Grow Your Investment Portfolio with Residential Rental Properties
Comparing ROI for Most Common Investment Types in 2016
Below you will see the outcomes of a recent research project, designed to answer the question: Where to Invest Now? In the chart, you will see the average return on investment percentages for the six most common types of investments: Money Markets, CD's, Gold, REITS, and Stock Market for 2016. For comparison purposes, I held the ROI of the rental property as a constant and then calculated, how much one would have to invest in each of the other asset classes to achieve the same return. The property selected as the own-your-own real estate example, was an active property, available for purchase in the Pittsburgh PA marketplace, on January 17, 2017. A financial performance analysis using a REIA Report Investor was conducted to identify the ROI for the rental property along with many other financial performance factors, including the year in which the property could start producing Infinite Returns on Investment (see below). Download a FREEcopy of the recent research study: Where to Invest Now?
* The return does not include the other three financial benefits of Owning-Your-Own residential income producing properties of Appreciation, Principal Reductions (tenants are paying for your investment), and Tax Benefits. * The return for Rental Property is based on a 100% cash purchase, however, real estate allows one to leverage their investment by getting a mortgage to fund the investment. *NOTE: Your actual results may vary. All investments come with substantial risks, including the complete possible loss of all monies invested plus other losses and may not be suitable for many members of the public.
Infinite Returns on Investment Achieved in Year 3- nothing invested, continued returns for life
The chart below is a partial chart from the REIA Report Investor that was used to conduct a financial performance analysis on the real estate rental property used for the Where to Invest Now? research study. Please note that this example property, provides Infinite Returns on Investment in Year 3 when the investor manages the property them self, and Year 4 when using a property manager. Unlike all other types of investments, you don't have to "cash in" the investment to continue receiving the investments benefits. For all other investment classes, you must dissolve the investment to reap the benefits of its equity growth (only one of the four pillars for building wealth in real estate). When you invest in the highest generating positive cash flow properties, returns move from good to great to infinite returns- yes infinite returns.
Owning-Your-Own Residential Rental Properties- Building Wealth at Four Levels at the Same Time
When investing, most investors seek out investments that are: safe, secure, provide positive returns, and are guaranteed to be there in the future. Investing in, and Owning-Your-Own residential rental properties, provides investors with an asset that can build net worth and income at four different levels- at the same time- known as a properties Four Pillars. The levels at which these four pillars come together, will be used to make investment decisions.
The Four Pillars for Building Net Worth and Income
1. Cash Flows- The amount of income generated from rents and other non-rental activities for a property
2. Tax Benefits- The total of allowable deductions on a tax return intended to reduce a taxpayer's burden (multiple tax shelter strategies you can take advantage of)
3. Appreciation- The increase in value of a property over a period of time (can come from market appreciation, forced appreciation, or financial appreciation).
4. Principle Reduction- The amount of principal that has been paid down due to making timely monthly payments on the debt (your investment is paid for my tenants).
Cash Flows and Tax Benefitsreturn cash back into your system on a monthly or yearly basis. Appreciation and Principal Reductionreturns equity over a longer period of time and typically are realized through an equity loan or line of credit, refinancing, or at sale.
Finding High ROI Properties with Research and Analysis: "Measure What You Want and Buy It!"
Successful investors live the power of the Max-ism above. They know what gets measured gets attention, and, it is this attention to financial performance that helps investors maximize returns. Conducting a comprehensive and accurate financial performance analysis of income producing real estate is THE most differentiating activity between successful investors and unsuccessful investors. Successful investors also know that financial performance analysis provided insights into what changes need to be made to continuously maximize returns.
Our REIA Report comprehensively analyzes the financial performance of income producing property, reports that performance for each of the four pillars for building new worth, along with providing performance metrics that allowed the investor to make decisions across asset classes, along with performance metrics required by any type of lender when funding such investments. We can also use our analysis to find properties that provided the highest tax shelter limits allowed by the IRS. To learn more about some of the different ways we analyze the financial performance of income producing properties, see REIA Report Versions below.
REIA Report Versions
Max Wilson invented and developed a full range of REIA Reports (Real Estate Investment Analysis Report) to meet the needs of his investor clients who needed a third-party independent financial performance analysis of a property. The reports can be used by sellers to support the list price, by buyers to support their offer price and to achieve lending, and for decision making between partners.
All versions of REIA Reports are an easy and cost-effective tool for buyers, sellers, lenders, and agents alike to better understand the financial performance of an income producing property based on sound mathematical financial calculations. The reports are designed to meet the needs of investors looking to maximize returns when buying and selling income producing properties. To date, no other analysis tool, at any cost, is as complete, comprehensive, customizable, and accepted by lenders or all types around the country.
Listed below are some of the most common REIA Reports of interest to investor buyers:
• Investor: Answers What are all the investment benefits of buying this property
•Best Buys List: Reports the financial performance of the highest performing properties in the Pittsburgh PA region, based on investor criteria. Uses owner and agent provided data. Please note that this high-end analytical tool is available for purchase only by clients that have contracted us to fully represent them with our Traditional Full-Service Investor Buyer Representation services.
• Portfolio Analysis: Reports the financial performance of an investors entire income producing real estate portfolio- identifying those to keep and those to sell off. Also used to compare the financial performance of multiple potential properties before purchase.
Picking the right agent for the job!
Over the last 20 years, we have become the #1 leading experts in helping investors find, analyze, buy and sell residential rental properties in the Western PA region. We have invented and ran financial performance analysis on millions of local income producing properties- so we know our market.
Even if you choose not to use our services, we'd still like to help. To be most successful in selling your rental property, you will be critical that you find a knowledgeable agent, to help you navigate the sales process, tap into and attract top investor to your property, be expert in negotiation, and understand financial performance. To help you find that help, we wrote Six Questions to Help You Find a Knowledgeable Agent. Although this article was originally written to help investor buyers, as the seller, your agent MUST be able to answer the same questions- as it will be their job to interact with the investor, their agent, their lender, etc., and if they don't understand the language and the processes that must be followed, then you'll either sell a long time from now at a fire sale price, or will need to wait until the agents contract expires- and then you can use this list to make better agent hiring decisions.
And we think it is worth repeating again here- we are business consultants that help people sell, buy, and invest in real estate across the entire Western PA region. We are licensed real estate brokers and sales persons in PA, but are NOT Realtors®- and proud of it.
Got questions? Ready to save thousands in wasted commissions when finding and buying high ROI residential rental properties?
Call Max at 412-552-9811 to
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