Rental property investments are considered to be one of the more realistic approaches to accumulating wealth. Rental properties often provide reliable income over the long term. Over time, you may acquire enough rental properties that they become a significant sources of income, enough for you to quit your job and retire.
The objective is rather clear-cut. You’re taking out a mortgage to buy rental property and collect rent to pay the monthly mortgage bill and to cover the expenses of owning that home. Ideally, the income generated from rent income will exceed the costs of maintaining that home.
Once you’ve repaid the mortgage in full, all rental income after that point is positive cash flow for you. You can stash the profit or reinvest it in another rental property.
Here are the prevalent advantages of owning rental property:
Stable income: Usually, rent income is rather reliable, given that you find decent tenants. It is also income that does not require too much time out your everyday life.
Appreciation: Although it is not guaranteed, there is the likelihood that the value of your property increases over time. In addition to the rent income, your property could worth more years down the line, if and when you decide to sell it.
Tax deductions: You can obtain tax deductions on mortgage interest on your rental property, travel expenses for the purpose of property maintenance, and possibly insurance, taxes, lawn care and damages to property. While it seems relatively easy to dip your feet into these types of properties, you should first conduct thorough research and create a plan. Buying a rental property is a major financial undertaking, so you should evaluate whether you are fit to take on such a venture. The major concerns include:
Liability: As the landlord, you are responsible for legal matters that arise in direct relation to your property. A lawsuit from a broken step on the stairs is an example of the risk that comes with owning property.
Unexpected expenses: Things happen. You may find that a major home repair is needed and it could cost more than you expect. Be prepared to shell out big bucks to fix your property to remain in compliance of building codes.
Bad tenants: Any landlord will adore a tenant who pays rent on time, takes care of the property and doesn’t get complaints from neighbors. On the other hand, there are tenants from hell that are irresponsible and create problems that may end up costing you money. If you think you can handle a rental property, see the next step: