<prompt> Human: One of my long term goals has been to buy a property to rent out, but I dont get how people make money on investment properties. Can someone please explain? Example: Lets say I bought a small house for 100k, and rented out for 1,000 a month. Thats about right for my area. It would take me 8.3 years to earn my money back, and thats assuming we never had to make any repairs or anything. It seems like theres a lot better things I could do to earn money over 8 years with 100k!  <response>: OP - The other responses are all fine and good, but theyre missing one major thing. While it would take you 8.3 years to recover your 100k, you always still have the underlying investment the rental property. So after 5 years, you pocket 60k and still have a 100k property that you could sell at any time.Mortgages have nothing to do with this. In fact, having a mortgage on the rental will eat into your profits. The advantage of using a mortgage is twofold: 1. You can put only 20k down and still reap the 1kmonth income... meaning you earn 5 of your initial investment per month instead of paying all 100k up front and only earning 1 of your investment a month. This is called leverage basically using borrowed money to invest with.2. Interest rates are low right now, so you could pay the 20k down again, take your other 80k and invest it elsewhere, which may return more than the mortgage rates i.e. say mortgage rates are 4 but you could earn 7 in the stock market... you are better off borrowing as much money at 4 as you can and investing it in your 7 investment. This is called Opportunity Cost. 