Benefits Of Investing In Rental Properties

in Property
Investing in rental properties has many advantages. It is not surprising that rental property investments remain popular despite the recent recession. Real estate has always shown the ability to recover its value despite economic downturns. The market value of the property may go down during the short-term but it eventually recovers and may even significantly appreciate in value. And then of course, you still have the rental income.

In this article, we'll look into the benefits and even some downsides associated with investing in rental properties:

- Ability to leverage in order to minimize out-of-pocket expenses - this type of investment allows you to leverage to grow your wealth faster. Compare this to buying stocks. For example, if you bought $25,000 worth of stocks, that is what you'll get. But in property investing, that initial $25,000 allows you to buy a $250,000 property.

- Property appreciation - that same $250,000 property can appreciate 10% or more after several years. So aside from the revenue you've been generating from the rent, you'll make even more money once you decide to sell that property.

- Simplicity of the concept - unlike investing in stocks where you need to know the different types of shares, research the company background, and hire a broker to purchase the stocks on your behalf, property investing is relatively straightforward. You know what you're getting.

- Mortgage is paid by tenants every month, but you keep the accumulated equity - basically, after you have a property in a good area and found a tenant, you just need to want for the rental income every month. This will pay off the mortgage and even allow you to generate incremental income.

- Tax deductions due to depreciation and business expenses - the rental property entitle you to claim special tax benefits. Expenses associated with repairs and the upkeep of the property is tax deductible. It is crucial not to rely on tax breaks to make a profit though.

Before you think that money grows on trees in rental property investing, however, it is also important to be aware that there are also downsides associated with this investment opportunity. Some of the risks and hassles you should take note of include the following:

- Property management can be a hassle - this is true if you have the misfortune of having bad tenants. If you have hired a professional property manager though, this shouldn't be an issue for you.

- The structure may have hidden problems - even after you have the property checked, it is possible that it may still contain hidden issues that will only appear long after you acquire it.

- Optimizing the opportunity takes several years - it is crucial to have a long term view if you engage in real estate investing - whether for home ownership or business reasons.

Rental property investing has a lot of benefits but it is not for everyone. The decision you make should depend on your individual financial circumstance, risk appetite, and goals. Consider what decision will be best for your family as well.
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Jason Kay has 1 articles online


Read property management software reviews to learn more how these software packages can help you manage your rental properties.

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Benefits Of Investing In Rental Properties

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This article was published on 2011/04/19