6 Reasons Why Rental Property Is The Best Way To Start Real Estate Investing
In 2021, there’s been a growing interest in rental property investment. Between historically small interest rates, steadily rising inflation, and the nature of Millennials to rent instead of buy, there are plenty of good reasons to invest. Add the fact that with an A-frame house, you can stand out from the rest of the rental market by offering a unique living experience that promotes sustainability, it’s easy to see why buy-to-rent is a good option.
However, becoming a landlord comes with its own set of pros and cons. Learning how to walk the tightrope of property ownership does require some guidance.
Currently, rental property investment is the most popular form of real estate investment in America. And it’s listed as the number one choice every year since 2012. So, why are so many people making the choice amidst the economic flux of an (almost) post-pandemic world?
Experts tell us there are a variety of worthy reasons to start renting out property. As long as you’ve done your research first.
Let’s go through six of the best reasons you should begin venturing into the blossoming territory of rental property investment.
1. Diversify your assets
Diversifying your assets essentially means putting your financial eggs in more than one basket. Many top investors get to where they are today by investing in multiple different markets. This way, the risk of loss is significantly reduced.
Investing in property is considered one of the least risky forms of investment due to the high level of trends and information provided for different locations.
Predicting a property’s value is a process that’s easily done and provides investors with a lot of control over their investment choice. The diversification of assets enables wealth to build steadily and predictably.
2. Keep rent inflation at bay
Inflation is something that affects every market. But the real estate market is one of the more manageable industries to monitor. This is because as inflation causes other prices to rise, so will the value of your property.
By leveraging to invest in property at a low interest rate, you can more easily ward off high inflation rates that threaten to lower the value of your property.
The demand for rentals is not going anywhere. In fact, several recent studies have concluded that Millennials prefer renting over buying. If anything, the rise of inflation only means that the market value of your property rises alongside it.
3. Have a retirement income
Another hugely beneficial aspect of investing in a rental property is the long-term passive income it provides. Passive income allows working individuals to continue growing their wealth without putting in any more work than their day job allows for.
If you rent out a property for long enough, a retirement fund can grow quite substantially—and it doesn’t require nearly as much effort or admin as a full-time job does. However, there are some maintenance and administrative tasks that property owners need to put in year by year.
4. Flexible selling options
If you at any point decide that being a landlord is no longer something you enjoy, selling property doesn’t have to be a particularly difficult or complex affair.
In fact, if you make changes, such as going off-grid that drive up a market value, you could sell your house at a much higher price than you purchased it for. An A-frame house is unusual, and this already makes it stand out in the market. If it has additional features that add to the value or make it more attractive, your property becomes even more appealing to those who recognize its potential.
5. Receive homeowner tax benefits
When taking ownership of a property in America, you may become eligible for homeowner tax benefits. In other countries, different taxation laws may apply, so it’s best to do your homework and ensure you know exactly what tax benefits you can claim.
US-specific tax benefits include:
● Repairs – Any costs you accumulate due to repairs can get deducted from your taxes but only if you file them in the same year they occurred. This deduction covers things like paint jobs, appliance replacement, or fixing broken infrastructure.
● Depreciation – If your property is providing you with income, the costs of the property can get deducted over several years.
● Insurance – Insurance premiums can also get deducted from your taxes if they’re related to your rental investment. This can include things such as disaster insurance, theft insurance, landlord liability insurance, and even car insurance if your vehicle is regularly parked on the property, or stored there.
● Interest – Landlords are allowed to deduct interest from their loans or mortgage interest payments that are used in order to fix or improve their property. Credit card interest (when used for the property) can also get deducted.
● Home office – Provided they meet certain requirements, landlords who use their property for work can deduct office-related expenses from their taxable income.
Being able to receive so many different types of tax benefits is just another one of the huge privileges that come alongside being a rental property investor.
6. Gives a high ROI (Return On Investment)
Even if you have to borrow money to buy property, you can include the interest rate in your rental fees. Ultimately resulting in a much higher ROI in the long run.
Your tenant’s rental fees can be used to cover any property-related costs you can’t afford to pay out of your own pocket. This makes property investment one of the highest-performing assets available to the working class.
How do I go about investing in a rental property?
To make the most out of your investment, there is no short supply of homework you will need to complete first. Being a landlord requires grit, perseverance, and comprehensive knowledge of the laws which surround homeownership.
Here are three expert-advice tips:
1. Choose the right location
Location is everything when it comes to property rental. The area you buy in determines a large portion of the property’s overall value. Make sure you choose one that reflects the market you are seeking to attract.
2. Develop an understanding of rental law
You won’t get very far as a landlord if you don’t have a well-developed understanding of rental and homeownership laws. There are many potential setbacks that can arise if you are not properly prepared with the right information.
3. Prepare for the unexpected
Being a landlord means taking on a significant financial responsibility. Any breaks, leaks, or disasters that occur under your roof are yours to take care of. Make sure to budget for unexpected costs and maintain two-steps ahead of emergencies.
Make a lasting investment
An A-frame house is an excellent way to start real estate investing. But just about any property in the right area and at the right price is a great foothold in the market too. If you’re looking for a way to earn passive income, buying to rent is low risk and potentially high return. Just do your research before signing on the dotted line.
WRITTEN BY MARGOT MORA
Margot is a content champion for a variety of online publications. She often covers topics that cater to business owners and entrepreneurs with a strong focus on legal finances, business management, and a few other topics.