Investing in a rental property is a smart move to make. Don’t take my word for it. Think of the wealthiest people in your area. I’m sure they became wealthy from investing in real estate. 1 out of 3 households rent their home. That’s how big the market is. Sure, you can spend your hard-earned money on financial instruments like stocks, bonds, and mutual funds. But there’s nothing like owning your piece of property. It feels permanent, and it’s something you can see and touch.
Rental properties come in all shapes and sizes, from single-family trailers and bungalows to multifamily apartments and condominiums. Investing in real estate requires serious cash, though, which is why lenders have devised all sorts of loans depending on the rental property you’re eyeing. For instance, if you want to build a multifamily apartment, you can always turn to a multifamily lender for a loan.
Here are some of the reasons why you should invest in a rental property:
- You are your own boss
When you own a rental property, you control everything. You get to make all the decisions about the property: how much to charge, who to take on as tenants, what amenities to provide, the list goes on. And since the land and building are yours, you can choose between short-term or long-term leases. Of course, some things become your responsibility, such as maintenance.
In the corporate world, you report to a boss and your boss reports to another boss and so on. The hierarchy is staggering. But as a landlord, your tenants and employees answer to you. It seems like a lot of work, but it’s going to be the best decision you’ll ever make.
- Better return on investment
What makes rental properties unique as an investment vehicle is that you can rely on lenders to finance your investment. While you’ll have to finance some portion of the property with your own money, you can borrow the rest from a bank or lender.
Let’s say you want to buy an apartment worth $200,000. You only have $50,000, so you borrow $150,000 from a multifamily lender. Combining your money and the lender’s money, you now have enough to purchase the property.
Property appreciation depends on where you live, but the national average is 3 to 5 percent per year. Let’s assume that for the next ten years, your property’s value will increase by 5 percent per year. This is where you benefit because the appreciation is on the total cost of the investment, not just your $50,000. In ten years, the value of your rental apartment will have increased to over $325,000.
With your $50,000 investment, you were able to buy a $200,000 apartment that has increased by $125,000 in value.
- Earn income while doing nothing
Some landlords like to be hands-on while others outsource management to other outfits. If you prefer to be a passive owner, you still earn rental income while doing nothing. Day-to-day management is handed over to your employees. You can focus on your day job or even your hobbies and other recreational pursuits. Of course, you’ll still have to pay for maintenance and payroll, but it’s always better than working long hours.
Meta Title: Why You Need to Invest in Rental Property
Meta Description: When you’re a landlord, you are your own boss. Here are some of the reasons why you should invest in real estate.