Buying a house and buying a rental property is a whole different thing. When you’re buying a house, what you’re essentially looking for is a home for your family, but when purchasing a rental property, you buy a house (which is more often than not a multifamily home), find tenants, and maintain the facility while collecting monthly rent while paying property taxes. When planned and executed well, buying rental properties can be an investment that eventually becomes a source of income and profit.
You would also want to consider what type of property you want to rent out. Different types of homes come with different responsibilities. For example, renting out a house with a lawn could involve more landscaping and lawn care than an apartment building in the city.
Here are the Pros And Cons Of Buying Rental Property
The major part of figuring out whether you want to buy a rental property is studying the risks and rewards associated with your purchase.
Before you decide if being a real estate investor is right for you, here’s what you need to expect when buying a rental property:
Pros
- Maintaining a rental property is essentially a passive source of income, meaning you can continue to work a regular job and earn rental income on top of it.
- As with other forms of real estate investing, rising values on the market will also increase the value of your investment.
- Rental income is not subject to Social Security taxes.
- Real estate is a relatively stable investment.
Moreover, you’re entitled to a number of tax deductions and benefits if you rent out your property for at least 14 days a year.
Here are some things you can be deducted:
- Repairs
- Insurance
- Mortgage interest
- Attorney’s fees
- Travel costs for traveling to and from the property
- Advertising costs from searching for tenants
Get the expert advice of a tax specialist if you’re not sure whether something’s deductible. Specific deductions may vary by state and income level.
Cons
- You may have to work with difficult tenants.
- You won’t be able to instantly sell your property if you need quick cash.
- Your success depends on finding tenants who can cover their rent, so you must advertise the property and find the right tenants. In some cities, leasing to the wrong tenants can mean fines or legal trouble for you.
- You’re responsible for performing regular maintenance and repairs, such as keeping the home up to code, lawn care, and snow removal.
- You’re totally responsible for paying the bills. This includes not only the mortgage and taxes but also insurance and utilities.
- Hiring a property management company to take care of your maintenance, rent collection, evictions, and advertising can be costly.
Conclusion
Being a landlord is a lot of work, but it can also be rewarding. Knowing what you’re getting into is essential to making a successful investment, and if you think you have what it takes to be a landlord, buying rental property could be a good investment for you.
If you’ve done the math and decided that a rental property is right for you, you can get started with a preapproval from J&C Property Management.