What is a Rental Property?
A rental property is a property bought or built with the intention of making money off of it. Profit is made through holding the property and renting it out with a later intent of selling the property after the value of the property has risen thanks to appreciation. Rental properties can consist of any of the following:
- Residential Properties
- Single Family Homes
- Multi-Family Homes
- Commercial Properties
- Strip Mall
- Business Buildings
There are so many ways to invest your money nowadays but which ways make it really worth it? What can I invest my money in to help me get rich? The answer to that is with Rental and Income Properties. 90% of the world’s millionaires are involved in real estate. Why is that? That is because properties will make money. Here are 3 reasons why rental properties are a great investment.
Appreciation on the Property
One of the best parts of investing in property is the fact that you can purchase a property with only a small investment of your own money while borrowing the rest. Using leverage, you can borrow up to twenty times the amount of your investment from a lender.
Let’s say you put $15,000 on a new property while borrowing another $135,000 from the bank or another lender. Together, you’re purchasing an asset for $150,000. For 10 years, your property will appreciate by 5% each year. This is where the benefits of leverage come into play. With leverage, the appreciation is for the entire investment and not just the $15,000 you put down with your money.
- Year 0: $150,000
- *Appreciation (1.05)
- Year 1: $157,500
- *Appreciation (1.05)
- Year 2: $165,375
- Year 10: $232,699.23
So after 10 years and an initial investment of $15,000 out of your pocket, you turn that into an appreciation profit of over $80,000 thanks to leverage.
Lots of Tax Write-Offs
If you own rental property, you are going to have a list of tax deductions available for write-offs. Here are a few of the deductions you would look forward to:
- Maintenance Repairs
- Property Taxes
- Interest on your Mortgage
- Interest on Credit Cards used for purchases on the property and for the property.
Along with the rest of the deductions, you can also depreciate the purchase price of the property based on a schedule. You can do this even if the property is actually appreciating in value.
You are the Decision Maker
If you end up investing in a rental property, that means you’re going to be the one running the show. You have to choose what kind of property to invest in, what kind of people you want to rent to, how much rent will be, who’s going to manage the property, etc.
If you decide to manage your property, you will also be able to decide when your property needs to be upgraded, what upgrades are needed to be made, and more.
A Great Investment
If you are trying to make some money outside of your 9-5 or are trying to think outside of the box, then real estate may be your ticket to each. Whether you want to invest in residential or commercial properties, these properties will make you money.
A small investment in a property could make you thousands of dollars thanks to leverage. You would also be writing off a bunch on your taxes. Lastly, you have the ability to be your own boss. These are only a few of the many reasons why investing in real estate is a great idea.