Top 5 Reasons You Should Invest In Rental Property

When it comes to looking for an investment with high reward, and just as much risk, real estate has been a popular focus. Effective business strategy in real estate often produces wealth in the long term, while passively building your investment. With so many people considering this big jump into real estate, it’s wise to weigh the positives against the negatives.

And here are the 5 reasons to invest in rental properties:

You’re The Boss You’ve Always Wanted

When you take the leap into investing in property, you finally get to become your own boss. You get to decide on every aspect of the home you are buying and renting. How much? Which home to invest in? What tenant will you rent to? These are all questions that you as your own boss get to ask while managing the property.

The Tax Advantages

As a property owner, you’ll receive tax deductions. The interest on your mortgage as well as any purchases towards the property can be written off. Insurance towards the home, any maintenance issues, property taxes, and any professional fees can be also written off.

The Leverage

When you decide to invest with a small amount of your own money, and borrow the rest from a lender, you often get 4x times the amount you borrowed. For example, when you put your efforts into a $400,000 home, you only need 25% of the price, allowing you to leverage $100,000. This gives you control of 4x times your investment.

The High Cash Yield

Assuming you are looking for tenants to occupy the home you’re investing in, you will be able to receive rental income. By having one tenant pay $1,000 a month for rent, your mortgage payment could only be $600 a month. That leaves you with $400 to go in straight to you right? Not necessarily.

You always have to assume that about 10% should be set aside for maintenance and times there isn’t a tenant occupying the rental. That leads you to put $100 of that into an account to deal with potential issues or risks. When all that is done, that still puts $300 in your pocket.

The Tenants Will Pay Your Mortgage for You

Initially when you pay on a typically popular loan like a 30-year fixed rate mortgage, a significant portion of the money paid goes to the interest over the principal. Over the course of time, at 15 years the interest and principal are split 50/50. This ultimately means the longer that you’re holding a property and having a tenant occupy it, the more of the loan they are paying down.

Every year that you have the property, is a year that the tenant’s money is paying off your debt. When all is said and done you should always speak to an accountant or real estate property management company to weigh all your options and see what would be a better fit for your lifestyle.

Being a property owner is a huge commitment, with a lot of risks. However, if planned and handled correctly, the investment can yield a very high financial success.