Rental property as an alternative investment

Investors today are all asking themselves the same question—where can I get a decent return on my money. The stock market is basically unchanged over the last few years, money market rates are less than 1% and 5-year cd’s are paying 1.5%. Without taking on considerable risk, it’s tough to get a higher return. Consider, then, an investment that could provide an annual return of up to 80% or 90% cash on cash. By owning rental property as an investment, one could achieve this return.

 

The key to achieving high returns with any investment is buying the investment as inexpensively as possible. One of the least expensive ways to own rental properties is by buying a distressed property and rehabbing it. Because each dollar spent on rehabbing increases the value of the property by almost two dollars, an investor can buy and rehab a property for much less than he could purchase a fully rehabbed property, thus drastically increasing his annual cash return. The problem for many investors is that the purchase and rehab of a property requires the outlay of cash which many people don’t have. The solution to this dilemma?—borrow funds from a rehab lender for a portion of the purchase price and all of the rehab construction money. Then when the property is completed and the value of the property is drastically higher than the acquisition and rehab costs, refinance with a traditional lender. After refinancing and renting out property, the monthly rents will be sufficient to make monthly mortgage payment, pay other expenses AND provide a healthy cash flow to the investor.

 

Clearly, rehabbing and owning an investment property is not a simple undertaking. An investor has to find a lender who will lend the purchase and rehab funds, the right contractor to do the construction, a manager to manage the property and collect the rents and often an experienced tenant finder to place tenants in the rental units. Fortunately we can help you solve all these issues. Select Funding is Chicago’s premier rehab lender. We can not only lend you the necessary funds, we can also guide you to the right contractors and managers if necessary. Please contact us if you would like to know more about the possibilities of purchasing and rehabbing an investment property.