How to Use Your Homes Equity…

Money is a funny thing.  When you leave it alone it is almost like a pile of sand that dissipates in the wind.  Inflation is not a pretty thing for money, however, if you deploy that money into something that can earn interest, cash flow, or increased equity…now we are talking.

One of my favorite things to do with equity is utilized it to purchase rental real estate.  What I mean by that is, I buy a duplex, 25% down, $175,000. My rental income for two units is $900 per side so $1,800 a month.

Check out https://www.zillow.com/mortgage-calculator/  and put in $175,000 as the purchase price, 25% down, and a modest interest rate.  

Sitting at about $850 a month of principal, interest, taxes, and insurance means that you have around $900 left over monthly after tenants pay their rent.

There is still vacancy, maintenance, property management, and repair escrows, but you should still have around $400 left when all is said and done.

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That is $4,800 a year.  25% down is $43,750. You are making 10% of your money!

The principal of your mortgage goes back to what you owe, interest is deductible, so is depreciation and the insurance cost.

Do the math, you end up making around 18-22% on your money cash on cash.

Let us know if we can help explain further.

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