Thinking about real estate as part of your investment portfolio?

Acquiring investment rental property such as houses, condos or townhomes has historically been a great investment for the long term. The return over a 10 to 20 year period has been better than any other speculation, although owning real estate requires interest and attention to protect and enhance your investment.


Below is a scenario that may be helpful in deciding if an investment property is right for you:

Purchase price = $250,000
(plus closing costs)
Loan Amount (80%) = $200,000
Monthly payment at 5.5% = $1,136 (Principal and Interest)
Assume taxes/insurance/HOA = $200

Rounding up, the monthly payment is $1,350/mo.. A reasonable rule of thumb for a property in decent condition would be to project about 10-12 percent of monthly revenue for vacancy and maintenance.

The projection equates to a break even proposition on the surface. However, other factors working for you include:

• Tax benefits
• PITI essentially stays the same while...
• Rents gradually increase along with inflation
• Your tenant's rent is paying down your principle balance monthly

Other helpful hints:

Buy properties at or below the neighborhood's average sales price.

Preference should be given to three bedroom house and two bedroom/two bath condos for optimum returns.

The location word-meaningful for higher rents, as well as higher values. A desired location is also less susceptible to ups and downs of the market. Know your Landlord (and Tenant) Rights.. Use a good lease and security deposit forms, understand everything from move-in agreement, keys, number of tenants, pets, and eviction procedures.

In time, rental properties can provide a portfolio nest egg is appreciating values of properties continue to do what they have done in the past.