Investing in a rental property may seem like a frightening process initially. Immediately, the financial and legal risks associated with purchasing can be enough to deter one from the idea. Inevitably you may be faced with periods of vacancy, repairs, and tenants who may not be perfect, but if you can get past these minor bumps, you will recognize the benefits largely outweigh these momentary run-ins. With the ownership of a rental, comes valuable benefits to the owner; unfortunately sometimes these go unnoticed. Let’s look at some rewarding aspects to owning a rental property. You may be pleasantly surprised!
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 daily cash flow considerably. Given the rental income exceeds the cost of the property, you can rely on income that is predictable and consistent, allowing you to budget your finances accordingly.
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, thus adding to your net-worth. This growth can come in handy for future purchases you may wish to fund.Financial leverage is another key asset connected to purchasing a rental. You may fund your down payment with the equity in an existing investment property, such as the house you live in. This can be done through a home equity line of credit.
Variety of Investments: Why not diversify your retirement plan with a different type of investment. While many have pension plans and stocks in place, owning a rental provides an additional means of investment that is tangible. While some investments can result in disappointment, rental property is reliable in the sense that it will continue to develop income for your retirement.