Many of us have considered investing money at some point or another but can never decide how to invest it wisely. However, one thing that’s been popular for years is real estate and owning a rental property. This is because owning a rental property can offer quite a few noticeable benefits, with an additional source of income being one of the most obvious. Having said that, though, there can be quite a few other benefits to owning rental property or even some rental properties. With that in mind, it’s worth looking at some of the most significant of these benefits.
Owning a rental property should be seen as a long-term investment and not one that will pay out large amounts of money in the short term. Having said that, though, it can be a great long term investment for a few key reasons.
Tax Deductions
While many people may assume that maintaining and owning a rental property will be expensive, this is not only offset by the income that it generates but also some rental property tax deductions that you may not be aware of. This is primarily because the costs that you accumulate while maintaining and renting your property can be seen as business expenses and are taxed as such. Because of that, you may be able to see a significant reduction in your overall taxes when tax season eventually comes around. Many of the things that may be eligible for these deductions include the likes of interest on the properties mortgage, insurance, maintenance and repair costs and much more.
On top of this, many properties may be eligible for a depreciation deduction, whereby the value of this depreciation can be offset against your taxes. Because of this, you may end up saving the majority of your rental income through a combination of these tax deductions. As such, it’s worth noting which deductions you may be eligible for.
Rental Income
This is the most obvious benefit to owning a rental property, but the sheer amount of income that can be generated can be quite staggering. While the exact amount that you’ll be able to generate every month varies from property to property, it can be reasonable to expect that it will be enough to cover the mortgage on the property while also putting money into your savings account. With that in mind, this can be quite a significant investment, especially when it comes to your retirement years. Not only will it allow you to pay off the majority of, if not all, of your debts but it will also allow you to save quite a significant amount of money to live on once you’ve retired. Once in your retirement years, it can often be a reasonable source of your sole income while you enjoy your retirement years.
Sweat Equity
Sweat equity is the term given to the activities you do to add additional value to the property over time. This includes any upgrades or repairs that you make to the house or apartment. While many of these may seem small and relatively insignificant at first, they can end up adding quite a notable amount of value to the property. As such, if you ever decide to put it back on the market, you may find that you’ll get a significant return on your original investment. This should also provide more than enough profit to justify the costs you accrued throughout renting it out. Combined with the rental income, you would have generated when you owned the property, and the revenue generated from the one house or apartment can be quite staggering. As such, it can be seen as one of the best long-term investments that you could make.
When it comes to owning a rental property, you can effectively become your own boss and begin your own business. This is especially true if you’re in a position to own multiple rental properties at the same time. Coupled with the benefits mentioned above, this means that you may be able to put yourself in a position where you’re finally able to quit your regular job. Furthermore, it may also mean giving you an extensive amount of free time to relax instead of having to work constantly. As such, it may end up significantly improving your overall work/life balance.