Is It Wise To Take A Loan To Build Rentals?

Is It Wise To Take A Loan To Build Rentals? | Real Estate In Kenya

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@iseektruth64 Жыл бұрын

Great information! You lay out some of the benefits and risks very well, thank you! I wonder though about one thing. The example you gave of a person who took out a loan to build rentals for which he makes 19k monthly payments to service the loan. In your example, the person gets only 8k from the rental property and you say that this is a bad scenario. I agree, to a point. I think this situation may actually work out if the person is young enough and they have a salary where they can effortlessly cover the difference. This scenario of course would not work for someone who is looking to depend on the rental income for survival. If this person is young and has a good steady income from a job, he could consider the money that he pays out of pocket as an investment on the property until it is paid off. The advantage is that the rents will continue to rise periodically to help him pay off the loan faster. Also, the property will realize capital gains and be worth more than he paid for it when it is paid off. Also, by having constructed the building, he locks in today's lower construction costs. If he were to put that money in the back waiting until he has enough to build without a loan, the construction costs will have gone up significantly over that time! By taking the loan and paying out of pocket to service the loan, it as though he were investing in the stock market where he would get the fruits of his investments in the future, not on a monthly basis. Again, I agree with you that if someone depends on the rental income to survive, such as a retiree, then this situation definitely would not work! Also, as you have said, it is prudent for everyone to do their due diligence and do the math to find out their own personal risk tolerance! Keep giving us the good info!