Quote:
Originally Posted by realcoray
Yeah, appreciation can vary (and you can be bit by it as I'm sure some were during the downturn), and while you can probably anticipate it to increase by about inflation (3%), I just consider it a bonus. I effectively bought equity as a house immediately next door sold for 190k, and a week after I closed a house right across the street sold for 220k. I seriously considered turning and flipping the house for an instant profit.
Good point about the liqudity of property. Another subtle distinction is that if you have an investment account and are re-investing your dividents (which you should be if that's your thing), it's all automatic. I may be getting 10% returns but the real power of investing is in the re-investing your profit. When I get 300$ in a month, I can't do anything real estate related with that money itself, so it's a good spot where the ideal would probably be to have it in some sort of higher yielding liquid account.
That being said the money will probably just go into finishing my car or building a shop, but I do save a lot of what I make in order to pursue things like this.
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2 Ways to re-invest that rent money:
#1 use it to pay down your principal faster, in turn saving you interest. The sooner that house is paid off the sooner you can collect 100% of the rent as income.
#2 use to renovate the house (if needed) this increases the value of the home and/or makes it easier to sell.
Personally that's what I'd do with the rent money, and the use the greater rent profit later on for cars etc like Greg mentioned.