Investors that have long-term wealth-building goals consistently have one thing in their portfolios, and that’s rental real estate. Rental properties are a great long-term investment for a number of reasons, beyond the regular income they provide to owners and operators. They can act as a hedge against inflation, and even offer significant tax advantages to investors. The many benefits they provide are fundamental in helping wealth over time and secure a financial future. Here are a few reasons why you should have a rental property in your investment portfolio.
The Power of Passive Income
One of the most apparent benefits of owning rental property is the consistent income it provides to owners every month. This can already be a great wealth-building tool, but rentals also have the potential to be turned into passive income-generating assets when you hire a property management company. This strategy allows investors to focus their time and efforts on other projects, and can even become a path to financial freedom. You will need to weigh the cost of property management against the property’s rental income however, with it making more financial sense for multiple single-family properties.
Building Wealth Through Appreciation
Besides contributing to your wealth through rental income, long-term rental properties can build wealth through appreciation. Real estate property values tend to increase over time, and even in economic downturns they tend to hold steady. This aspect can be very beneficial to building and maintaining wealth over time. The gains can be significant each year on top of the returns made from rental income, and the equity you build can be used to help finance future investments.
Diversification and Risk Mitigation
Another great benefit of investing in rental property is being able to diversify your portfolio. Being overinvested in one category is very risky, as a market downturn can have a big impact on the value of your investment. If your portfolio doesn’t already contain a diverse variety of investments, this is your sign to make that happen. Rental properties make for a smart way to diversify as they are more resilient to these downturns, and adding one to your portfolio can be a good way to mitigate overall risk.
Hedge Against Inflation
Inflation is becoming more important of a topic as the Fed continues to increase interest rates in hopes of curbing it. However, owning rental property can be one of the best ways to protect your wealth against the effects of inflation. Property values often keep up with the inflation rate, and rents also tend to grow at a similar rate. Your investment isn’t likely to lose any real value, and the monthly income you receive will not either.
Owning and operating rental property can provide significant tax savings for investors. Many of the expenses associated with the property can be written off, including all maintenance and repair costs and even mortgage interest payments. You may also be able to benefit greatly from depreciation by conducting a cost-segregation study. Consider working with a tax professional so you can maximize your savings and make the most of your investments.
Strategies for Long-Term Success
If you’re trying to secure your financial future, it will be necessary to come up with a long-term strategy that can help you get there. For investing in rental properties, this means selecting great properties for your portfolio that will hold their value over time. Location is often an important factor in this, with areas experiencing high growth often leading to great returns for investors. You will also need to make sure you have a solid grasp of property management, with regular maintenance and check-ins with tenants to ensure you don’t run into any issues with vacancies. The key to finding success will be careful planning and research, along with making the effort to stay on top of any issues that arise.
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 rental property for your investment portfolio?Connect with us today.