Last week, we discussed that investing in a growing market is important. This week, we want to look deeper into buying rental property for building your wealth in real estate. Here are key reasons why buying rental property is a good investment strategy.
- Inflation – Inflation causes prices to go up. This includes groceries, clothing, wages, rent, house prices, etc. Cash and bonds do not increase in value as a result of inflation. In fact, the value of cash goes down when prices go up. The best hedge against inflation is real estate because it is an asset that will tend to increase in value with inflation. Why? Because people need a home. If you invest in the right markets, at the right time, real estate investments should increase over time.
- You Can Create Sweat Equity – This is also known as forced appreciation. This is the process of buying a distressed home and making improvements that increase the property value in a short period of time. Please note that not all improvements will increase value. Check with us for more detail.
- Buy & Hold – Once you sell a home, you have to start again to create equity. But if you hold a rental property, you will continue to make money (cash flow) every year. Also, the value of the home will continue to appreciate while your tenants are paying your expenses.
- The Advantage of a Fixed Mortgage – A fixed rate mortgage payment does not change for the life of the loan. Over time you can raise rent and increase your cash flow since your biggest expense is the mortgage payment.
- Leverage OPM (Other People’s Money) You can get a high rate of return by leveraging the bank’s money or private lenders to invest in rental property.
- Tax Advantages of Owning Rental Property – You can deduct almost all expenses incurred as part of your cost of doing business as a rental property owner. You can deduct depreciation, property taxes, repairs, maintenance, and more.
- Tip: Buy a Rental where you like to vacation, so that you can deduct some of your expenses managing your rental.
Disclaimer: The information provided on this page is for educational purposes only. Amelia Wong and Robert Wayne Mason, Inc. makes no warranty or representation as to the accuracy, completeness or reliability of this information. Please be advised that this content may contain errors, is subject to revision at all times, and should not be relied upon for any purpose. Under no circumstances shall we be liable to you or anyone else for damage stemming from the use or misuse of this information.