5 Reasons to Buy Investment Property in 2021
Today I’m going to talk about five reasons why it might be a good idea for you to consider purchasing investment real estate this year. The first reason is interest rates are super low. We’re seeing investment loans right now on a 30-year fixed rate mortgage around 3% in the low threes. That’s very cheap money, so you’re able to get a payment that’s very low and you should be able to cash flow every single month on that property.
The second reason is that home prices are appreciating rapidly. Last year in the Athens area, we saw prices go up around 8% to 9% depending on whether you look at average or median price. For example, if you purchase a $200,000 rental house and it goes up 8%, that’s a $16,000 increase in appreciation.
If you put 25% down on that property, that’s $50,000 of your money going into that house, but it appreciates $16,000. Well, that’s a 32% return in a year just off of your down payment. And that doesn’t even factor in the monthly cash flow, which is probably a few hundred dollars a month, which would end up being, $4,000, $5,000, $6,000 over the course of a year. Also, the depreciation that you get from your taxes. So you’re getting a larger than 32% return if we continue to see the appreciation that we’ve been seeing.
The third reason I would say is simply that rents are rising. The market is strong, there’s demand for rentals in this area, and rents are going up. When you look at what rents were two or three years ago compared to what rents we’re getting on houses now it’s gone up tremendously. If rents continue to rise, that cashflow each month, you buy a house on a 30-year fixed rate mortgage, that payment doesn’t change. The rents go up, your cash flow goes up as the years go by.
The fourth reason I would say is simply a hedge against inflation. In my opinion, I could be wrong on this, as the government does more stimulus as more money is printed, more money is produced in the marketplace, just generally speaking, we should see some inflation. Now, we may not see it next year, but in five to ten years, we’re going to see inflation, which means your dollar is going to buy more, which means your real assets such as real estate are going to go up in value. So most likely as we see inflation, prices are going to continue to rise on real estate. So investing in rental property this year creates a hedge for you against inflation.
And the final reason I would say you may want to consider buying real estate this year is, just as a general rule of thumb, buying it sooner rather than later is better. And what I mean by that is, when you look at wealthy folks or people that have owned real estate a long time, it’s a way to grow your wealth for you and your family. And to give an example of what I’m speaking of, think back to when your parents bought their first house, or your grandparents bought land 50 years ago, or houses 50 years ago, or even 20 years ago, the difference in what they were worth then versus what they’re worth now.
So just as a strategy to build your wealth, it might be something to consider. And again, when you rent it out, unlike a vacant piece of land or a vacant property, if you buy a rental house, you rent it out, the tenants make that payment for you, and eventually it’s paid off and you own it free and clear. So those are five reasons you might consider buying a rental property this year.