Do you want to build up a financial nest egg so you can retire comfortably, go on a vacation every year, support causes you care about, and provide for your family?
Americans saved an average of $5,011 in 2022, and 54% of adults achieved or exceeded their savings goal last year. Meanwhile, a Gallup survey shows that around six in 10 — 61% — Americans own stocks. Add to that the fact that 65.8% of Americans lived in their own houses last year. That works out to around 230 million Americans.
If you want to take control of your finances, saving, investing in stocks, and buying a home are worthwhile. Another option to consider is buying a rental property. There are around 50 million housing units in the U.S. Forty-one percent of them are owned by mom-and-pop landlords. Is owning an investment property right for you?
Consider these six reasons to consider buying a rental property. One thing to remember is that hiring a property manager can make the experience more enjoyable.
Earn Passive Income
The passive income potential is one of the biggest reasons to invest in a rental property. When you purchase the property and rent it out to reliable tenants, you can look forward to a steady flow of rent month after month and year after year.
Of course, it won’t be as “passive” as you might want if you insist on taking on landlord duties rather than outsourcing them to a property management firm. If you get the help you need to look after tenants, maintain the property, and handle the other things connected to owning an investment property, you’ll have a source of income that doesn’t require much of your valuable personal time.
That’s one reason you should find a property manager located close to your real estate. So, if you have a New York City, New York unit, find a property manager from there, and if you have a Houston, Texas multi-family unit to rent out, ensure you find a Houston property management firm to work with. Going local matters a great deal.
2. Monetize Investment
Another reason to consider buying a rental property is the opportunity to sell the real estate whenever market conditions suggest a big return is afoot.
You’ll want to hold onto your investment property for a while and enjoy passive income and investment diversification. But if there’s a seller’s market and you get an offer that’s too good to refuse, you can monetize your investment and reap the rewards.
3. Diversify Investments
Investment diversification makes sense. You don’t want to put all your proverbial eggs in one basket. In addition to stocks, savings, mutual funds, index funds, and bonds, you can sink money into a rental property. Of course, it’s probably not the best course of action if you’re heavily in debt. But if you have the financial flexibility to get an investment property, that can go a long way toward diversifying your investments. You’ll be less susceptible to downturns in the market with your eggs in multiple baskets.
4. Move-in Option
Yet another reason to get a rental property is that it’ll give you an option should you need to move into the property. So, if you suffer some sort of setback — loss of a job, a death in the family, or the end of a relationship — you might want to live in the rental home. Of course, you’ll have to honor whatever lease arrangements you’ve signed with tenants. But you’ll have peace of mind knowing you can move into your rental unit should circumstances shift and leave you without an alternative place to stay.
5. Tax Benefits
Rental property owners also enjoy considerable tax benefits. For instance, you can deduct interest paid on the mortgage loan for your rental property. You can get even more benefits by deducting any interest on credit cards used to acquire services or goods for your investment property. Those deductions can add up when you file taxes.
Another way rental property owners can enjoy tax benefits is through any repairs made to their investment properties. Repair expenses are deductible. So, if you get the roof replaced, an HVAC unit installed, new flooring, or the interior refreshed with a few coats of quality paint, you can deduct the costs when you file income tax.
Among other tax benefits, rental property owners can benefit from depreciation if their rental assets provide them with an income. And they can deduct insurance premiums connected to insurance policies you get for your rental property. If you get theft insurance, landlord liability insurance, or some other insurance policy, you can save.
6. Retirement Income
Many people invest in rental properties to live off the monthly income after retiring. Rental income can be a godsend after the bi-weekly employment checks stop. It can help provide financial independence so you’re not struggling after retirement.
Sinking money into a 401K plan, income trusts, or other investments is a good idea. But another way to make retirement more pleasant is to buy rental properties. After decades of working and caring for loved ones, you’ll want to enjoy retirement. That’ll be easier if you have the financial flexibility to travel, enjoy hobbies, and do other things.
Some people struggle after they quit their jobs and enter their retirement years. That doesn’t have to be you. The monthly passive income from tenants can supplement your pension and social security check. You’ll enjoy a higher quality of life.
As you can see, some good reasons exist to consider getting into the rental property space. It’s not for everyone, though. So, you’ll want to ensure you have cleared up any high-interest consumer debt, saved enough to make a sizeable downpayment, and put together an emergency fund so you’re not among the house-rich-cash-poor crowd.
When you do take the plunge and buy an investment property, you owe it to yourself to explore hiring a property management firm. You’ll not only get the help you need, but also have access to answers when you have questions.