Are rental properties profitable?

[Jake Arbour]

Hi everyone, I am very new a the real estate investment world. I have seen the cash flow of many properties being only a couple of hundred dollars a month. How can this be very profitable if the income is such little. Would I need to own many properties for the incomes to add up?

[Tom Shepard]

Also don't forget about the depreciation!  Cash flow is certainly the meat, but depreciation is the cheese.  That is where the government assumes that over time the property deteriorate and become less valuable.  Everything I have seen depreciates in a straight line over 27.5 years.  (Just the value of the structure, not the land)  With that you end up not paying taxes on much or sometimes ANY of the cash flow you generate, so that cash is worth more than what you might get if you got a $300 a month paycheck!  And then, if you're lucky and chose the right property at the right time in the right location, you might also get the icing on the cake:  appreciation in the value of the property!