There are four reasons you should be buying rentals right now.

• Money is cheap.  Interest rates, even for investment properties, are at all-time lows.
• Home prices have fallen, great deals are everywhere.
• There are plenty of renters (former owners who have lost their homes to foreclosure)
• The money you have sitting on the side in fading IRAs, money markets, mutual funds, etc. is evaporating right in front of your eyes.

Let’s say that you do have some money tucked away in an unproductive portfolio, and that you have decided that it will generate a larger and safer return in rental properties.  How much cash should you use as down payment? How much should you borrow?

You want to make a maximum Return on Investment (ROI).  Right?

Let’s say you can find decent rental properties from $150,000 to $200,000 (ready to rent total costs–purchase + fixing up + holding costs + etc.).

You will be able to rent these properties for $1200 per month.

• At 100% cash purchase (ready to rent) you will generate a ROI of 4% to 5%.  Not bad, and better than your money market.
• At 50% cash and 50% loan (ready to rent) you will generate a ROI of 6% to 9%.  That’s a lot better isn’t it?

If you would like an excel spreadsheet showing how the calculations work, get in touch with us and we’ll be glad to share with you.