Are Rental Properties Worth the Investment?
Maybe you're looking for passive income to supplement your salary. Perhaps you want to quit your day job and rent properties as your new full-time endeavor. Whatever your reason, owning real estate can be quite lucrative, especially if you live in areas experiencing growth. However, before purchasing your first property, it's always best to weigh the pros and cons carefully.
Upswing in the Market
When the economy is good, real estate tends to be a good investment. Renting your property to qualified tenants can prove beneficial to establishing financial wealth. For instance, areas across the country like Austin, Texas, are developing rapidly and, when the population starts to rise, people and businesses need places to live and run their companies. Hiring professionals who specialize in property management in Austin to help you find qualified tenants also takes much of the workload off of your shoulders. However, if you live in saturated and overdeveloped areas of the country, not only are properties hard to find, but the intense competition can prevent you from acquiring the few properties that are available.
The Role of Landlord
Most tenants of rental properties abide by the lease they sign and pay their rent by the due date. However, if you are the landlord and the property owner and a tenant doesn't pay their rent on time or destroys the property, you will have to initially lay out the funds to a lienholder and pay for the repairs out of pocket. While you can have the tenants removed and take them to court for damages, the process is often very lengthy. Additionally, even if you have good tenants, home repairs along the way are inevitable, so you must have funds set aside to make repairs as needed.
Location, Location, Location
Your real estate based financial wealth depends on many factors. Among them is where you purchase properties. In order to find the right properties located in desirable areas, you will need to do extensive research. Just because a property looks like a good deal doesn't mean that it is. Talk to the realtor or owner showing the property about the costs and check out the neighborhood, too. You'll find that some areas attract lower-income tenants due to higher crime rates or poor schools.
Time to Sell
There may come a time when you need to sell your home due to circumstances beyond your control. When you own rental properties, you have leases that guarantee the home will be rented to your tenants for a year. While you can offer a discount on their current rent for leaving voluntarily ahead of the lease’s expiration date, many tenants are not in the position to find a new property midstream. In some states, you will also have to cover their moving costs.
You may not think that a tenant will have any reason to sue you, but it happens more often than you may imagine. Risky tenants will use any means to sue a property owner. You may have a few loose bricks along the walkway or a front step that suddenly gives way. Before renting your property, make sure that you have the management company do a background search on all those they consider for possible tenancy.
Pays Your Mortgage
Owning several rental properties successfully can actually provide you with enough extra money to pay your own mortgage, too. This will help you free up money from your home's budget and allow you to really start enjoying life.
Reap the Tax Benefits
When you own several properties, you are entitled to credits and many tax deductions you would not otherwise receive.
Owning real estate rental properties can prove quite rewarding when it comes to additional income. However, owning properties does not come without risks. Just make sure, before you buy your first property, that you weigh the pros and cons before making your final decision.