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Benefits of Owning Rental Property
In these uncertain times, investing in property is seen as potentially risky, but with research and due diligence, purchasing real estate to rent it out still makes good business sense. Here are 5 reasons why you should invest in rental property:
1. Excellent Source of Passive Income
The prevailing wisdom says that one should have multiple income streams to be financially stable. Owning rental property provides a regular monthly income with little effort. Of course, as a landlord, you have a responsibility to maintain your property and pay the taxes, but for the most part, this is a monthly income for which you’ll have to do relatively little work. You’ll attract tenants if you’ve researched your local market, purchased an appropriate property, and set a monthly rent that covers your costs.
2. Investment Opportunity of Rental Property
Investment in rental property is not just an excellent way to increase your monthly income, but it can also help you grow your income long-term. If you’ve done your research and purchased a property in an area where it’s in demand, when you eventually come to sell several years later, you’ll receive a good return on your investment. This strategy is one for the long term, and if you plan on doing this, we advise that you hold on to the property for at least ten years before selling it. This should give you enough time to see a considerable return on your initial investment.
3. Diversifying Your Portfolio
Another benefit to owning rental property is that it allows you to diversify your investment portfolio. By spreading out your investments across multiple properties, stocks, bonds and other investment vehicles, you reduce the risk to yourself (it’s never a good idea to put all your eggs in one basket!) and increase your chances of seeing a good return. Diversification makes sense for the savvy investor.
4. The Demand For Rental Property is Increasing
The rate of home ownership in the U.S. is in decline. Consequently, demand for rental property is on the up. There are several reasons for this drop, chiefly that wage increases have not kept up with the increased cost of property or the increase in the cost of living making home ownership out of the reach of many.
5. The Tax Benefits of Being a Landlord
As a property owner and landlord, there are many tax benefits available to you. These include:
- Deductibles – some operating expenses, such as property taxes, utilities, insurance premiums, maintenance costs and loan interest, are deductible. Other deductions are available depending on your circumstances and the type of rental property you own. Check in with your accountant to ensure you claim everything you’re entitled to.
- Avoidance of the FICA tax – the Federal Insurance Contributions Act tax is a tax imposed on the earnings of an employee and the employer. However, someone self-employed is not liable, as rental property income is not classified as earned income.
- Defer paying capital gains tax – you can defer capital gains tax by using the 1031 exchange. This allows a property owner to defer capital gains when selling a property by buying another property within 180 days of selling the first.
- There are other tax benefits that you can realize. We advise that you speak with your accountant to ensure you understand your tax obligations and how you can minimize your tax burden.
Ready to Invest? Contact Invest With Ben To Get Started!
Buying rental property is still a worthwhile investment. While there are obligations as a landlord, property continues to appreciate in value and is worth the time and effort it takes to research where to buy and how much rent to charge to secure your financial future. I help everyday people understand the key benefits to investing in private and commercial property to create new revenue streams. Contact me today or learn more at my website: Invest With Ben.
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