Rental real estate is a great investment; at least it sounds like that on paper. All you have to do is purchase a good property at a good location, rent it out and see the cash flowing in. That being said, there are certain important things to be considered before purchasing a property to put on rent or even start advertising.
Since the realty market is tough, it is hard even for sellers or purchasers to make financial commitment. There is tight inventory competing in the industry for a smaller group of shoppers. In this challenging market, you need to know why you aren’t supposed to purchase the cheapest ones on the offer, and invest only in rental properties that are bound to fetch assured returns.
Mentioned herein are some of the top benefits of investing in rental properties –
It’s a tangible asset that continues to appreciate over time: The biggest advantage of owning a property is you also own a substantial asset, which will only grow with time. Many people stop themselves from investing in different financial instruments, but those people don’t hesitate to invest in properties as they know they would be a safe investment. The appreciation in property rates is one of the biggest driving factors. Though the rate of appreciation is not guaranteed, even those in less populated localities see an increase in their value of realty investment as time passes. And, even if the market is bad, people never lose the capital, unlike mutual funds.
Tax Benefits: The rental income that you get may be exempted from tax if you don’t get the total cash flow post the expense deductions. This also means that the mortgages are being paid for and you also get more than the net property owned by you; above all you don’t really have to pay taxes for the money that is being used for doing all of this. And, if you have taken a property loan, you can charge off the entire interest portion paid every year towards tax deduction.
Ability to Earn Rentals without Investing Full Money: Rental properties can be owned just by paying a small percentage as down payment, and then earn handsome revenues. This also means that with a small amount you can take ownership of the property and its equity as well. After being purchased, the property secures the debts and you don’t need to pledge any of your other assets.
Additional Monthly Income: You start generating an additional monthly income from your rental property. The rents coming every month are of course much bigger, but a large part of it goes towards mortgage, maintenance etc., but you also get to keep a good amount. It is your property that generates this amount every single month, and you don’t really have to do a part-time job to earn that amount.
Therefore, it makes complete sense to invest in rental properties instead of a second home, and studio apartments, as well as commercial offices make smarter investments that the traditional homes.
Moreover, instead of investing a lot of money in a luxurious bungalow, guest house, or a high-end condominium, it makes more sense to invest smaller chunks of money on multiple properties. This ensures that even if one of the properties is left unoccupied, you still continue to generate stable monthly revenues from the rest, and you aren’t financially dependent on just one particular property.
Author Bio – Dino Pearson is an online marketer for John D Wood London, who has been working in the realty industry of past 7 years. He believes that smart investments in realty markets can potentially transform the financial position of an individual.