Beyond shelter, homes give people a sense of being rooted. When we have a place to call home, we acquire a certain level of personal power due to the security and freedom that the place brings us. This is why the most common aspiration for Americans is the dream to own their own home.
But for those who are not at the stage where they can buy a property of their own, the next best thing is renting. Renters view where they live as a representation to the home they will eventually own in the future. And this is why the rental property business will never go out of fashion.
Owners of rental properties meet an important social need. Other than serving the basic need of providing shelter, they help people feel close to the prestige of owning their own home. This need for this status is one of the biggest reasons why good rentals are always in demand.
Also, with the cost of homeownership rising out of most people’s reach, the demand for quality rental properties is even stronger. If you have been toying with the idea of investing in rental properties, this article will convince you of the wisdom of making that move today.
Why you should own rental properties
- Cash flow via rental income
- Get help paying off the mortgage
- Income from property value appreciation
- More control over the asset
- Rental properties offer several tax benefits
- Portfolio growth by leveraging rental property equity
Everybody is looking for a way to make more money and that is why “side hustle” has become a new buzzword. But making more money is difficult if your income is tied to how much time you spend on a job or doing tasks. The best way to make more money consistently is to find a source of income that is separate from your time at your real job.
Rental properties offer that opportunity. A rental property can be a constant source of additional income for its owner. In fact, it is one of the few investments where the owner can start earning income from day one.
Another good reason for owning rental property is that the ongoing cost of operating the property will be shouldered by the tenants. Usually, the only cost the property owner has to bear is the initial cost of acquiring the mortgage for the property.
Afterward, the landlord can use the rent paid by tenants to cover the maintenance costs of the building as well as its monthly mortgage payments. What this means is that the owner of a rental property uses other people’s money to pay for their assets.
Although it may fluctuate in the short term, property prices invariably rise in the long term. This is due to a simple reason. Real estate is based on a finite and essential natural resource, land. As populations grow, the quantity of available land decreases.
This places a demand on land and pushes up the value of the structures that are on the land. As a result, over a relatively short period of time, a rental property can experience substantial growth in its value depending on its location. The property owner can then capitalize on this appreciation by selling the property when its value is highest.
Buying investment real estate gives investors more control than, say, mutual funds, or similar investments. When buying mutual funds, investors only have control over what they buy and when they sell it, subject to the conditions imposed by the funds’ manager.
With a rental property, this is not the case. A property investor has full control over the type of property they buy when they want to sell it, and how the property is managed. Since there is no entity between the investor and the asset, owning rental property offers investors more freedom.
There are numerous tax benefits to owning a rental property. Several of the costs associated with the operation of the rental are tax-deductible. These include improvements made to the property, necessary expenses, and depreciation.
Basically, landlords can deduct what they spend on mortgage, insurance, maintenance, legal fees, and even natural wear and tear to the physical structures and systems of the home. These tax deductions can be made legally and is one of the most important ways that rental property owners make money on their investments.
It is possible for owners of rental properties to use their first rental property as the foundation for acquiring several other properties. And they can do this without putting down money toward the purchase of a new property. This is possible when the property owner leverages the equity in the rental to finance the purchase of another property. Successfully managing one rental property can set a property investor on their way to true financial freedom.
Finally, owning a rental property does not require any form of expertise. As long as you can meet lenders’ requirements and abide by your city’s landlord-tenant laws, the door is open to you.