After purchasing a property and renovating it into habitable condition, you have several options available: renting it is the first one you might consider.

Bear in mind that real estate essentially is a long-term investment. Properties you buy today, especially with a small down payment, will unlikely be highly profitable in the beginning. But as time goes on, your costs should remain relatively fixed while rents and values gradually rise. This means that a property on which you initially break even will, after a few years, show a substantial net income and subsequent greater value.

As an example, let's say you buy a house with a small down payment and rent it out for $700 per month. Your total expenses on the house are also $700 per month, which, except for equity buildup, essentially represent a breakeven situation. One year or possibly two years later you could rent the same property for $800 per month, allowing you $100 per month in positive cash flow.

In a similar situation, assume you have a second loan on the property that you will pay off after eight years. Once it's paid off, you're that much further ahead in net income because you no longer have to pay on the second loan. But more importantly, the second loan was paid off with money you derived from your tenants.

If you decide to rent the property, you have to choose either a long-term lease or a month-to-month rental agreement. The long-term lease (one year or more) has one primary advantage, that of securing the tenant over a long term and essentially limiting turnover and somewhat assuring a stable flow of income over the term of the lease. (I say "somewhat assuring" because you cannot entirely guarantee that a long-term tenant won't move out without regard to lease obligations before it expires.)

A long-term lease has two primary disadvantages. 

The first is that you've restricted the salability of the property because the lease would take priority over the buyer's occupation rights should you sell the property before the lease expires. (The lease and all rights belonging to it are conveyed if the property is sold.) 

The second disadvantage is that a long-term lease agreement restricts the amount of rent you can charge. Under a month-to-month rental agreement, about the only disadvantage is that your tenant is obligated only to occupy and pay rent in monthly increments. The advantages are that a short-term rental agreement does not limit the salability of the property, and you're entitled to increase the amount of rent
after 30 days. Simply renting out your property is definitely a proven method of realizing a reasonable yield on your investment. However, there is another method that offers tremendous returns and fewer hassles than simply renting out your property, and that method is a buy option.

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