Investment properties are a great way to earn extra income whether you’re currently working or retired. The income received from these types of properties is known as residual or recurring because you continually receive payment from tenants. Rental properties are one of the quickest ways for immediate cash flow in the short and long term.
The different types of investment properties include multi-family, apartment complexes, fixer upper single family homes, bank owned and pre-foreclosure properties. Depending on the type of property you choose to purchase, you can get a quicker return on your investment. With a fixer upper, pre-foreclosure or bank owned property, the purchase price is typically lower than expected which can be beneficial if you don’t have a lot of upfront money. If your investment, however, is purchased in poor condition or needs repairs, you might need to put forth a higher amount of money initially but the upgrades and repairs will allow you to rent at a higher price point to help you get your investment back more quickly.
One of the advantages of owning an investment property is the gain in income from property value growth. Even if your property doesn’t receive any modifications, the value of it grows over time due to inflation and the change in demand in its area. If your property is in an up-and-coming neighborhood or is close to a nearby city, its value can increase significantly in a short period of time. Even if it’s not in one of these areas, the value of the property increases as inflation does which means you will have more equity in your investment property.
Another great reason to invest in a rental property is the tax write-offs you can make come tax time. Interest on your mortgage or any credit cards used to make purchases for the property can really add up and be written off. You can also write off your property’s insurance, repairs, legal and professional fees and your property taxes. The government also allows you to depreciate the purchase price of your property as well.
Although the advantages of rental properties are great, there are some disadvantages as well. As a landlord, you always need to be prepared for a time when there might be a lapse in tenants or ones that don’t pay their rent in which you will be responsible for paying the mortgage of the property as well as on the property you live in. For most, this can be difficult. After tenants move out, you also need to prepare yourself for damage they might have caused to the property. Usually any damage can be covered by the tenants’ security deposit but there may be times when you have to pay additional out of your property if their security deposit wasn’t enough to cover the repairs.
With so many more advantages than disadvantages of owning an investment property, why not see what your options are! No matter what type of investment property you’re searching for or if you want some help determining the best choice for you, Nicole C-Zurita is here to help!