Pros and Cons of Owning Rental Property

Pros and Cons of Owning Rental Property 

Owning rental property can be a good investment to think about, but it's not going to be for everyone. There is great potential for income and when considering factors such as location, size, and condition, owning a rental property can provide a steady stream of cash flow. But despite the profits, owning a rental property is a long-term investment that requires both time and money. If you are considering purchasing a rental property, here's a breakdown of the pros and cons to help you decide if it is the best choice for you:

Pros:

• Income: Rental properties provide a steady stream of income from tenant’s monthly rent payments. This steady flow of income can help offset mortgage payments and property expenses.
• Appreciation: Over time, rental properties have the potential to increase in value, allowing owners to build equity. Real estate historically tends to appreciate over the long term, although appreciation rates can vary depending on factors such as location and market conditions.
• Tax benefits: You can deduct many rental expenses, like mortgage interest and repairs, from your taxes. These tax advantages can help reduce taxable income and increase cash flow.
• Diversification: Rental properties add diversification to your investment portfolio, reducing overall risk. Consider investing in multiple locations to further diversify your portfolio.
• Control: You have tangible control over the property and can make decisions about renovations and upkeep.

Cons:

• Management: Managing a property can be time-consuming, requiring tenant screening, repairs, and rent collection. You might consider hiring a property manager, which cuts into profits but can ease some stress and workload.
• Vacancy: Periods without tenants can mean a loss of income. You can’t always guarantee no vacancy.
• Maintenance: Unexpected repairs and upkeep can be costly. To ensure renters want to stay at your property, it is expected with the cost of rent that you’ll provide consistent upkeep as well as your availability for emergencies.
• Tenants: Dealing with difficult tenants can be stressful and time-consuming. Eviction can be a lengthy process. It also takes a certain person to be a landlord, you need to be confident, patient, and good with people. Be ready to potentially deal with late or unpaid rent and even damage to your property.
• Lack of Liquidity Real estate is not a liquid asset, meaning it may take months to sell the property in the case you need to.

Other Considerations

When thinking about investing in a rental property, here are some questions you can ask yourself:

• Are you looking for steady income, long-term growth, or both?
• Can you afford the down payment, ongoing costs, and potential vacancies?
• Are you prepared to manage the property yourself, or can you afford to hire a property manager?
• Is there a demand for rentals in your area? What are the average rents and vacancy rates?

Before you decide on investing in a rental property, do your research and carefully consider all the factors involved. Owning a rental property can have many challenges and responsibilities. However, for many the benefits of owning a rental property outweigh the drawbacks. If you are seeking more insight you may also want to talk to a financial advisor to see if owning a rental property is a good fit for you.

RCN Capital

The easiest way to save on rental property financing 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 an investment property?