5 Benefits of Investing in Rental Properties

When it comes to investing, you have many options. Learn why rental properties are the best investments: 

High Leverage

Real estate makes it easier for you to use borrowed capital to maximize your return on investment. When you have a loan, you can increase your return on investment by investing less of your own cash up front and covering monthly mortgage and interest costs with rental income. 

High ROI

High leverage and high ROI are directly correlated. This is because high leverage means you invested less of your own money, which helps you get a larger return on your investment in the long run.

If you can pay off monthly financing payments and interest with rent income, then you are bypassing the hardships that come with financing, and reaping all of the benefits.

Another reason why real estate has a high return on investment over time is due to high appreciation.

High Appreciation

Real estate typically appreciates over time, meaning the value of your asset (the house, building, or apartment itself) will increase over time. Real estate is one of the least volatile markets you can invest in because it is guaranteed to increase in value in the long run.

In addition to the value of your asset increasing, rent prices rise over time. This means that rental properties are assets that naturally combat inflation.

Tax Benefits & Passive Income 

Owning a rental property makes you eligible for several tax benefits, including the following deductions:

1. Home office
2. Insurance
3. Interest
4. Depreciation
5. Repairs

Tax breaks help you keep more of your income. Speaking of income, rental property investments are commonly associated with the term “passive income.” However, the term, "passive income" is not entirely true- owning rental properties can be a lot of hard work.

This is especially true for owners who become DIY landlords and manage day-to-day tasks themselves.

Thankfully, there are tools available online to make the rental process easier. In a recent article, we went over the benefits of using online rent payments to simplify the process for both you and your tenants. And US News recently published an article on how renting is becoming a more automated process.

Ultimately, rent income makes it easy to fulfill your investment goals: use the cash flow from your rental property to pay off mortgage payments, supplement a retirement fund, and when you’re ready, you can sell for a big payout.

Exit Strategy

Real estate investments are most valuable over the long term and they truly pay off once you sell. However, many people see the value in holding onto their real estate asset. Once a mortgage is paid off, you continue to reap the benefits of rent income. 

This is why real estate is a fantastic retirement strategy. 

But keep in mind, in real estate, there are no fixed rules. Ultimately, it is your decision when to sell and how to manage your investments.

Conclusion

While there are many benefits of owning rental properties, it’s also important to keep in mind the expenses that go into the investment. In addition to the cash of buying your first property, you also need capital to cover unanticipated repair fees, renovations, unexpected damage, and legal fees.

It’s also important to consider the real, day-to-day work that goes into managing a rental property: finding and screening tenants, creating and signing a lease, collecting rent, and managing maintenance.

But thankfully, it doesn’t have to be time-consuming with the tools that are available to landlords today.

What's the benefit of investing in real estate for you? And comment below to learn how you can save time managing your rental properties.