Rental Income – The True Road To Passive Wealth
Do you know why owning real estate that generates rent is such a good investment? Yes, you get a monthly income, that’s the most obvious – and there are other benefits too!
- Your rental income is taxed separately and at a lower rate than your regular work income.
- You get a big tax write-off on the property and certain parts of the property which can significantly lower your already low tax bill.
- Generally speaking, rental real estate appreciates in resale value.
- You can increase your income regularly by increasing rents.
- You don’t have to trade your precious time for money!
This is one of the two parts of the My Freedom Blueprint that you can use to match or even replace your corporate income. What we do is help you develop the cash necessary – through our wholesaling and flipping programs – to purchase a rental home free and clear that generates $750 to $850 each month in cash after expenses.
We then help you repeat this process until you reach your goals!
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An example to think about…
Just for a moment, let’s compare 2 scenarios so that you can see the true power of income property. In these examples, we’ll assume that you’re working with $100,000 in cash that you’ve developed from our programs.
Example 1 – Mutual funds via a 401K or IRA:
Let’s say you get a really good return – like 7% per year on your $100K. That’s an annual income of $7,000, or about $580 per month.
Remember, however, that this is taxed at your normal earned income rate. Let’s say that’s 30% – which means that your $7,000 income is now reduced to $4,900 – or about $405 per month.
Which means, in reality, your cash on cash return is about 5% and that’s before we talk about what inflation does to eat away at the value of your money.
An income property:
You buy a house with your $100K and you earn a $9,000 annual income after expenses, or about $750 per month. This is a 9% cash on cash return.
You also take a depreciation on the building and your accountant does what’s called a chattel analysis so that you can write off non-structural components on the property. These include the AC units, windows, doors, appliances, flooring, etc.
So let’s say for the sake of argument that you can write off $5,000 each year which makes your taxable income from the property $4,000.
Now, this isn’t a tax lesson, we’re not accountants – this is just to give you a comparison. So that $4,000 is taxed at 10% which means of the $9,000 each year, you pay $400.
Not bad, huh?
Imagine if you had 10 of these!