How Do Investment Properties Make Money?

In our last blog, we talked about the many ways to find and buy investment properties. 

Now, we’re kicking things up a notch and teaching you how exactly investment properties can start making you some serious cash.

How do investors make money owning investment properties? Let’s dive right in!

How Investment Properties Make Money

There are four key ways investors make money with rental properties. These include:

Rent Collection

It’s as simple as it sounds. Every month, your tenants pay you rent to live in your property. This steady stream of income is often what draws people into becoming landlords in the first place. It’s like having a monthly subscription service where instead of you paying, you’re getting paid!

Debt Reduction

Imagine every time your tenant pays their rent, part of that money goes toward paying down your mortgage on the property. It’s kind of like having someone else help fill up your piggy bank, slowly but surely reducing what you owe while increasing how much of the property you truly own outright. You don’t see this money right away since it doesn’t land directly in your bank account, but think about it as building wealth quietly behind the scenes.

Depreciation

Your investment home is a depreciating asset. The IRS allows you a tax benefit to compensate you for the depreciation of the structure because they understand buildings get older and wear out over time.

Appreciation

Historically, investment properties have appreciated (or increased in value). The amount of appreciation varies due to economic influences, neighborhoods, and location. But all in all, investment properties are worth more over time.

Conclusion

With these four categories, as an owner, you can see the full rate of return you’re getting from your investment properties. That means you can start making money off your investment in no time. 

Have additional questions? Contact Evergreen Property Management today! We’re happy to help.