RealEstate Investing: Five Benefits of Owning Rental Homes

Real Estate Investing: Five Benefits of Owning Rental Homes Our guest today is a former athlete and family man who built a career on the corporate side of the solar industry. Along the way, he saw the value of owning rental property, and now owns 16 single-family rentals in seven states. Nate O'Neil is a true believer in the financial power of long-term rentals and is here to tell his story on the Real Wealth Show. Show Notes: There are five really great benefits to holding financed properties over time: 1) Cash flow 2) Appreciation 3) Tax Shelter: $300 of monthly rental cash flow is like $460 of W2 income because W2 income is heavily taxed. This is significant over time, and with a number of properties. You can also depreciate the home over 27.5 years, which offsets taxable gains. 4) Mortgage Pay Down:   A rental home owner's net worth is credited every single month by the amount of principle their loan is paid. I look at is how much principle was paid down by the rent and how much my net worth increased from owning the asset. Again, the payoff grows over time and an expanding portfolio. 5) Inflation Hedge: People underestimate the power of a 30-year mortgage.  Due to inflation, a $600 monthly payment today, will actually go DOWN over time.  The value of that $600 in 10 years will be less, so therefore, in essence, the payment goes down.  Furthermore, with inflation, both rents and property values will increase.   Bonus: Over time, equity grows as the loan is paid down and appreciation grows.  This is money in the bank for further investing. For example, if you own an asset that is worth $200K and is paid off, you can do a cash-out refinance at 75% LTV, meaning you can take out $150K.  That $150K is TAX FREE.  I would have to earn $230K at my W2 job to take home $150K. And the original loan, at least in part, is paid back, not by me, but by the rent!  Current tax law allows my kids to inherit the property, at which point, the property steps up to market value.  Overall message: Owning long term rentals is POWERFUL well beyond those first two big benefits of cash flow and appreciation!   www.RealWealthShow.com