Business is primarily about making the right investments at the right time; however, one investment that will be profitable almost every time is Rental property. If you find the right building and invest in it, you will be able to get an impressive return.
The great thing about rental property is that you make money from the regular rents, and if you choose to sell the building down the line, you can also make money. However, all this is only possible if you purchase the right property.
Now, that is an entirely different topic that is suitable for a separate post, and we aren’t going to get into it. This post intends to motivate you to invest in a rental property and expand your assets. Therefore, I am going to tell you why rental properties are a good investment and five ways in which a rental property can make you money.
Why rental property is a good investment?
One of the most prominent reasons I consider rental properties to be an excellent investment is financial security. When you have invested in a rental property, you develop a steady cash flow, which is not disturbed by any of your other endeavors.
Consider the current situation of lockdown; if a person has a rental property, they will keep getting a regular income from their tenants, even if they can’t operate any other businesses. Furthermore, if you ever have a loss in one of your other investments, you will have a secure source of income in the form of your rental properties.
Five ways in which rental properties make you money:
A steady return on investment:
The first way you will make money from your rental properties is the monthly rent you collect from the tenants. However, it would be best if you also kept in mind that a rental building demands some expenditures.
As the landlord or lady, you need to keep up with the building’s maintenance, and you need to make money for the mortgage of the building, which can be quite high for rental premises.
Therefore, you need to evaluate these factors before investing in a particular building. However, if everything goes smoothly, and you have invested in the right property, you will get a steady flow of funds. This will allow you to focus on other business endeavors, and you will be able to expand. If you are interested, look for rental properties for sale in Playa Flamenca.
Forced appreciation happens when you make specific changes that affect the value of your property to increase. As an investor, you should look for properties that are in excellent condition. It would be best if you weren’t looking for the best house or apartment building on the street because it is not much you can do to increase the value of such places forcefully.
On the contrary, you also don’t want a property that is wholly beaten up. It would help if you looked for something in the middle, where you can make inexpensive upgrades and repairs to increase the overall value. Here are the features you should look out for if you want to appreciate the value of your property forcefully.
- Worn out exterior and interior paint that you can renew
- A front yard that you can fix up with a little landscaping
- Worn out carpets or flooring that you can replace
- Replaceable lighting and plumbing fixtures
These small upgrades can be quite inexpensive, but they can force the value of your property to go up significantly. It is not uncommon to get an appreciation in volume, up to three times the price of making these repairs.
After making the necessary repairs, you can also make some upgrades to the building, if you think that they are suitable considering the neighborhood and the type of tenants you have. For instance, if most of your tenants are old, making a gym in the building might not be financially suitable, whereas if your tenants are mostly college students, adding a laundromat to the building is a good investment.
We all know that given enough time, any decent property will appreciate; therefore, the value of your total assets will increase if you invest in a rental property. If you know your neighborhood and the specific market you are investing in, you can evaluate the increase in your property’s value over time. Due to market appreciation, you will be able to make a profit when you sell your property.
By investing in real estate, you can gain many tax advantages. The IRS has written its laws to favor real estate owners. When you own a rental property, you can offset a significant part of your income, if not all, for tax purposes.
Having a rental property allows you to write off many expenses as business expenditures, which will enable you to save money on tax. For instance, when you are traveling because of your business, you can add the cost of the fuel and maintenance of the car to the business expenditures.
Though this might seem a little sketchy, it is legal, as long as all the money you are earning is lawful, and you aren’t creating fake business expenditures to decrease your tax.
Owning rental properties allows you to expand your business:
You may have heard the common saying, “you need money to make money.” Well, there is some truth to it, when you have more financial assets like real estate, it is easier for you to get bigger loans from banks, and you can invest in more business endeavors.
Even if you don’t take a loan from the bank, the steady flow of income from a rental property gives you the freedom to explore other options and expand your business.
As an investor, you are most probably always on the lookout for business opportunities. Investing in rental properties is a great option. It can have many advantages, and it can improve your financial state in many different ways.