Here are five ways a rental property makes you money:
- Cash flow, which is what’s left over from the rental income after all expenses are paid. Cash flow may also be referred to as the “net income.”
- Appreciation, is when the value of a property increases due to various factors. This is Probably the most popular form of profit when people think of rental properties Appreciation has been a consistent performer over time and one of the biggest players in what makes people so wealthy from real estate.
- Building equity through mortgage payoff and you have somebody else doing it for you (i.e., your tenant).
- Tax benefits. Rental properties are among the best investments within the IRS tax code. Essentially, rental property income can wind up being tax-free income when filed correctly. Get a great accountant.
- Hedge against inflation. People who own assets are the ones who do well in inflationary periods Inflation helps with both the overall equity in your property and the tangible cash flow hitting your pocket.
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