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Why Invest in Rental Income Real Estate?

There are many types of property to invest in: unimproved land, single-family homes, multi-family structures, apartment complexes, commercial and industrial property. In his experiences, Jack Haley has discovered downsides to many types of real estate investments. For instance, commercial properties suffer first and foremost in any downturn in the economy, and unimproved land takes years (perhaps decades) to provide any return at all on your investment, if at all.

Rental Income real estate provides a good balance of both regular income and investment opportunity, but some are better than others. Single family rental homes have a lower profit margin and can be subject to high vacancy rates; duplexes are better in both regards, tri and quad-plexes are even better. But apartment complexes, due to the economy of scale, have lower relative vacancy rates, higher profit margins, and can have the best rates of return of all types of residential properties.

Commerical Rental properties can have even better rates of return than apartments, but there is a catch. Typically these properties have few tenants. When a tenant moves out even with the required advanced notice it is hard (if not impossible) to completely fill the vacated space without some loss of potential rent. Should these vacancies occur in times of prolonged economic downturn, rental income can be reduced for several years. These properties require complex and careful analysis to minimize risk.

Real estate that provides rental income rarely experiences wild swings in value, instead providing predictable returns at many times the rate of money markets accounts or CDs, with tax advantages bonds and mutual funds do not have. But no type of investment is a "sure thing"- the property must be professionally analyzed, the purchase price and financing costs must allow the rate of returns you seek, and a credible business plan must be followed.

Rental properties are the most complex to analyze because they have many operating and non-operating expenses, can have complicated income schedules (see Mr. Haley's tips), tiered and/or staged financing, and tax considerations. The NOI Academy software package was developed specifically to meet the needs of the professional real estate investor, whether it's your first duplex or a 4000-unit Multi-Use complex.

Multi-Use Properties

With the addition of the Enterprise Reports module, the NOI Academy software package allows unprecedented power to the average real estate investor. Now the high returns and advanced risk of Commercial rental properties can be balanced with the lower returns and lessened risk of Apartments; both single-family rental homes and apartments can be combined to allow serving the entire residential rental market; or all three types of properties can be combined into a magnificiently balanced and profit-generating powerhouse.

Links

For other valuable information on multi-family real estate search for "multi-family" on Prudential's website and, by all means, carefully examine Rental Housing OnLine's range of websites. If you are a landlord, I would strongly suggest becoming a member of RHOL to take advantage of the legal forms, information and generally good advice they offer. It may be the best $40 you'll ever spend.

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