If you’ve ever thought about purchasing an income property, keep reading! Here are a couple reasons why owning a rental property is a good investment.
Inflation Protection
Purchasing real estate is one of the best ways to protect your investment portfolio against inflation. An article written by Jeff Rohde for roofstock.com explains, “Rental property also acts as a hedge against inflation, when rent prices and home values increase faster than the annual rate of inflation. Here’s how the math works. According to the U.S. Bureau of Labor Statistics, the 12-month percentage change in the Consumer Price Index (CPI) is 5.3%. However, even though prices are going up, home prices and rents are rising even faster.” What does all this mean? Simply put, you won’t lose money on a rental property investment in this economy. Historically speaking, your home or rental property will be worth more over time and you’ll likely be able to raise rent as well.
To give you a better idea of how dramatic home values have risen, here’s an example. The above mentioned article goes on to say, “Zillow notes that the value of a typical middle price tier home in the U.S. increased by 17.7% over the past year (through August 31, 2021). Rents have risen nearly as much. As the Q2 2021 Single-Family Rental Investment Trends Report from Arbor Realty Trust, Inc. reveals, vacant-to-occupied rent growth has accelerated to 12.7%, setting a record high.” These drastic increases highlight what a great investment rental properties can be.
Passive Income
Passive income is a beautiful thing. It’s also one of the best parts about owning an income property. Who doesn’t want to make money without having to work? Having a rental property allows you to collect money from your tenants. Price your property at a rate where you can pay the mortgage and any other operating fees. You also want to make sure you’re making some money for yourself every month as well. If you’re unsure of the monthly price range in which you should rent your property, check out comparable rentals in the area. Those numbers will be a great jumping off point.
Tax Benefits
There are quite a few benefits you receive by being a landlord especially when it comes to filing taxes. The tax code allows you to write off things like property management fees, repairs and/or maintenance, mortgage interest, and property taxes. There are additional write offs a rental property owner can claim such as travel expenses and continuing education expenses. Make sure you contact a tax professional to help you file. You may not be eligible for every deduction; however, there are likely some you qualify for that aren’t listed here.
Making the decision to purchase a rental property is huge. It’s requires committing to a large new debt and taking on the responsibilities associated with being a landlord. However, a rental property is a great wealth building strategy and it’s worth the investment.
