There are many ways that you can choose to invest your money. Buying real estate is a lucrative prospect, and it has proven to be one of the most reliable long-term investments. Becoming a landlord and renting out a property is a great way to put your money into something and have someone else pay your mortgage down over time.
The challenge for many is that buying real estate can require a sizable initial investment. If you are able to put the money down on an investment property, then you absolutely should. There are many financial benefits of buying a rental property. In just a few years, you could be sitting on a very sizable amount of equity at very little expense of your own.
You may encounter some difficulties in finding the right tenant for your property, and the occasional bit of maintenance or appliance replacement that is required. These little annoyances pale in comparison to the long term benefits.
Benefit #1: A rental property is a leveraged investment
The benefit of owning property gives you a great deal of leverage. This is one of the best ways to apply for a loan with relative ease. Applying for a loan that you want to invest in other things will not get you anywhere fast. The bank simply doesn’t trust you or the investments that you are proposing to provide the security that they need to release the funds.
However, if you have a plan to buy a number of properties and rent them out it offers unrivalled security when it comes to investment. The banks love a sure thing, and there are a number of guarantees when it comes to real estate.
The property isn’t going anywhere, you will already have a renter lined up or demonstrate that this won’t be a problem, and you have the funds to provide a down payment.
Benefit #2: A rental property offers huge returns
You will be able to sit back and enjoy a huge return on only a 20% investment in the property’s total value. You can then sit back as someone else pays off the principal loan payments and interest as you watch your equity grow.
There will, of course, be some expenses throughout the term of ownership but the are now secure in your financial future.
Benefit #3: You are able to keep up with inflation
Your real estate selling price will rise with inflation. This offers at least some cushion as prices and other costs rise. Buying at a low-interest rate and fixing it for a term can allow you a great deal of security and flexibility over time.
Benefit #4: You can potentially retire early
If you start early enough you could have a renter pay off your mortgage completely. This means that you will be able to sit back and receive the full rental amount as personal income.
With a few properties working for you like this you may not need to worry about working for a living. You can transition to being a full-time property manager. Which in reality translates to only a small portion of your time dealing with the occasional contractor or minor repairs.
Benefit #5: A rental property is going to appreciate in value
There are very few other investments that offer this same guarantee. There may be adjustments and corrections over time to the market, however, in the long run, your property will appreciate in value. Buying a rental property one of the safest places to put your money. It offers a great deal of security for anyone looking to invest for the long haul.
The best part about this is that it’s not even your money that is paying off the mortgage. Every day that you wake up and go to work, your renters are going to work for you as well.
Benefit #6: You can pay less tax after buying a rental property
As the owner of rental property you will be able to enjoy a number of tax deductions. To make sure that you are taking full advantage of what you can do here be sure to speak your accountant so that they will be able to take everything into account and provide you with the correct information. This can be very complex especially if you have more than one rental property.
Benefit #7: You can sell the rental property whenever you want
This is one of the best benefits of buying a rental property. You are in control of when you cash out. It is ideal that you hang onto the property for the long term if you want to see the biggest return on your investment.
If you follow the market and are confident that now is the right time to pull the money from a property and invest elsewhere, then you can do so. Freeing up some equity in your investments this way to buy some more property can open even more doors in the future.