Maybe you’ve come into an inheritance or received a substantial bonus at work. Or perhaps you’re looking for a way to invest your money that is lower risk and provides you with a retirement income. Either way, investing in a rental, or income property could be a good investment for your future.
Although there are some financial risks and legal considerations, once you venture beyond the surface, you’ll discover the benefits that make it a journey worth taking. But, how does one decide whether or not a property like this makes sense for you and your family right now? Let’s take a deep dive into the details.
First, what is an Income Property?
Income properties are real estate properties, residential or commercial, bought with the main purpose of earning money through renting or leasing the property to others. Often people invest in a rental property as an alternative to traditional investments like stocks or bonds that allows them to draw on that added income regularly, whether in addition to their regular salary or to provide income during retirement.
A few benefits that might pleasantly surprise you are:
- Tax Savings: Federal taxes are lowered significantly when you own a rental property. With the rental income you’ll be receiving, all maintenance and utility fees, taxes and insurance on your mortgage will be tax deductible. Often these deductions will place you in a lower tax bracket, providing you with immediate and long-term savings.
- Regular Income: Receiving rent cheques on a monthly basis can increase your monthly cash flow considerably. Ideally, the rental income exceeds the cost of the property so that you can rely on income that is predictable and consistent.
- Property Appreciation: Unlike some investments that can be volatile in terms of your return, typically rental properties often see an increase in value over time. This appreciation can add to your net worth and provide you with a valuable asset for future financial endeavours.
- Security: Unlike stocks that are unstable, with a home, the value of the property is more likely to increase than not. Whether you are in a busy city or a less populated area, as time passes properties generally see an increase in value.
- Financial leverage: As time goes on and you pay down the mortgage, you create equity in the home which you can draw on later using a home equity line of credit. Whether you are in need of a short-term loan to complete renovations, you want to consolidate debts, or you want to use the equity as a down payment for additional rental properties, you’ll have more options than just relying on credit cards or a typical bank loan.
Investing in a rental property has its share of advantages that can make it a worthwhile and rewarding endeavour. However, it’s important to note that it’s not without cons. If you’d like to explore this path and add a new dimension to your financial future give me a call at 705-315-0516 or click here to book an appointment. Together we can discuss your real estate investing options, look at mortgage solutions, and make a plan as to where and how you’ll save for the down payment too.