An income property is a real estate investment that people purchase to earn income via rent. In other words, the property owner’s goal is to generate cash flow. However, the property owner can also have a “secondary” goal, which is to get the property to appreciate over time.
Are Income Properties a Good Investment?
Income properties can be a lucrative investment. Not only is it less volatile than stocks, bonds, etc., but it also breaks the barrier of entry through a wide range of financing options. You can consider fractional ownership if you don’t have the capital to purchase a piece of real estate, or owner-occupied rentals to get a mortgage with a lower interest rate.
By investing in real estate, you will also be able to take advantage of tax deductions, for example, property management fees, maintenance fees, and more. In the end, it will be as though you didn’t spend a single dollar to run your rental!
But perhaps the best part about income properties is that they provide a source of passive income. If you partner up with a property management company, you can delegate your tasks, like collecting rent, coordinating repairs, and more to a dedicated agent. In other words, you can sit back and wait for your rent to roll into your bank account.
Reasons Why Income Properties Are a Good Investment
If you want to become an investor, buy real estate. Here are a few reasons why you should purchase an income property today:
#1 You’re Your Own Boss
If you’re tired of the 9-to-5, you can benefit from the freedom that comes with income properties. As the property owner, you get to decide how much time you want to dedicate to property management. Want to rent out only one property for one year? Go ahead. Of course, you’ll have to invest a lot of your time to ensure it’s well-maintained, however, that’s ultimately up to you.
If you don’t have the time, you can enlist the services of a professional property management firm. That way, you can put your property’s operations on autopilot and let a team handle its day-to-day demands.
#2 Security
Do you have a piece of real estate that you have never lived? Let’s say you inherited it, and you don’t want to sell it due to its sentimental value. You don’t want it to be vacant, either, because that would turn it into a hotspot for thieves.
The solution is the rent it out. That way, you won’t have to sell your property, and you can earn passive income on the side. Plus, since it’s no longer vacant, you won’t have to worry about would-be burglars, vandals, and so on.
#3 Value Appreciation
One of the reasons why people invest in real estate is its potential to appreciate. Investors anticipate that its value will increase over time. When that time comes, they can then sell their property for more than what they paid for.
For instance, if you purchased a property for $300,000 today, in ten years’ time, its value will probably be greater than that. You can choose to sell the property, or “hold onto it” and wait for the value to rise even more.
Be wary, though. Appreciation isn’t guaranteed – your property can also depreciate if it’s in a poor market where no homebuyer would dare live in. It would be wise to consult your property management firm to find out if a particular property has the potential to appreciate, and if so, at what rate? As a rule of thumb, you should buy properties in developing neighborhoods.
#4 Ability to Buy and Hold
In real estate, the buy-and-hold strategy enables you to buy a property that you intend to resell later on (sometimes ten years down the road). While you wait for that time, you can rent out the property to tenants. That way, your property won’t have to be vacant, and you’ll be able to earn passive income at the same time.
The buy-and-hold strategy is ideal for people who want to wait until the conditions are better or more profitable. They don’t want to waste their time, either, so they decide to rent out their home to earn some money on the side.
#5 Option For Retirement
What if you have to move? If you own a real estate investment, you can always turn it into an owner-occupied home when your current tenant’s contract ends. That way, you won’t have to rent a unit in a place where you already own a property! It’s more economical.
If you intend to retire soon you better invest in a rental property for retirement income. Owning rental property enables you to generate passive income and retire comfortably. Plus, it’s nice to know that you can retire in a place where you already own a property. You can purchase a property in South Florida, rent it out for now, and then eventually move it when it’s time to retire.
What Should You Consider When Purchasing an Income Property?
Before you buy your first rental property, you need to consider these factors. It’s the only way you can make sure your property will be profitable down the road.
- Interest Rate. Chances are, you’ll get a mortgage to purchase your property. Make sure that the interest rate is low, otherwise, you may not be able to make your monthly payments.
- Property’s Condition. If possible, buy a property that’s rent-ready. This is a property that you don’t have to renovate in order to rent out. Remember, renovations can be costly, so it’s best to buy a property that’s already in habitable condition.
- Where your income property is can make or break its profitability. If your property is in a bad area, you won’t be able to attract tenants. It would be best to consult your property management company to be sure that it’s in a prime location.
Expertly Manage Your Income Property With Luxury Property Care
If you’re ready to purchase your first income property, make sure to partner with the experts at Luxury Property Care. With us by your side, you can rest assured knowing that we’re going to make it as profitable as possible. Contact (561) 944 – 2992 or complete our contact form today for professional property management in South Florida.
