Thinking About Buying Rental Properties?
While housing is still very affordable in many areas of the country, it seems like a good time to purchase real estate as an investment — that is, to own rental property. Should the average American consider this as a legitimate means to grow their financial portfolio?
In a word, yes. Even during the housing recession you heard the experts maintaining that real estate was still a valuable investment. There are many reasons to take the plunge and invest in rental properties. Here are a few.
It’s a good time to buy property. Rates and property prices are generally low right now, which means you can get a great mortgage rate and a good price on a property you like. But rates and prices are slowly building all across the country. This is both a plus and a minus: every eighth of a point rise in rates means your purchase power goes down. You’ll get less property for the money, and as home prices rise you’ll pay more for less as well. But keep in mind
that property you purchase now will cost more in the future. As the market continues to recover, your investment should appreciate steadily.
Your expenses are offset in several ways. By buying a property and renting it out, your tenants will be covering a large portion of the costs you incur. Over time, rents will increase as you pay off the mortgage, leaving more income as profit. In addition, you’ll benefit from tax breaks and incentives* on depreciation and expenses.
Appreciation works in your favor. Your investment will be appreciating on the entire value of the property. If you put 25% down on a $400,000 property, you may be paying 4.5% interest on the 75% you borrow, but a 3% appreciation on the value of the property is on the entire $400,000, not just the $100,000 you put down. Compare that to your return on an investment in the stock market.
Diversity in your investment portfolio is a good idea. See above. And remember that by spreading out your investments, you’re more likely to reap the benefits of a changing economy.
You can invest in your retirement. If your $400,000 investment appreciates 3% per year for the next 20 years, just think of what you can do with the money when you sell the property upon your retirement. Or perhaps you bought a property you would want to retire to.
It’s true that being a landlord can be stressful for many people. However, the benefits of investing in property usually outweigh the negatives for most landlords. I am always available to review your goals and to help you determine the strategy and options that can benefit you the most. In addition, I’m also experienced with the management of rental properties and am available to relieve you of that chore.
Call, text, ( 949-887-5305 ) or email me ( BobPhillipsRE@gmail.com ) today to start to explore the possibilities.
*I am not a tax advisory expert. The information contained in this article is for informational purposes only and may not reflect current tax year rules and regulations. Consult your tax advisor or the IRS for current tax year rules, restrictions and regulations.