Why invest in Real Estate?

KMPH is reporting that housing in the Fresno area is cheaper to buy than to rent.  All over the state, occupancy rates are rising, and rental rates are rising.  With sales prices still remaining very low, and mortgage rates also remaining very low, this is a great time to purchase an investment property and start earning positive cash flow.  If you're wondering how that works, please allow me to explain..
Today there is a listing for a 2 unit property on East Dakota Ave listed at $107,000, so lets use that property as our example.

First, lets make some assumptions.
1.  You're going to put $7000 down on the property, and borrow $100,000, seller is paying closing costs.
2.  Your interest rate is 7% (probably much higher than what your actual rate would be in this market)
3.  You rent the units out for $500 per month (that's probably less than what you'll actually rent the units for).

And you're going to have some expenses...
$50 per month for landscaping maint
$100 per month per unit management fee (10% of gross rent collected)

With these figures, your mortgage (impounded) will be approx $700 per month.  When you add your monthly expenses to that, you're up to $850 per month.   Your gross rents minus your monthly expenses leaves you with $150 per month cash flow, or 25% cash on cash return.  That's a great return on investment, and it's just one example.  The Fresno area is full of properties you can purchase cheap and rent for positive cash flow.

Where else can you invest $7000 and earn 25% return (or greater, because rents are increasing, not going down).

Can you put $7000 in a money market account and earn 25% cash on cash return every year?  You're not likely to see a 1% return on that money.  Can you put $7000 in the stock market and earn 25% cash on cash return?  Not likely, but it is possible.  It's also possible you'll lose your $7000.

The beauty about real estate is that it isn't going anywhere.  If it burns down, your insurance policy will compensate you.  As long as you pay the mortgage, taxes and insurance, your investment will always be there at that address.  Managed properly, it's the safest investment available

"Well, real estate is always good, as far as I'm concerned." - Donald Trump