Doubling Your Investment: Do Income-Generating Properties Pay?
Buying or selling a house is one of the biggest decisions most people will ever make with their finances and their lifestyle. Getting the best bargain in the purchase or making the most profit on the sale give buyers and sellers so much to think about that many may never stop to consider keeping that old house - or buying another - as an income-generating property. But the rewards, in savings, profits and problem-solving, can be high.
One option for buyers who otherwise might consider home prices beyond their reach is the property that pays for itself: a house you live in part of and rent the rest of. This offers not only an obvious balance of cost and income, but perhaps lesser-known benefits in taxes and mortgage. The rental units can be depreciated over time; considered to offset the rental income, this can lower your taxes on that income. At the same time, the rent's addition to your finances helps you qualify for a larger mortgage, and investors who occupy their rental properties can, under certain conditions, get interest rates lower than those who do not. (A professional like those at ERA Mortgage can tell you more.) Of course you'll want to decide if the demands of being a live-in landlord are for you (and find out if rent-control laws in your area might limit the return on your investment).
If being an offsite landlord is more appealing, you could always keep your current home as a rental after you move into the new one. Your long-tern familiarity with the home's features and condition could lend a certain confidence both to yourself and your potential tenants. As with any investment property, you'll first want to calculate whether the rental income will make up for the needed expenses. (This is another consideration in which a qualified real estate sales professionals can help, with his or her knowledge of the local rental market and its prospects over time.) And of course being a long-distance landlord has its headaches too, so you have to enjoy the challenge and be ready to meet the needs.
But if solving problems appeals to you, then you may even prefer a fixer-upper to your familiar former home. With a thorough inspection to answer any questions, and a realistic budget and disciplined schedule to handle all improvements, your outlays can prove to be well worth it. Renovations can range from reconfiguring the floorplan to simply replacing a now-unfashionable décor. The attraction of "move-in" quality can draw renters who share your appreciation of state-of-the-art living but not your passion for the do-it-yourself effort behind it.
Owning an income-generating property is not for everyone, but - from younger buyers offsetting their purchase costs, to seniors easing the expenses of their retirement years - it can be for all kinds of people. Talk to a real estate sales professional to find out if rental property would be double trouble or two times the success.
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