Real estate is booming, and for property investors, that means two things. The first is that property value is higher than ever, but for property investors, rental rates are also higher than ever. The second is that property investments have the potential to pay themselves off quickly, if you research and make the right investment.
One important consideration is that property investment isn’t for everyone. You have to consider the return on investment, the location of the property, your ability to manage the property, and local real estate law. All of these considerations can make or break your property investment, so it is never a good idea to jump into any investment without research, no matter how good of a deal it seems.
Real Estate Appreciates Value
Real estate is an appreciating asset providing you maintain it. By spending money every year to maintain, upgrade, and improve your property, you can increase the original value and prevent depreciation. Maintenance, especially preventive maintenance, is generally affordable. But, don’t be fooled into choosing property that needs a great deal of work to be livable. Refurbishment is usually considerably costlier than you might think, so unless the low cost of the property is enough to offset the cost of repairs, choose something that only needs minor work to rent out.
A Tangible Investment
Real estate is a tangible investment and it won’t vanish if the stock market crashes or the economy changes. While real estate values can fluctuate, the trend is most definitely upward, so lowered property values can be combated by simply holding on to your investment until values go up again. Most importantly, you can most often resell property for at least the sum you initially invested in it, even if property values don’t go up.
Passive Income
If you hire a local property manager to help with your property, any apartments or homes that you invest in become passive income. You earn money through rent each month, your property manager collects it, they handle rent collection, maintenance, and other details, and you focus on your job or on your next investment. Importantly, your mortgage and interest rates are often tax deductible, which can greatly reduce your taxes on the property until it is paid off.
Loans and Mortgages Are Available
Most banks allow you to take out a buy-to-let mortgage, which allows you to invest with money you haven’t saved up. You will likely need a 10-20% down payment, after which you can use your monthly rent income to pay the mortgage. This can make investing in property very cost effective, because you can purchase a relatively large investment with less initial capital, so even individuals can invest.
Lowered Risk for Most Investments
Some property investment can be risky, especially when you decide to develop your own, fix something up, or join a tenant in common scheme. However, a fee simple title (standard property ownership) is relatively low risk when you take the time to research your ROI, the cost of the investment, reports, taxes and liens on the property, and other details.
Like any investment, real estate is not risk free, but it is lower risk than many alternatives, provides multiple, tangible benefits. Rental property does take years to pay off, but it’s also something you can pass on to your children or grandchildren, and something that will continue to provide income, even when you are retired.
If you want to learn more, contact SJA Property Management for a free quote.