Investing in real estate isn't for everyone --- and it isn't without its risks.  But if you have some money to put into an investment as a down payment, and if you have financial reserves with which to cover maintenance costs and months without rental income, you might be interested in learning more.

The easiest case study of real estate investing in Harrisonburg is to consider the purchase of a two-story townhome built in the last ten years.  There are quite a few neighborhoods where these townhomes can be purchased, somewhere between $130k and $160k:

• Avalon Woods
• Beacon Hill
• Blakely Park
  
• Harmony Heights
• Liberty Square
• Wellington Park

These two-story townhouses in these neighborhoods will likely rent for between $850 to $950 depending on the age and condition.  View them on a map here.

Next, let's assume a great deal on the purchase (we'll shop until we find that deal) with a purchase price of $129,900.  However, we'll make lots of conservative assumptions as we continue.  For the time being, assume:

• $850 / month rental income
• Half a month's rent lost each year between tenants
• 20% down payment, the balance financed at 5%

This results in an estimated $927 of positive cash flow in the first year...



This might not seem like much, but when combined with a few other investment benefits, it starts to add up, even in the first year.

Year 1 Investment Benefits

• $926 positive cash flow
• $1,533 principal reduction via rental income
• $638 tax benefit for loss based on depreciation
• Total "Gain" = $3,097

It gets even better when considering the property over five years:

• $6,990 positive cash flow
  
• $8,492 principal reduction via rental income
  
• $2,394 tax benefit for loss based on depreciation
• Total "Gain" = $17,876

And if we assume a meager 2% of appreciation per year, then, over five years we'll see:

• $6,990 positive cash flow
  
• $8,492 principal reduction via rental income
  
• $2,394 tax benefit for loss based on depreciation
• $13,520 appreciation
  
• Total "Gain" = $31,396

Do recall, that you put 20% down ($26k) and paid some closing costs ($4k), so after five years you have more than doubled your money.

There are plenty of variables to consider when buying an investment property, but the basics of the cash flow are the first to thoroughly understand.  For a head start on everything else you need to learn, review this detailed investment analysis.