I can’t really wrap my head around it, you can have a tenant in there that maybe covers the mortgage, but it’s not really a good investment if you’re not getting a return?
Even if you use 500k to buy a property cash, wouldn’t that money be better off in the market?
In: Economics
People who invest in residential property, specifically houses, do it for the growth in equity, with leverage. Commercial real estate and apartments are good for rental yields, but the growth in value is usually very slow, or can even go backwards (for eg many shopping malls are now worth less than they were before covid). But the land value for houses has gone up over the past many decades. So even if the rent barely covers the mortgage, but the house value goes up by 5-10% annually, then that’s a good investment. Plus the leverage you have with the bank’s money, which you don’t get with other investments like stocks.
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