Is it Better to Pay Cash for a Rental Property?

Keep reading to learn the benefits and drawbacks of paying with cash, what cash on cash return to aim for, how much cash flow a rental property should bring in, and more.

Is it Better to Pay Cash for a Rental Property?

There are several reasons buying a rental property with a mortgage can be a smart idea. For one, mortgage interest is a tax-deductible expense. It’s also easier to save for a down payment than buying an entire rental property outright with cash. 

What is a Good Cash on Cash Return for a Rental Property?

Your cash on cash return is compared to the cash spent out of pocket, while your return on investment measures the returns on your entire investment, including any loans you took out.

How Much Cash Flow is Good for a Rental Property?

To calculate a rental property’s cash flow, take the following steps: 1. Determine the property’s gross income. 2. Subtract all of the property’s expenses. 3. Subtract all of the property’s debt service.

What is the 1% Rule in Real Estate?

In real estate investing, the 1% Rule states your monthly rent should equal a minimum of 1% of the rental property’s purchase price. This rule ensures the monthly rent will exceed the property’s monthly mortgage payment (if bought with a mortgage).

What is the 2% Rule in Real Estate?

The 2% rule uses the same idea as the 1% rule, but this rule says a rental property is only a good investment if the passive income every month is equal to or higher than 2% of the original purchase price. It’s calculated the same way as the 1% rule, but with 2%. 

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