Owning a tenant property can be an excellent investment. You buy the property, rent it out to earn income, and if the property appreciates during that time, you get the benefit of that increase in value, too. Of course, real estate investing is not without its risks, but that is true of any investment. Real estate investing offers some significant benefits as long as you can understand that patience and knowledge of the market are paramount.
Let’s see how beneficial it can be to invest in a tenant grabbing property:
You are your Own Boss
Consider real estate investing as your second job (or even your first if you can do this full time), and it’s a job where you are the boss. You make the decisions about what property to buy, what rental prices to charge, and what tenants to accept. You decide how to maintain and manage your property. There is no dress code, no set working hours, and no meetings with the boss.
Your Renters can Pay your Mortgage
If you buy your rental property using a mortgage, you will have monthly payments to make on it. If you are able to rent out the property for more than the monthly mortgage payments, then your renters are paying your mortgage. In essence, you get to buy the property and let it appreciate, while they are paying for you to do this. As you hold onto the property longer, the percentage of your monthly payment that is applied to principle instead of interest increases. Thus each month, the amount of equity you own in the house increases, and it’s all paid for by the tenants.
Rental Properties can Yield Real Income
A portion of the rent you receive each month will probably be used to cover your mortgage payments. There will also be money from the rent that will have to go towards maintenance costs, management fees, and possible vacancy costs. After you subtract all of those costs, most landlords still end up with a positive cash flow. This means real income flowing to you on a regular basis, month after month.
Appreciation of a Leveraged Asset
Real estate prices fluctuate, but in general, they usually increase over the long term. This means that when you decide to sell your property, you could get a sizable gain on the sale, in addition to the monthly income you’ve been collecting for the duration. If the property is mortgaged, then it is a leveraged asset. Leverage can give you a greater return on investment (ROI), because you get to collect the entire gain in value, even though you only invested a small portion of the purchase price yourself.
Income Tax Write-offs
There are some excellent tax deductions for owners of rental properties. You can write off all of the interest you pay on your mortgage. You can write off the expenses of running your rental business, such as insurance, repairs and maintenance, and management and professional fees. You may even be able to write off your property taxes and travel expenses. In addition to these deductions, you can also depreciate your property based on a fixed depreciation schedule, even though while property is actually increasing in value. Talk to an accountant for specifics on how these write-offs could work for you.
Outperform the Market
If you want to be a successful property investor, you have to outperform the market. Do it by adding value or make improvements that will benefit you in the long term. Rather than opt for a newly-built establishment – where you may be compelled to pay a premium – it’s best to opt for an older, sturdier property. Don’t forget to check the area and write down all the amenities and facilities. You can also take help from online letting agent. Thus, you’ll be able to give straight answer to potential tenants.
Investing in property and renting it to tenants can be an extremely profitable business. Of course, prior to getting started, you must know the market like the palm of your hand. It’s vital that you buy houses or flats in locations where want to live. Choose a niche and a target. Do you want to buy apartments to rent to students, or houses for families? Get your priorities straight and talk to a realtor if you’re just getting started in this domain.