Thinking of purchasing a property to rent out? Here are six benefits of this investment route.
Whether you’re a long-term investor always searching for the next great opportunity or you’re just starting out and looking for a smart use for your cash, buying a rental property can offer important benefits. This investment decision, especially in thriving markets like Colorado Springs and Denver, can pay off in a variety of ways for years to come. Consider these six benefits of buying a rental property.
1. Property Value Appreciation
Particularly in neighborhoods seeing constant growth in popularity and population, such as Aurora, buying a rental property can allow you to benefit from property value appreciation. As the Colorado population increases, homes continue to grow more expensive. If you purchase a property this year for $300K, keep it and rent it out for ten years and sell it at even $600K, you’ve doubled your investment. Along the way, you’re ideally paying the mortgage and yourself by charging rent, all while growing your equity, which means an even better return on that investment.
2. Greater Control
With many investments, there isn’t much you can do to control their success or returns. On the other hand, investing in rental properties places some of the control back in your hands. By selecting the rental property itself and then deciding which renovations to take on, how much rent to charge, and the details of every lease, you retain a great deal of control.
You also get to choose how involved or uninvolved you’ll be. You can decide exactly how much time and energy you’d like to put into this investment. Whether you decide to leverage a property manager to handle the details or to retain more of your earnings by coordinating every detail yourself, you have plenty of options for how you’ll handle this income stream.
3. Monthly Income
Some say that rental properties generate passive income. This is certainly the case some of the time, but depending on the level of involvement you choose to have in your property and the specific events taking place from one month to the next, it will likely not feel passive all of the time. Still, every month that you have renters in your property, you’ll be generating monthly income to help you pay the mortgage of that property and then some, ideally.
The amount of work vs. “passivity” that your rental property demands will depend in part on the property itself. Properties that require extensive repairs or that are not well-located will require more of your time to find renters and keep them happy. Working with an experienced realtor as you search for the right rental property can save you endless time and headaches later on.
4. Diversification of Investments
Investing is widely accepted as a smart avenue for growing wealth over time and securing a comfortable future for retirement. However, all investments come with a degree of risk. The more diverse your portfolio of investments, the more protected you are against the risk of losing it all. Many people choose to purchase rental properties in order to diversify their investments.
5. Tax Advantages
An important benefit of buying a rental property is that you can generally deduct expenses like mortgage interest, property taxes, insurance, maintenance costs and more from your taxable income. The tax benefits of rental property ownership are an important benefit of this investment. Depending on your situation, you may also be able to take additional deductions. Keep in mind that tax laws are complex and the specifics of your situation will depend on a wide range of details.
6. Long-term Wealth Building
Building equity and owning a flexible investment are excellent ways to grow your wealth over time. With the ability to sell your property if needed to take advantage of market changes, or continue to watch the property value appreciate, you can create a reliable income stream and safety net for yourself and your family.
Purchasing a rental property requires a different process than buying a primary residence. Working with a qualified real estate agent is crucial to ensure that you find an ideal rental property and that the purchase process goes smoothly. I’d love to chat about your real estate investment goals and answer any questions you have! Give me a call at 719-337-7254 or 720-498-9592.