Are you a property owner, or a potential investor and thinking about investing in real estate by buying a rental property? If you’re wondering if it’s still a smart move for property owners like you, you’re in the right article to find out!
By the end of this guide, you’ll gain a clearer understanding of whether investing in rental property is still worth it, along with the potential benefits and potential drawbacks it could bring to your financial portfolio. Let’s get started.
Pros: 5 Benefits of Buying a Rental Property in 2024
Investing in a rental property is a path many consider for various reasons, all aiming toward financial stability and opportunity. Whatever situation you’re in right now, let’s explore the advantages together by discussing the five key benefits of owning a rental property in 2024.
Long-term Appreciation
Think of how real estate increases in value like an oak tree growing. At first, you put your money into a tiny tree, just like buying a house or land. This little tree, similar to your new property, needs looking after, effort, and time to get bigger. As time goes by, the tiny tree becomes a big, strong oak tree. Its worth goes up a lot, not just because it’s bigger, but also because of the shade and beauty it adds.
With rental properties, it is similar. You buy a house or apartment to rent out, and over time, the value of that property can go up. This means, that if you decide to sell it years later, you could sell it for more than you paid for it. That’s long-term appreciation.
Steady Income Stream
As as established Philadelphia property management company, we know that buying a rental property can be like getting a new source of regular income. When you rent out a property, the tenants pay you rent, which serves as a steady income stream. It’s like having a job that pays you regularly, except in this case, your property is doing the work for you.
This rent can help cover any mortgage payments you have on the property, slowly but surely helping you own it outright. Over time, not only do you benefit from this monthly income, but your property might also increase in value, offering the potential for a profit if you decide to sell it down the line.
Tax benefits
Owning a rental property in the US not only provides a steady income stream but also offers various tax benefits that can significantly enhance your financial position. From deductions on mortgage interest to property management and maintenance, being a rental property owner presents unique opportunities to optimize your tax liabilities while building wealth through real estate investment.
Some of the tax benefits when you own a rental property include:
- Depreciation Benefit: A big win for landlords when it comes to taxes is being able to depreciate, or gradually deduct, the value of their building (but not the land it’s on) over time. The IRS has set this period at 27.5 years for houses and apartments, and 39 years for places like office buildings. This deduction can help lower the amount of taxes you owe, making it easier to keep your rental business profitable even when the market gets tough.
- Deductible Operating Expenses: Running and keeping up a rental place means you’re going to have some bills to pay, from fixing things that break to making sure the property is well-managed. The good news is, all these expenses? You can deduct them from your taxes. This effectively reduces your taxable income, essentially putting some of that spent money back in your pocket.
- Mortgage Interest Deduction: This is a piece of good news for property owners with a mortgage. The Tax Cuts and Jobs Act of 2017 offers a nice perk. You can deduct the interest you pay on it, up to $750,000. This isn’t just for your primary mortgage but also applies to home equity loans if you’re using them to buy or revamp your place.
Psychological Satisfaction
Owning rental properties feels awesome for a lot of landlords because it’s like hitting a personal success milestone. It’s all about getting the hang of the real estate, from buying a place to keeping it running smoothly, and that journey makes you feel accomplished.
Plus, knowing you’re providing a comfortable living spot for someone to live in is a great feeling. For many, the mix of making money, growing personally, and making a positive difference in people’s lives is a big reason they find managing properties so fulfilling. Seeing your properties appreciate and your rental income increase is pretty exciting and motivates you to keep going and possibly expand your portfolio.
It’s not just about the money, though. Although, that’s a big part of it, but it’s also about building something on your own and seeing the direct results of your efforts.
Control Over Investment
Having control over your investment is another huge perk of owning rental properties. Think about it this way: you’re in the driver’s seat. You get to make the big decisions, like picking the right property, setting the rent price, and choosing who gets to live there.
It’s like customizing your investment strategy to fit what you think is best. Plus, you can decide when it’s the right time to make upgrades or renovations to bump up the property’s value or attract better tenants. It’s not like stocks or bonds where things can swing without you having a say.
Here, if you want to make a change, you can just go for it. This control not only makes your investment feel more personal but also gives you a direct hand in growing your wealth. It’s empowering, knowing that your decisions can lead to bigger profits and a more successful portfolio.
