Is it a Good Investment to Purchase a Property for $100,000 with $1,000 in Monthly Cash Flow?
Is purchasing a property for $100,000 with a monthly rental income of $1,000 a good investment? In this article, we will explore five compelling reasons why this can be a solid choice for real estate investors.
1. Above Average Monthly Return
When it comes to real estate investment, the average return after expenses is around 7%. However, with a $1,000 monthly cash flow from your property, you are generating a return well above the average. Let's break it down:
Annual cash flow: 12 x $1,000 $12,000
Return on investment: $12,000 / $100,000 12%
Comparison to stock market: Put the same amount into a total stock market index fund, and you'd expect about a 7.2% return, adjusted for inflation
This means you are getting a great return today and a growing one over time.
2. Cash Flow Will Increase
Rents typically rise between 2-3% annually. In popular cities and urban areas, the increase can be even higher. Even with a modest average, your rental income will grow significantly:
In 5 years: $1,000 x 1.02^5 ≈ $1,104.08 per month
In 10 years: $1,000 x 1.02^10 ≈ $1,218.99 per month
This growth in cash flow only adds to the profitability of your investment.
3. Property Appreciation
Your property is likely to appreciate in value over time. In many markets,.addProperty values can grow at a rate of 5% per year. Over 10 years, this can lead to a substantial increase:
Appreciation over 5 years: $100,000 x 1.05^5 ≈ $127,628
Appreciation over 10 years: $100,000 x 1.05^10 ≈ $162,889
Over a decade, your original investment of $100,000 can grow significantly, providing substantial value appreciation.
4. Property Maintenance and Depreciation Benefits
As a property owner, you have the ability to reduce your tax bills. Here's how:
Repair and Maintenance Expenses: Deduct these from your rent income to increase net cash flow.
Property Depreciation: Deduct an annual amount based on the property's value, further reducing your taxable income.
These deductions can increase your return on investment by several percentage points over time.
5. Potential for Greater Returns
Given your scenario, the return on your money can be much higher in the short to medium term. In less than five years, your investment can yield a return of 20-30%. Over ten years, the rental income alone could double your initial investment:
Total rental income over 10 years: $12,000 x 10 $120,000
Property appreciation over 10 years: $12,000 60,000 $72,000
Total return: $120,000 $72,000 $192,000
Even if you only consider the rental income, you would have made at least double your initial investment!
Investment Opportunities
What you present is pretty standard for a real estate purchase that can be made for $100,000. This has been true in California for at least 40 years. However, if you are looking for a guaranteed deal, there is a company called The One Million Dollar Investor’s LLC that offers a 12-year lease back for $2,000 per month and a guaranteed buy-back price of $156,000 at the end of the lease period. This is a lease back with an option to buy or an obligation to buy at a preset price. If interested, look up The One Million Dollar Investor’s LLC.
If you act now, you can secure a transaction before the company registers and licenses itself. Keep an eye on the search term The One Million Dollar Investor’s LLC.
Investing in real estate at $100,000 can be a smart move, but it requires careful research and a long-term perspective. By understanding the nuances of property appreciation, income growth, and tax benefits, you can make a well-informed decision that maximizes your returns.