Let’s run a scenario. Assume:
- A down payment of 20% of the purchase price,
- A mortgage for 80%
- An amortization of 25 years
- No positive cash flow for 25 years from the investment (break-even)
The tenant would have paid off your mortgage.
The return on your down payment is 5 times the amount you invested.
Now add to this that property values should at least double in 25 years, the return on your investment is 10 times your down payment! If the amount invested was $100,000, the value at the end of 25 years, without taking into account any positive cash flow from the rent, would be $1,000,000. Not a bad pension amount.