Investing Question: I have $90,000 to invest, which investment returns more money?
$90,000 in today’s volatile stock market might earn someone 10-20% per year with some risk as a long term investor and some wise stock stock choices. Stocks generally gain over the long term as economies grow. Take the average, 15% growth. This would earn $13,500 per year on $90,000.
Or, invest $75,000 (the other $15,000 for minor repairs and closing costs) as a 20% down payment on a single family East Ventura $375,000 rental property. Such a property would rent for about $2,250, and your monthly principle, interest, property tax, and insurance payment (PITI) might total about $1,950 before tax benefits and principal pay down. Let’s assume that before tax benefits and principal pay down, the $300 cash flow the owner would receive would be used as reserves, incidentals, and management ($3,600 per year). Now, after averaging the ups and downs of the real estate cycle, real estate tends to appreciate at a rate of 4% per year. A 4% return on $90,000 is $15,000 in growth per year.
This reflects the beauty of leveraging. By borrowing and controlling a larger asset, a smaller rate of return can earn more money than a higher rate of return on a smaller asset.
- Your effective payment after tax benefits, assuming you are in a 15% Federal and 5% state tax bracket, would be $300 per month. That is, you would be saving $300 per month in taxes because of your ownership of this property (tax induction and mortgage interest deduction).
- Each month your equity in the property would grow by about $400 per month via principal pay down, effectively creating a forced savings account if you were to sell.
- Factoring both of these into an investment return in real estate would yield $23,400 per year. That’s 26% per year in real estate!
- Returns would compound.
- That is, a 4% rate of appreciation on $375,000 would be a 4% return on a $390,000 house the next year.
- The same would be true for stocks.
- Real estate rents may increase, increasing your cash flows.
How to Find a Great Real Estate Deal
- Find a great real estate agent! Using a real estate agent is free for a buyer and agents are the first ones to find out about great deals. Whether the deals are not on the MLS or have just hit the MLS, an agent who is on it – watching the market all of the time — will be able to procure a great deal before anyone even finds it on Zillow, Redfin, or another MLS-drawing website.
In an effort to make more money with existing money, people invest. Here are a few generic real estate investing methods that you may be interested in.
Short Term Notes
For short term notes secured by real estate with terms ranging from 1-7 years and very competitive hard money interest rates, feel free to email me. We are always looking for lenders throughout our property acquisitions.
Additionally, we pride ourselves and our mantra or preferring to eat dirt than not repay our debts. No matter if the value of the property increases or especially if it decreases, your note will be repaid. Ventura is too small of a town to tarnish any reputation.
Searching for fixer-upper properties or County Court House foreclosure auction deals to repair and sell fast? We can help. email
If you’re looking to buy income producing property, in which you purchase a condo, single family dwelling, duplex, 4-plex, 10-plex, or whatever is available as long as it cashflows, send me an email to get hooked up with immediate new listings, sizzle hot deals, and professional analysis and advice.
Don’t want to deal with tenants? No problem! Hire us to be your property manager and you won’t have to deal with anything. We do it all.