When it comes to getting your finances on track, sometimes what you need is another stream of income. Tips for managing and saving money can go a long way. However, increasing your cash flow would afford you more financial freedom.
Are you considering expanding to the real estate industry? Is starting a rental property business worth it? Prepare to have all your questions answered in this comprehensive guide. We’re going to explore the benefits of owning property in the US. We’ll also cover some processes every landlord should know and why they’re crucial for success. Let’s get started.
5 Benefits of Owning a Rental Property Business
1. Source of Income
One of the most obvious benefits of owning rental property is that it secures another income source. Depending on your location and what amenities you provide, you could clear a lot of money in rent. Besides, real estate is something that doesn’t require a lot of hands-on supervision. In other words, you can still retain your day job. Nevertheless, if you want to exercise a more passive role, Bay Property Management Group can support and help grow your rental business.
- Asset Acquisition
Another benefit of becoming a landlord is that it’s a form of asset acquisition. A house is a great way to build equity, especially when you buy one in a desirable location. Such an investment can boost your chances of getting a loan or using HELOC directly to purchase another house. Besides, once you pay off the mortgage, you can pocket the total revenue from your unit.
- Diverse Investments
Financial experts recommend that investors diversify their portfolios. For example, if you have a stake in real estate and stocks, you can still earn a profit during a bearish season. Thus, it offers you a valuable layer of protection and prevents the need to liquidate. Further, you can also earn more interest in a diverse portfolio.
- Property Appreciation
Stay one step ahead of inflation when you buy a rental property. Real estate might not earn as many returns as specific stocks, but it is known for its stability. Most properties retain their value over the years and are likely to appreciate. If you spend $100,000 to buy a house in a developing neighborhood, it could be worth $250,000 in a few years. More so, you can also add more amenities to drive up the resale value.
- Tax Advantages
Finally, owning rental property has several tax advantages for the landlord. Although there are several bills you have to keep up with, many of them are tax-deductible by IRS laws. For example, you can exclude wages, property taxes, maintenance and repair costs, travel fare, and depreciation costs. You can catch a significant tax break if you keep receipts of your transactions and track your finances properly. Besides, you can even defer taxes with the 1031 exchange.
Importance of Having Processes to Handle Landlord Tasks
- Tenant Screening
The benefits of owning an investment property are only achievable with efficient management. One of the biggest problems landlords have to deal with is tenant complaints, which is why you need to pay attention to tenant screening. It’s always easier to avoid disputes with renters when they’re responsible. Thus, it would be best to adopt a thorough tenant screening process that evaluates a candidate’s worthiness before they move into your apartment. Ideally, you should analyze their credit score, income statements, criminal background (if applicable), and relevant references.
- Payment Collection
Rent is the only source of income for a rental property, so you must streamline the process. Going door to door to remind tenants and collect their payments is no longer the most efficient method. Savvy landlords are now making it possible for renters to automate rental prices. E-transaction solutions save both parties significant time and energy.
- Routine Maintenance
Carrying out repairs is one of the most common duties of a landlord. Thus, you should know how to maintain your property in good condition. Scheduling routine maintenance is one of the best tips and should become a regular habit. Be proactive in calling a professional. You don’t have to wait for your water heater, HVAC system, or dishwasher to develop faults. Regular servicing can preserve the lifespan of your equipment and save you money on replacements.
- Landlord-Tenant Communication
Another process you should lock down quickly is communicating with your tenants. As a landlord, you need to work on being available when your renters need you. Tenants might try to reach out to report a problem, ask for permission on an issue, or update you on emergencies. If they can’t reach you, it could lead to frustration and further damage your rental. Hence, it would help to set up a platform that works for both parties. Also, if you’re too business or would rather not be bothered, you can hire a property manager.
So, is starting a rental property business worth it? We think it is. After all, there are significant benefits you can enjoy like tax advantages, building equity, and earning more income. Although, it’s much easier to be an owner when you have the right processes to help you. Some of your principal duties will revolve around finding tenants, collecting rent, coordinating maintenance, and communicating with tenants. Thus, setting up efficient procedures to care for such matters is crucial.