Welcome to Professor Savings.com
We teach finance basics.
Hi, I’m you’re host today Rayfil Wong.
Todays lesson is
What is real estate investment?
Real estate investment are purchased with intention to generate income either by renting it out or
make money from the appreciation of the property.
Let’s say that Jane purchased a house 5 years ago for $100,000.
She get’s it appraised and the value of the housevhas increase to $200,000.
She has gained $100,000 in equity and can go to her bank and ask to barrow more money to purchase an additional house at $200,000 but she only has $50,000 in deposit so she has to take out a mortgage of $150,000 for 30 years at 10%.
Hop over to mortgagecalculator.org
Jane has to pay $1,524.69 monthly but she rents it out at $2,000 to Damon so she is still up $475.31 monthly but owning property also has it’s responsibility such as bad renters who parties too much and may damage property.
Landlord’s are also responsible for maintenance.
She also have to find tenant for rent as well as well pay for property insurance.
She must also plan for a worst case scenario which is dealing with dropping or lower rental prices because of a weak economy.
consider all these factors before purchasing real estate.
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