What Are The Advantages of Owning A Small Rental Property
Owning investment property is something that everyone can and should do. There are a lot of advantages to owning rental property that your average person can take advantage of. And, in addition to the advantages, owning rental property gives you a lot of flexibility that you wouldn’t normally have.
Before I list some of the advantages of owning a small rental property, understand that there are more advantages than what’s mentioned in this post. Everybody’s situation is unique. An advantage for me could be a disadvantage to you.
So, at the end of the day, you’ll have to make your own decision as to what the advantages are of being a real estate investor and buying a rental property.
With that said, let's start with the advantages.
1. Rental Income
The rental income from renting the property is one of the most important advantages. This rental income will be used to pay your mortgage, help you save for repairs, and put money in your pocket (as long as your rental property is profitable).
If things go well, the majority of your time renting the property should be spent making passive income. For example, while house hacking, I haven’t spent much time or money on the rented unit - but the unit continues to cash flow.
2. Building Wealth
In addition to enjoying rental income, your rental property is also helping you build wealth over time. Every month you pay your mortgage, you’re also paying down your loan. As your loan goes down, your net worth goes up.
In the short term, this monthly loan pay down doesn’t affect your life in an impactful way. However, in the long term, the wealth earned by paying down your loan will be available in the form of home equity lines of credit and loan refinancing.
For example, by paying down your loan, you’ll be able to take out a home equity line of credit. This HELOC can be used to fund additional rental purchases, fund repairs at a low interest rate, and do whatever else you deem necessary.
3. Tax Benefits
Another advantage of being a rental property owner is that, in America, you get a lot of tax benefits. I’m no accountant so I don’t know all of the available tax benefits. However, the two tax benefits that I personally utilize the most are depreciation and write-offs (like property taxes, mortgage interest, and repairs).
When most people think of owning rental property, they imagine themselves being tied down to one city or area. The thought of having rental property and traveling the world for a year seems impossible. What if your property needs repairs or a tenant leaves?
Well, with real estate investments like residential rentals, you don’t have to manage or maintain the property yourself if you don’t want to. You can hire property management companies to handle just about everything involved with renting and managing your property.
If you choose to use a property management company, you’ll have all the flexibility you’d need.
5. You have control over your investment
Compared to investments like the stock market, owning rental property gives you more control over what’s successful and what’s not. You control the improvements you make to the property, the people you rent the property to, the inspections perform, and much more.
With stocks, you have the ability to choose what companies you invest in. Afterwards, you have no control over what happens at that company on a daily basis. While it’s possible for that company to make good decisions and cause the stock to skyrocket, it’s also possible for the stock to plummet.
Regardless of what happens with the stock, the changes were out of your control.
6. It’s simple
If you’re an entrepreneur or ever started a small business, you know that starting a new business requires you to manage a lot of moving parts. With rental properties, there are a lot less moving parts to manage.
You simply purchase a property, make sure it’s livable, and rent it out. There are always good property deals available, making sure it’s livable is always possible, and there are always people looking for a place to live.
7. There are programs to help you get started
One of the most common obstacles I hear from people looking to invest in rental properties is that they don’t have enough money. Don’t get me wrong, you definitely want to have money saved and be able to purchase a rental property without putting yourself in a bad financial situation. But you’ve got to know how to finesse not having enough money to your benefit.
With that said, there are a lot of programs available for purchasing homes that can help you get started. And with the lending options available today, you’re able to “buy” a $100k property for as little as $3500 plus closing cost.
Now, a $100k property might not sound like much depending on what area you’re in, but in Cleveland, Ohio, there are plenty of multi-family houses available for that price. You can even purchase single-family homes in some of the surrounding suburbs for less than $100k.
So, what’s next for you?
You now know some of the advantages of owning a rental property. But what will you do with this information?
Buy a rental property? Start house hacking? Learn more?
Whatever you choose to do, the best time to do it was yesterday. And the next best time is today.
Please use the information in this blog post to help you take action.