A recent study found that there are over 20 million rental properties, and of those, 71% are owned by individual investors. Owning a rental property is an efficient way to earn extra income and save money for your future. In fact, many people today own rental property to save for retirement, but is it as economical as it sounds?
Don’t worry with this article; you can find out! We’ve looked into all you need to know about managing a rental property.
Now, are you ready to get started? Here’s a quick look at a few advantages of property management:
1. Create Wealth and Develop Equity
The first advantage to managing a rental property is its ability to grow wealth and build equity. After all, as you own a house or a piece of land, it naturally increases in value. Once you pay the mortgage down and make the house appreciate, you’ll increase your equity.
Equity is an asset that is part of your net worth and one of the easy ways to increase wealth. With it, you have multiple options to get a return on your investment.
For example, selling your property at the right time could make a large profit. You can even use equity as leverage to boost your investment profile and make even more money.
2. Reliable Long Term Investment
While the real estate market does fluctuate some, it’s still a stable environment to invest in. In fact, it’s a better option than the stock market.
After all, the stock market is highly erratic and can change on a dime, making you lose or gain money frequently. However, rental properties don’t instantly increase in price due to capital volatility, making real estate a safe long-term investment. In fact, property management is stable enough to help you gain a steady cash flow; that way, you can save for your retirement.
3. Tax Benefits
Tax benefits are a less commonly understood advantage of owning a rental property. However, using tax benefits can significantly lower your taxable income and sometimes even eliminate it. Common tax deductions include:
- Insurance payments
- Repairs and improvements
- Mortgage interest payments
- Loan fees
- HOA fees
- Advertising and marketing
There are other options to maximize tax savings, like section 1031 of the IRS and Opportunity Zones. Section 1031 authorizes you to postpone paying your taxes when reinvesting in another property.
Opportunity zones permit you to avoid paying capital gains when you invest in a specific piece of land. Of course, these tax laws are complex, so make sure you thoroughly understand them before applying them to your property.
Purchase a Rental Property Today
By purchasing a rental property, you’ll be able to build equity, set up a stable investment, and reek tax benefits. It’s a great way to save up for your retirement or supplement income while you are retired. To begin, look at potential rental properties on our website so you can find the perfect property.
Now, for more information about managing rental property, contact us today.