5 Reasons for Considering Property Rental as a Lucrative Investment

Property owners can make money through holding and renting a property while it appreciates and then sells it for profit. A property rental can be a lucrative investment. If you want it to make money, you need to take location, the age of the property, property condition, and market trends into account. For example, the neighborhood you choose and property taxes can vary widely. Here are some of the reasons to consider property rental as a lucrative investment .

5 Reasons for Considering Property Rental as a Lucrative Investment

5 Reasons for Considering Property Rental as a Lucrative Investment

 

  1. You are in charge of your investment

Affordability, access to financing, and your expected return on investment are key factors to consider when selecting an investment property. The advantages of investing in a property for rental purposes are that real estate tends to be more stable than the stock market, and you have more control over your investment. 

When you invest in property, you decide on which property to invest in. Picking the right cities and neighborhoods can make a difference in how lucrative your investment will be. You can take factors like schools, crime, property taxes, etc., into account when making a choice. You can also choose your tenants and decide how to manage and maintain the property while renting it out. 

Dealing with tenants can be a problem if you want to make money from a property rental. Using a property management company can help to find and service long-term renters. When looking for well qualified property managers in Little Rock or other U.S. cities, Evernest, KeyRenters, Fletcher, and others are the answer. The companies use a screening process that ensures you only get the best tenants, maintain your property, and make sure you receive your rent in full and on time. 

  1. Your property appreciates in value

One of the advantages of investing in real estate is that you can use a small amount of your own money and borrow the rest. If you can pay cash for a property and its value increases over the years, your investment could be very profitable. 

If you take out a mortgage for the full amount, you have to pay back the amount plus interest over a certain time period. The rent you receive should cover the monthly mortgage payments. If they don’t, you will have to pay a certain amount each month, but you will still own an asset that appreciates over time. 

  1. You can earn passive income

When you first take out a mortgage, more money will go towards interest than to principal, but eventually, this will change. If you can hold onto your property for over 15 years, your tenants will pay down more of the principal, and you will create more wealth for yourself. When you eventually pay off your loan, you can sell the property for a profit or refinance the loan. 

If you manage to pay cash for a property or put down a large deposit, the scenario is different, and you could start earning a passive monthly income from the start. The money you have leftover after you receive your rent and pay off all your expenses is money in your pocket. For example, if your mortgage is $700 a month and you receive $1000 in rent from a tenant, you will have $300 to pay other expenses, and the rest is monthly passive income for you. The more passive income you earn, the more time and energy you can spend elsewhere. 

  1. You qualify for tax deductions

There are certain tax deductions you may qualify for as the owner of a property rental. For instance, interest on an investment property loan is tax-deductible. You may be able to deduct property maintenance, legal and professional fees, insurance, and other expenses. 

On top of this, the government allows you to depreciate the purchase price of your property according to a depreciation schedule. This can reduce the amount of tax you have to pay on rental income. 

  1. You can take advantage of market trends

When considering buying a property to rent out, you can look at a few key market trends. Is the population in the area growing? Who is likely to want to live in the area in the coming years? Are there any new developments coming? Is the area being revitalized? What are jobs and wages like in the area, and is this like to change? 

You can consult the local planning department for information about planned developments. Make sure that you look into the average rent you can charge in the area. By doing some research into what an area looks like currently and what it is likely to look like in the next 5 to 10 years, you can avoid making a costly mistake. For example, a significant tax increase on an affordable property could mean your investment doesn’t pay off.