There are at least two kinds of landlords. The most obvious is the investor landlord. But often homeowners find themselves a landlord through a different route. Maybe they’ve inherited a property, found a great buy or decided to rent out their own home because the sales market is not strong enough.
For the new real estate investor, there is much more to consider than how much rent you can charge or how to find a tenant. Rental property ownership can offer different kinds of financial and other benefits: Here are a few key points to consider
Property appreciation and passive income wealth building:
- Real estate increases in value, on average 5% per year. It’s a great way to increase your net worth. Once your rental properties are paid off, you can use the earnings to supplement income or early retirement
- A professional management company can find and manage tenants who pay the rent on time, keep vacancy to a minimum and can control the nickel and diming for maintenance that is so common to renters, is more than worth a reasonable management fee. Their knowledge and help can bring you a steady stream of income.
- If you lose your primary source of income, owning investment properties can diversify your income and give you a cushion.
- If more volatile forms of investments make you nervous, you can relax and know the returns on real estate are fairly steady. Stock values can fall or disappear, real estate isn’t going anywhere and as they say, they aren’t making any more of it.
Rental properties can be found anywhere and in any price range:
- It has been a buyer's market for quite a while now. With an experienced property manager it won’t be too hard for you to find a home for sale that will fit your budget. Now is a great time to buy a rental property. Homes prices are still low enough to find good buys.
- If you have a personal property that you could turn into a rental property, this is a great option! Would you feel more secure in the stock market or in the residential real estate market?
Rental income is taxable but you can deduct most of the expenses related to your rental property. Consult a professional accountant for what may apply to your tax situation. Here are some short and long term tax advantages:
- Business expenses; property management fees, phone, supplies, attorneys, accountants, computers, office equipment, and more
- Insurance; your landlord insurance policy is deductible.
- Travel and entertainment; if you travel or entertain related to your rental property; those expenses are deductible.
- Home office; if you meet the IRS guidelines, a home office is deductible.
- Interest; this can be a significant deduction on your taxes. Not only does this include your mortgage deduction but also any credit card interest on business expenses for your rental.
- Depreciation; you can take an annual deduction that reflects the decreased value of the property caused by wear and tear.
- You can actually deduct the purchase price of the rental property from your tax return over a period of 20 years or more.
- Repairs and upkeep; any repairs and maintenance costs for upkeep are fully deductible.
- You don’t pay taxes on the increased value of your investment until you sell. With good strategies, you can keep that to a minimum.
- It doesn’t take too much cash to buy real estate and if you already own a home, then you don’t need any. A minimum down payment is generally all you need to start real estate investing. Once you get started, you can add more real estate by leveraging what you already own.
- If you do have other investments, real estate allows you to diversify; a very important component to investing.
Unless you can take time off from work, fun and family, your best bet is to hire a professional property manager. They can take over the day to day tasks that are necessary to maintaining your investment. The experience, advice and income management they bring will provide peace of mind and free you up to earn more money or enjoy life. Everyone knows that the second you leave for vacation, the renters or your house will need something.
- Unless you can take time off from work, fun and family, your best bet is to hire a professional property manager. They can take over the day to day tasks that are necessary to maintaining your investment. The experience, advice and income management they bring will provide peace of mind and free you up to earn more money or enjoy life. Everyone knows that the second you leave for vacation, the renters or your house will need something.
- A lot of people that start with one rental go on to invest in more properties. Some even leave a regular job and become full time real estate investors. Setting your own hours and being your own boss comes with its own set of benefits.
If the idea of owning rental property sounds interesting or you just want to wait out the sales market, consider working with National Property Management. We can advise you on what to buy and where. This will help you to maximize your investment dollars with no obligation. No investment should be made without research, education and professional advice.