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[quote=Anonymous]The only reason people believe in rental property is because they don't have an issue with leverage. In the above example, if you take out a $240,000 mortgage at 7% and let's say invest that in 5% treasuries, then your calculation looks like this: Equity: $60,000 Annual rental: $26,400 Treasury Interest: $12,000 Less: ($5,000) taxes Less: ($24,000) mortgage Less: ($3,000) other expenses Net: $6,400 or 10.7% annual return on equity You are betting the house appreciates while the mortgage of course does not and you are betting on rent increases. It's just like P/E returns...they only make sense if you are comfortable with debt to juice returns. I personally think you can't count on 100% occupancy and the hassle of being a landlord is so awful that the return is just not worth it for one property.[/quote]
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