Residential real estate investing is the way to go for many realtors. In specific, buying rental properties is probably the most widely spread real estate investment strategy. Surely, there are many benefits that buying investment properties of this kind offer. In order to be a successful real estate investor, you need to know the potential opportunities for making money in the field. Buying rental properties is certainly one of them. Let’s not skip ahead of ourselves and explore what rental properties actually are. Afterwards, we will discuss why buying rental properties is a must when attempting to grow your real estate investment portfolio.
Related: Buying a Rental Property? Consider These Factors
What Are Rental Properties and How to Find the Best Ones?
Rental properties are a type of residential real estate investment properties. Real estate investors purchase such properties for the sole purpose of making money from the generated rental income. However, in order to be a successful real estate investor, you should be well aware which rental properties are a good investment and which are not. Buying investment properties in general is a very difficult task. The same is valid if you are willing to buy a new rental property. There are multiple factors to be considered with regards to buying rental properties. Such factors are, for instance, the potential rental income as well as if the investment property will generate positive cash flow. Additionally, to be making money from rental properties, you should choose the optimal rental strategy as well as the appropriate monthly rent to charge your tenants. Even though all of this sounds quite overwhelming, there is a way to ease the pressure. Mashvisor’s investment property calculator is a great real estate tool, which can help you in evaluating the property and deciding if it is the right investment for you. Further, Mashvisor’s investment property calculator suggests the optimal rental strategy and, thus, guides you in being a successful real estate investor.
Are you still wondering why buying rental properties is a must when willing to grow your real estate investment portfolio? Here are some of the most important reasons:
Related: Investment Rentals Are the Best Way To Make Money. Here is Why
#1 Buying Rental Properties Provides Steady Income
Once you buy a new rental property, find tenants, and set the monthly rent, you will receive a steady income each month. Even though you might need to fix a problem with the rental property here or there, the income you will receive is relatively passive. This is one of the main reasons to be buying rental properties in order to grow your real estate investment portfolio. Of course, passive income is not the case when it comes to investing in short-term rentals as a real estate investment strategy. Nevertheless, the latter type of rental properties has other perks, such as a higher rent per night.
#2 Rental Properties Are a Low-Risk Real Estate Investment Strategy
Another great reason to buy a new rental property is the low risk the investment holds. As a part of the residential real estate investing, buying rental properties has its benefits. There are always people looking for accommodation. Additionally, if the rental property generates negative rather than positive cash flow, selling it is always an option. Hence, if you have chosen the right rental property and the optimal rental strategy with the help of Mashvisor’s investment property calculator, it is highly unlikely to end up with a bad investment.
#3 Investing in Rental Properties Offers Some Tax Advantages
Buying investment properties with the purpose of renting them out has tax benefits as well. What we mean here is the fact that the real estate investor is able to apply for tax breaks due to depreciation of the rental property and maintenance as well as property insurance. Moreover, sometimes lower tax rates are applied when it comes to buying rental properties and leasing them as long-term rentals.
Related: What You Need to Know About Real Estate Taxes as an Investor
#4 Rental Properties Are Associated With Real Estate Appreciation
Buying rental properties as a way to grow your real estate investment portfolio has another benefit as well: long-term appreciation. This, principally, means that the longer you hold on to your rental property, the higher it gets in value. The real estate market value of properties and land tend to go higher with time. Therefore, while you are leasing your rental property and hopefully generating positive cash flow, it is also appreciating in value. If you decide to sell your rental property at some point, you will receive financial benefits due to this appreciation.
#5 Investing in Rental Properties Pays Off the Mortgage
The principle is simple: the real estate investor takes a loan in the form of mortgage while buying a rental property and pays it back with the received rental income. In this way you do not have to make complicated calculations and overthink how to divide your financial assets. At the end, you will have a new rental property which paid for itself. The important thing here is to find tenants as soon as possible, charge the right monthly rent, and avoid having the rental property vacant.
#6 There Is a Possibility of Increasing the Value of the Rental Property over Time
While investing in fix-and-flips has a specific time frame, this is not the case when buying rental properties. This is another great opportunity for real estate investors. When it comes to rental properties, the real estate investor can simultaneously receive rental income form the property and work on increasing its value. For instance, while tenants are renting the property, the investor can install new supplies, build additional facilities, etc. In this way the landlord will receive income in the form of monthly rent. Additionally, the property owner will have the time to calmly work on increasing the value of the rental property.
If you are interested in becoming a successful real estate investor, Mashvisor is the right place for you! Read more of our useful tips and guidelines on various real estate subjects.