Real estate investing is one of the most stable and profitable investment pursuits you can do. You have solid equity that can be used to maximize your earnings, and the housing market is typically more stable than the stock market.
Among your many options for real estate investment, rental properties are generally regarded as more stable and often easier to maintain. Though we couldn’t possibly state all the reasons people love to invest in rental properties, here are fourteen of the most popular.
In other words, you don’t have to use your own money to make this purchase. You can borrow money from a bank or from an individual. Such an investment is one of the only times you can walk into a bank with $40,000 and get $400,000 back for use in generating profits.
Multiple Profit Streams
When you’re backing a rental property, you take advantage of all four of real estate’s primary profit streams: cash flow, appreciation, loan pay down, and tax benefits. With other real estate investments, such as a house flipping, you often miss out on certain tax benefits, continuous cash flow, and even appreciation.
Renting is Up
Though homeownership still claims the majority, the number of residents who prefer to rent is higher than ever before. People prefer the freedom they enjoy from allowing others to cover unexpected expenses.
They’re also not tied to a huge financial investment, and can pick up and move relatively easily. Furthermore, human beings will always need a place to live, so this is an investment that won’t lose popularity just because the market changed or a new tech gadget came out.
There will always be high demand for rental properties.
More Stable and Predictable
Though no investment is utterly stable, real estate is more solid than others. Occasionally, markets will crash without much warning, but the housing market is less likely to do so than nearly any other market.
Rental properties are among the most stable because even if appreciation slows down, you’ll still receive rent payments that cover your mortgage each month. This makes it a very low-risk investment.
As mentioned earlier, you have access to all four of the primary revenue sources in real estate, which sets you up for a higher return on investment. You receive regular rent payments as well as appreciation of the property as a whole.
What’s more, because you leveraged the purchase with the bank’s money instead of your own, you’re set up for a better return.
There’s not just one type of rental property to invest in. You can choose from apartment complexes, duplexes and fourplexes, single-family homes, mobile homes, office buildings, government-subsidized apartments, transient, and so much more. You’ll have your pick of options that fit your needs and interests.
Great Tax Benefits
Real estate entitles you to some great tax benefits, particularly if you operate in the realm of rentals. You can include all the following deductions on your taxes:
- Repairs on your rental property
- A home office for being a landlord
- Depreciation if the property loses value over time
- Insurance premiums for your property
- Interest on your mortgage payments
You may also be entitled to other tax benefits based on your city or state, which can be discussed with an accountant. The benefits of taking these deductions are obvious, because it means more profits are left over!
Low-Risk Exit Strategy
Rental property investments are a low risk for a variety of reasons, not the least of which is the simple exit strategy. If you don’t enjoy the business or you’re not making as much profit as you hoped, you can simply sell the property.
The market for selling properties is very good now, and they almost always appreciate in value, which raises your asking price. You’ll likely get more than your original purchase price, which puts you in the green even after you leave the business.
Your property is already an equity dream come true, and you have the potential to increase that equity. Every time you make a repair or update the property with things like paint, new carpet, renovations, etc., you raise the current market value.
Real estate is one of the few markets in which you have some control over the amount of value you get out of it. The more you fix up the property to match current trends, the more you can charge for rent and raise the final selling price.
Paid For Mortgage … Plus Profit!
As long as you fill your units, your mortgage payment will be covered. Some of the leftovers can go to repairs or a contingency fund, and the rest is straight profit.
Thus, if you purchase a $200,000 home with 20 percent down and a four-percent interest rate, your mortgage payments will be about $950 per month. When you consider that these homes may rent for about $2,000 per month, you’re looking at leftovers of $1,050, which can be collected or put toward future investments.
Imagine the profit potential for a commercial or multi-family property investment where the rent payments are higher and the mortgage lower. The continuous cash flow is a huge bonus.
How many investments can you make with insurance on them? If a tree falls on the roof, tenants trash the place, or you suffer a pest infestation, the property insurance will cover the damages.
You can even get landlord’s insurance that will cover the rent in vacant units so you can continue to pay the mortgage. How’s that for a no-risk investment?
Tried and Tested Results
A Memphis Invest survey revealed that one in every eight Americans has invested in real estate in some form or another. What’s more, major investors like Donald Trump and Warren Buffet say that all investors should diversify their portfolios with real estate because the returns are high and the market is stable.
Investors see incredible investments from rental properties regularly, and it’s not a difficult market to enter. You don’t need the experience and financial savvy of a FOREX trader to make a significant profit in real estate.
There’s something powerful to be said about the simplicity of investing in rental properties. You can do it yourself without the help of an experienced investor, and much of the information regarding a savvy investment can be found online. It’s fairly easy to learn, and the risk is low even if you make a mistake.
More Hands-Off Work with Green Residential
You don’t have to go anywhere near the property to make money. In fact, you can use some of your excess earnings to pay property managers to handle all the landlording, maintenance, landscaping, rent collection, eviction notices, and so on for you.
At Green Residential, we’re an experienced property management team that can reduce your load while maximizing your investment. We provide a number of services in the Houston and Katy areas that can save you both time and money. For more information, contact us today!