Deciding Whether to Invest in Rental Property
Finding the right place to invest your money can be difficult...
there are so many investment opportunities that create a great
return and generate a large profit, but there are even more that
end up with very little if any return and minimal profits or
possibly even losses. For the careful investor, real estate can
generate a much larger return than some other investments,
especially if the property purchased is used as a rental
property.
Not everyone is cut out to be a landlord, however, and care must
be taken to make sure that you're not getting into something
that will only lead to problems down the road.
To help you to make the decision as to whether or not you should
purchase rental property, here are some of the pros and cons of
buying property for rental purposes.
Advantages of Owning Rental Property
Rental property can be a great way to make money, especially if
the property is well taken care of and lies in a good location.
If the property is low-maintenance, then the majority of the
money that is paid in rent will likely be a profit for you the
profit being determined after all property taxes and other costs
are paid. As long as the rental property is occupied, you should
continue bringing in money... and if the location of the rental
property was well chosen and is in a popular area, then you
shouldn't have very much trouble keeping the property occupied.
Depending upon where the property is located and the individuals
that you rent the property to, you may also be eligible for
government programs or tax deductions for opening your rental
housing to low-income or special needs families.
Should your rental property begin to perform below your
expectations in regards to rent, you also will still have the
option to sell the property just as you would any other real
estate though there may be some legal restrictions if the
property is occupied at the time.
Disadvantages of Owning Rental Property Just as there are
several advantages to owning rental property, there are also
several disadvantages that you should be aware of. Since you are
the owner of the property, you are responsible for all taxes and
costs associated with owning the property... and these are due
whether you've made a profit from the property or not. You are
also responsible for maintaining the property in a livable
condition, and some of the repairs that may arise in meeting
this responsibility (such as repairs to electrical systems or
cleaning up of health issues) can be quite costly.
Additionally, the income potential of rental property is based
on the assumption that the tenants will pay their rent on
time... some tenants are constantly late with their payments, or
may decide to withhold payment altogether and force you to evict
them.
Landlord/tenant conflicts can sometimes even become legal
matters that can become bogged down in court and cost more than
the issue that started the conflict in the first place.
Of course, not all tenants will be bad... nor will all of them
be good. The advantages and disadvantages listed above are
intended to show you the potential for both good and bad
experiences that exist when investing in rental property.
Consider both carefully so as to better make your decision and
to help choose your investments wisely.
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