Financial considerations tend to loom large when evaluating how advantageous one investment is over another, but with real estate, the benefits don’t stop at income growth alone. Rental property offers more, from financing flexibility and wealth building to the enjoyment of life. Need more convincing? Here are just a few reasons why rental properties are the best investment.
Why Rental Properties are the Best Investment
Few investments encourage leverage as much as real estate investment does. Although loans for rental homes require a 20 percent down payment, borrowers can use gifts, loans and partnerships to raise the funds. Peer to peer (P2) lending is easier and more widespread and limited partnerships make pooling money without liability an attractive investment. Mortgage interest rates are historically low and tax deductible, and a 15- or 30-year fixed rate loan keeps payments predictable.
Property Investment Has a Long History
No other asset classes have been around as long as property investment and there’s plenty of data to back up decisions about when and where to invest. Government agencies and private firms compile statistics that cover the major indicators of the housing market, which help investors make educated decisions.
Real estate specialists like property management companies offer their expertise in location, home and tenant selection, maintenance and upkeep, and record keeping. Colleges and universities have degree programs in real estate development and investment. Bookstores and libraries cover all facets of the topic on their shelves.
Although the housing crisis of the 2000s is over, investors can still find bargains in foreclosures and short sales at auctions. Many of these properties do require some TLC, but their low sales price, coupled with the improvements, can get you into homes below retail. Every dollar you buy them beneath market is money in your pocket as a landlord. Once habitable, there’s nothing to stop you from charging market-based rent.
Networking is Encouraged
Real estate investors are encouraged to network with others and learn all they can about future developments and the players involved. While success isn’t necessarily dependent on an information stream, it does help to fine tune decisions about which properties show the greatest promise for short and long term investment. Sources include newspapers, planning departments, community development agencies and land brokers.
Income Stream and Wealth Building
- Cash flow. Few investments provide the positive cash flow that rental homes do. Rents almost always exceed payments and expenses. In solid markets like Jacksonville, vacancy rates are low and the demand for housing is high.
- Taxes. Besides the depreciation, you can deduct all the reasonable expenses associated with owning and renting the property, including professional management fees.
- Appreciation. The property’s value will increase over time. In 2017 alone, Zillow estimates values grew by 11 percent. Few other asset classes provide such growth, tax advantages, and passive income.
Invest Profitably and Enjoyably in the Future
Florida has more than its share of second homes and retirees, and if you want to be one of them, you can plan to do it and make money on an investment home while you wait. You can rent the home until you want it for yourself and deduct all expenses, along with depreciation, associated with it. The trips you make to inspect or maintain the property are tax deductible including food, lodging, transportation, and other allowable miscellaneous costs you incur.
The Bottom Line
Income property provides a secure, lucrative and interesting way to grow your assets. It provides plenty of involvement for the hands-on investor, but if you’re more inclined to observe, there are plenty of ways to reap its substantial rewards.
JWB has over 10 years experience managing turnkey rental property investments. We have a consistent approach that delivers steady cash flow from our clients investment properties. Curious what your cash flow could be from one of our rental properties? Try our cash flow calculator or contact us to learn more.