Investing in rental real estate is a great way to achieve financial independence and earn more money. Because this idea sounds alluring, people often think about buying a house, apartment or some space to rent. But like every business and investment, investing in real estate also has its pros and cons. First of all, there are several different ways to invest in rental real estate, such as house flipping, rental property investing, and other like REIT investing. But what is it that we should be concerned about when it comes to investing in rental real estate?
If you are unsure whether to invest in this kind of job and considering if it can be profitable for you, take a look at some of the major pros and cons of investing in rental properties. Maybe this will be your dream side-job, or you may realize it’s too costly risking.
Investing in rental real estate: Pros
Of course, the biggest benefit of renting real estate is income from renters. Your tenants provide you with a direct income stream. You will get monthly rent checks on the price you decide. For example, you can speak with renters and arrange the price. Just make sure your incomes are greater than outcomes, taxes, fees, and insurance, and you will earn a lot of money. Furthermore, here are some long distance moving problems and solutions to have in mind when considering potential renters and price.
Incomes from property value growth
If you own a rental real estate, you can earn from any gains in the underlying value of the property. Property value growth depends on external variables like population growth, neighborhood development, and economics. You can research historic pricing data and nowadays trends for the locations before you purchase real estate. This mostly depends on the location so choose wisely!
Renovate and charge more
Investing in rental real estate sometimes requires renovation and repairing things in your property. It could take more money from you, but sometimes it can bring you more money than ever! Sweet equity will add additional value to your property as you maintain it. You can decorate walls, add new sitting or lightning, or even do some basic landscaping to the yard and charge more for rent while increasing the value of your real estate.
Investing in rental real estate provides Tax benefits
If you are into investing in rental real estate, you may face a significant number of tax concessions from managing a rental property. Furthermore, with tax benefits, you must know the ins and outs of the real estate contracts too. For example, you can claim annual loan interest and origination fees as tax-deductible expenses on a rental property. The Internal Revenue Service allows you to deduct many expenses such as ordinary expenses, improvements, and depreciation. But we recommend consulting a tax professional if you consider purchasing rental real estate.
You can rent extra space
Investing in rental real estate such as buying a house has many benefits. A house has a basement or a garage which can be used for renting too! You can always rent extra space and earn more money. A room from your house, a garage, basement or storage unit are a great way of earning additional money. Think about that. And South Florida moving and storage is a must see if you want to invest in renting storage units or move to your newly purchased real estate.
Rental real estate cons:
There is always a risk of irresponsible tenants
This is probably the most common and well-known risk when it comes to investing in real estate. Sometimes, tenants can be really awful and difficult to deal with. First of all, tenants often leave apartments in a mess and dirt. Sometimes they destroy everything so you need to repair things before renting again. It should be great if we’d choose the ideal tenants, but you never know. And besides mess, tenants can be needy, demanding and unreliable. They can be late on rental payments or forget to pay it at all! They can rent for a month and then get away. In this case, we suggest requiring a security deposit.
You still need capital for investing in rental real estate
Let’s be honest. Investing in rental properties is not for everyone. For any big investments, you need to have a certain amount of money. Of course, you need capital to purchase real estate. Whether it’s an apartment, a house, garage or storage unit, money is what you need first. And it’s not only about buying a property. Renting is always a risk. Sometimes you will have to spend hundreds of dollars to repair the damage made by tenants. Or on the renovation. And imagine investing a high amount of money, and constantly losing rather than earning. So if you’re considering renting a storage unit, check storage units Fort Lauderdale to find the best offer.
You need to be active
When you purchase a house or an apartment to use it by yourself, you may be relaxed and take your time as you want. You may live in another town and use that property for vacation only. But, investing demands active involvement. Because you’re renting something, you will need to check it sometimes, to speak with tenants, to do some paperwork or repair something. If you’re renting that doesn’t mean „hands off“.
And… Lack of liquidity
Keep in mind that real estate is not a liquid asset. A liquid asset represents something that can be turned into money fast, with a very little impact on the price received in the open market. This is why investing in rental real estate is a high risk. Sometimes, even if it’s about the biggest market, you will need a couple of months to complete a sale. And if you’re in a lack of money and you want to sell it fast, you may sell it on small price or wait for months.