Investing in rental property is a tried-and-true method of building wealth which adds a cash flowing asset to an investor’s portfolio. Rental properties are great since they provide owners with consistent monthly income along with a few other key benefits. They can even grow in value over time, which provides a greater return to investors without ever having to lift a finger. Have you been considering adding a rental property to your portfolio? Continue reading as we cover 6 reasons long-term rental properties make for an amazing investment.
Stable and Predictable Income
One of the main reasons investors operate rental properties is to have a consistent source of income, so that your cash can start working for you instead of the other way around. Rental properties provide owners with a predictable return each month which requires much less of a time investment than other forms of real estate investing. Rental income also has potential for appreciation which often outpaces inflation. If you purchase a multifamily property, this income becomes very stable since even when a unit becomes vacant the other occupied units can still provide rental income.
Another great reason rental properties make for a good investment is their ability to diversify your portfolio. If your wealth is mainly invested in stocks, it’s subject to volatility from big swings in the market. A rental property makes for a much less risky investment and can also provide you with additional income every month. Rental properties are one of the best ways to protect your wealth and can act as a great hedge against inflation.
One of the lesser-known benefits of owning rental properties is all the tax benefits they can provide to owners. Many of the costs associated with your rental property can be written off such as your mortgage interest, maintenance expenses, and repair costs. You’ll want to work with a certified tax professional in order to maximize these savings. They can help you conduct a cost-segregation study which can net you massive tax deductions through depreciation.
Another reason to invest in rental properties is their steady demand and resilience to market downturns. There is always going to be demand for rental properties because people will always be looking for places to live. Even in times when markets at large aren’t doing great, real estate tends to hold its value better than other investments. You can benefit from high demand in a specific area by investing in a market experiencing high job or population growth, which often leads to greater demand for housing and higher rent prices.
Creating Wealth through Equity
Owning real estate provides a unique benefit in that you’re creating long-term wealth by building equity. Rental properties are a safe way to invest your hard-earned income so that it can generate more money for you over time. You can then leverage the equity you’ve built in a property by refinancing it, and using the funds to finance another investment and grow your portfolio. Equity is an incredible tool that lets you build long-term wealth, and may even be used to fund further investments.
Rental properties can become a form of passive income so long as you’re willing to hire a property manager to run their day-to-day operation. They should be able to handle finding tenants, collecting rent, and maintaining the property which frees you to focus on other business ventures. This strategy is more viable with multifamily properties where the rental income generated by the units is already significantly higher than monthly expenses. You’ll have to weigh the costs of hiring a manager against a property’s net income to determine if it makes sense with your investment.
The easiest way to save on a real estate investment is to find a trusted lender that can get you the best leverages and rates. RCN Capital lends to real estate professionals, commercial contractors, developers & small business owners across the nation. We provide short-term fix & flip financing, long-term rental financing, and new construction financing for real estate investors. RCN Capital also has flexible and competitive loan options available. Are you looking to purchase or refinance a long-term rental property? Connect with us today.