Long Term Rentals in Central Ohio
Long term rental properties are a great way to generate passive income, diversify your investment portfolio, and provide financial security for you and your family.
Why Invest in Long-Term Rentals?
There are three main benefits to investing in long-term rental properties:
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Passive Income – Long-term rentals can provide income with relatively little active involvement. Sure, you have to find new tenants every couple of years and address the occasional maintenance issue, but the overall time commitment can be minimal compared to many jobs.
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Diversification – Financial experts always talk about diversification. This doesn't only apply to the stock market. A diversified investment portfolio may consist of stocks, bonds, and real estate (among other things).
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Financial Security – Unlike stocks, real estate is tangible. While real estate values can fluctuate over time, it's highly unlikely for the value to hit zero. I can't say the same for those shares of Blockbuster stock that you purchased in 1997.
How Do Long-Term Rentals Make Money?
This is where things get exciting, but it can also be a bit complicated at the same time. You often hear horror stories of landlords whose rental income doesn't cover their mortgage, but did you know rental income is just one of several ways to build wealth through long-term rentals? With proper research and planning, you can structure an investment portfolio that generates financial benefits on multiple fronts from the same property.
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Rental Income – This is the most obvious one. While rental income can vary by neighborhood and price point, the average in Central Ohio is about 25% above the mortgage payment. For example, if your mortgage payment is $1,000, you could receive $1,250 per month in rent—a $250 monthly difference before other expenses.
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Automatic Savings – So you're bringing in $250 more than your mortgage payment each month in the above example, but the $1,000 mortgage payment isn't all an expense. While a portion goes toward interest, taxes, and insurance, some also goes toward paying down your loan principal. That's equity in your home that you're building automatically with each monthly mortgage payment.
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Appreciation – Home values have historically increased over time, although appreciation rates vary by location and market conditions. I know 3% doesn't sound like much, but keep in mind your investment is leveraged by a mortgage. For example, if you put 20% down on a $100,000 home, your initial down payment is only $20,000. If the home increases in value by 3%, that's a $3,000 increase. Compared with your $20,000 down payment, that represents a 15% gross return before financing costs, transaction expenses, and other ownership costs.
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Tax Savings – Did you know you may be able to deduct expenses such as mortgage interest, property taxes, and home maintenance? These deductions can provide valuable tax benefits, depending on your circumstances. Always consult a tax professional to optimize your return.
Now that we understand how long-term rentals can generate financial benefits, let's look at a sample income report. Please note that these numbers are just estimates based on a sample property.
Purchase Price: $200,000
Down Payment: $40,000 (20% down)
Monthly Mortgage Payment: $800
Monthly Taxes & Insurance: $400
Monthly Rent: $1,500
Estimated Annual Maintenance: $2,000
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Rental Income
Monthly Rent - Monthly Payment = Rental Income
$1,500 - $1,200 = $300 per month
$3,600 per year
Automatic Savings
Monthly Payment - Taxes & Insurance - Interest (this will vary by month) = Automatic Savings
$1,200 - $400 - $500 = $300 per month
$3,600 per year
Appreciation
Purchase Price X 3% = Annual Appreciation
$200,000 X 3% = $6,000
***Note: this amount will compound each year
ROI
Rental Income + Automatic Savings + Appreciation - Maintenance / Down Payment = ROI
$3,600 + $3,600 + $6,000 - $2,000 / $40,000 = 28%
ANNUAL ROI = 28%
How Do I Get Started?
Now that you know some of the basics of real estate investing, it's time to take it to the next level. Below are links to some of my favorite investor resources, as well as some featured investment properties in Central Ohio. You can also contact me at info@alfriendgroup.com or 614-395-1776 to schedule a free investment consultation. I look forward to speaking with you soon!
Resources
Find Long Term Rental Properties in Central Ohio
Single-Family Investments
Multi-Family Investments
Navigate the Central Ohio Real Estate Market
Choosing the right real estate agent is the key to finding your perfect home, negotiating a price you can afford, and ensuring you unlock the door to your new home with a smile. And that’s where The Alfriend Group steps in. We’re more than just a group of agents; we’re local residents, active members of the community, and a seamless team dedicated to serving your every need as we help you find your dream home.
With over 20 years of residency in the wonderful city of Dublin and two decades of real estate experience, lead agent Kyle Alfriend of The Alfriend Group has the local knowledge and real estate expertise to help you find the right home in just the right location. His supporting team members at The Alfriend Group are available to answer your questions, ensure your needs are met, and help you discover Dublin.