Rental homes can be the IDEAL investment in today’s market because they offer a much higher rate of return than alternatives without the volatility of ups and downs in the stock market. 
IDEAL serves as an acronym to identify the advantages of rental properties:
- Income from the monthly rent contributes to paying the expenses and a return on the investment
- Depreciation is a non-cash deduction that contributes a tax shelter
- Equity grows monthly as the mortgage amortizes due to some of each payment being applied to the principal
- Appreciation is achieved as the value of the property goes up
- Leverage can increase the return on investment by using borrowed funds to control a larger asset
The combination of these characteristics working together makes rental real estate a very good investment for today’s economy and years to come. Increased rents, high rental demand, good values and low non-owner-occupied mortgage rates contribute to positive cash flows and very favorable rates of return.
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Investing in a bank savings account? Consider that you’ll make less than 1% and will have to pay income tax on the earnings. On the other hand, when you contribute extra cash to your house payment on a regular basis, you’ll essentially, earn at the mortgage interest rate which is certain to be more than you’re earning in the bank.
re prevention initiative – the Home Affordable Modification Program (HAMP). Among the changes, borrowers who are struggling because of debt beyond their mortgage will be eligible for a secondary evaluation with more flexible debt-to-income criteria, and eligibility will be extended to investor-owned homes that are used as rental properties. Principal reductions will also receive a bigger role within the program, tripling incentives for investors that agree to write down an underwater borrower’s principal balance and offering these same incentives to the nation’s two biggest mortgage investors – Fannie Mae and Freddie Mac.
However, with interest rates as low as they have been in the last two years and the price of homes having come down considerably, it is possible that the standard deduction may be the better choice.
Interestingly, Americans live in much larger homes than most people in other countries throughout the world. The U.S. Census reported in 2006 that the average single family home completed had 2,469 square feet which was 769 feet more than in 1976.
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