Let’s make a deal: Know how to profit when investing

When considering investment property, you need to know how to make a profit. Remember to look for a good D.E.A.L.

»Depreciation is one way to maximize profits from rental property. Depreciation is a reduction in the value of an asset with the passage of time. It is an accounting method of allocating the cost of property over its lifetime. Depreciation represents how much of its value has been used up creating a tax deduction. Consult your accountant for the tax benefit details.

»Equity is the difference between what the property is worth and what you owe on it. When you own rental property, the tenant is making your payments for you and the property is building equity with each payment. Every payment made reduces what you owe and increases equity. You may be able to use your property equity to purchase another property.

»Appreciation is the increase in value your investment property will experience over time. The national average for regular property appreciation rates is three to five percent. Ask your Realtor about the appreciation in your area and what you can expect.

»Leverage is the ability to earn higher returns from your investment than the cost of borrowing the money to purchase it. In other words, your property grows in value well over the cost of borrowing the money to finance it. Leverage (in this case obtaining a mortgage to purchase a home) is helpful when you don’t have the money to purchase the property outright. Rates are at all-time lows, so if you don’t have a mortgage lender, ask your Realtor.

The biggest advantage of them all is the positive cash flow you should receive from your rental property. Talk to your Realtor to get started.