often think about a house that sits on a quarter acre of property. However, this is only one of many types of real estate that one can purchase. Other types include: land only, a building (no land) only, duplexes, 4-plexes, 8-unit complexes, and the list could go on. Even though the listed examples are quite different from one another, each of them could be purchased and rented for a profit.
For the purpose of simplicity, I’ll be focusing on the 8-unit complex today and will show you the profit that could exist within this investment.
8-Unit Rental Complex – Benefits
This real estate type is often a great investment for a few reasons.
- All of your units are in the same location, making it easy for you to keep tabs on it and ensure its safety.
- Your property may not always be 100% rented, but it can easily be 75% rented. With a large rental house, it’s either 100% rented, or 0% rented.
- Because you are purchasing 8 units, you will most likely receive a greater discount per unit than if you would have only purchased one.
Typical Rental Dollars
Sticking with the 8-unit example, let’s take a look at what kind of money could be made in real estate investing.
In South Florida (where I lived most recently), it’s possible to find an 8-unit complex for $400,000, or about $50,000 per unit. Each unit is a standard 2 bedroom, 1 bath, and can easily rent for $800 + utilities. If 7 out of 8 units are consistently rented (which is not unreasonable), you’ll have an income of $5,600/month!
In order to acquire the property, let’s say the bank required 10% down, and allowed you to take out a 30 year loan for the remaining $360,000 (@ 4.5% interest). Using my finance calculator, I found that your mortgage payment would be $1,824 per month.
Of course, if you own an investment property, various items will need to be fixed, taxes will need to be paid, and other unexpected expenses will occur, but with nearly 4,000 additional dollars over your mortgage expense each month, I’m sure that you’d be able to afford it!
Another Positive of Real Estate
In addition to receiving a positive cash-flow from your real estate, your equity will also increase with each mortgage payment. And, on top of that, the market will likely bounce back soon, making your house worth more tomorrow than it currently is today! This is like a win-win-win for real estate!
Do you think you’ll start investing in real estate soon? If something is holding you back, what is it?