Have you considered investing in income property but have yet to do so? While it is perfectly normal to feel apprehensive before making a big decision such as purchasing real estate, there are many benefits to owning rental property, particularly since homeownership is at an all-time low. The fact is that not only have home values risen greatly in recent years making homeownership difficult for first-time buyers, but also, young Americans appreciate the flexibility renting offers, as these individuals are waiting till later in life to get married, have kids, and purchase property. These factors combined have led to a boom in the rental industry, making this the perfect time to invest in real estate. However, there are a variety of other benefits to owning income property as well; here is a quick overview of just a few of these benefits.
Provides a Passive Income Source
One of the more obvious benefits of owning income-producing real estate is that these properties provide a passive source of income. This means that your property will provide you with a recurring income that will require little effort on your own part; particularly if you enlist the help of a property management firm. This will increase your cash flow, and it can help to supplement your regular income.
Tenants Help Pay for Your Investment
By owning an income property, not only will you benefit from a passive income source, but you will also benefit from the fact that your tenants, not you, will be the ones paying your mortgage. This effectively increases your net worth each month as your tenants will be paying off your investment through their rent. In this way, an income property can become a savings account that grows without you depositing money into it. Over time your renters will slowly pay off your mortgage until it is gone, leaving you with a significant asset that you can sell, or continue to rent for a complete profit, thanks to your tenants paying for your investment.
Diversify Your Investments
It is likely that you already have investments that you have made either on your own, or through a 401(k) or some other kind of investment program through your work. However, owning rental property allows you to diversify your portfolio. Having your money invested in different areas can help to add a layer of protection against risks, and it can also help you to better take advantage of potential positive swings in the market.
Become Your Own Boss
Let’s face it, not everyone is cut out for a 9-5 office job. If you have been looking for a way to escape the corporate world, or to at least cut back on your hours, owning rental property could be the way to achieve this dream. Once you own enough rental properties, you may come to a point where you are able to decide to leave the business world, and become your own boss. This will provide you with the unique opportunity to make your own business decisions, as it will be up to you to decide what properties you invest in, how you manage these investments, and what tenants you accept.
Potential Tax Write-offs
Another great benefit of investing in an income property is the tax benefits that come with doing so. The fact is that rental property owners are entitled to huge tax deductions. For instance, you can write-off your insurance, maintenance and repairs on your property, travel expenses associated with maintaining your property, as well as your property taxes. You may even be able to write off interest from your mortgage as well as interest paid on any credit cards used to perform maintenance on your property. Additionally, income from rental properties is not subject to self-employment taxes. These tax benefits combined can help to make owning income property an even more profitable venture. However, it is important to consult an accountant who will be able to help you take the full advantage of these write-offs.
A Hedge Against Inflation
Many people fear the effects of inflation, and this is understandable. Consider this; the average cost of gas in the United States in 1970 was 35 cents a gallon. As of January 2018, the cost of gas has risen to an average of $2.50 per gallon. This makes it reasonable to believe that gas could reach five or six dollars a gallon in the coming decades, which would inevitably correlate to an increase in inflation across the board. While an increase in the costs of living can seem overwhelming to consider, this inflation is good news for those who have invested in property. This is due to the fact that inflation will lead to an increase in rent costs and property values, making your income properties even more valuable and profitable than ever before. This is why real estate is often referred to as a “hedge against inflation”, as real estate investments have historically shown the highest correlation to inflation when compared to other assets.
Provides Long-Term Financial Security
The way in which the value of income properties appreciates over time, and the passive income these properties provide, means that real estate provides investors with long-term financial security, as your investment will continue to bring financial rewards even into your retirement years. With that said, real estate investments can still be risky, which is why it is important that you thoroughly research locations before closing the deal on a property. However, over time real estate has proven to be a more secure long-term investment than other business ventures, making real estate investments a good option for those looking to provide for their future financial security.
Whether you are looking for additional income, you want to get out of your 9 to 5 job, or you are merely looking to make investments that will help to ensure your financial security in your golden years, there are many benefits you could gain by choosing to invest in real estate. Contact us to learn more about the benefits of owning income-producing real estate, as well as for advice on how to go about making your first investments.