Tuesday, November 12, 2019
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5 Reasons why you should start a Rental Property Business

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Having an idea about something is good but implementing it is way better. Rental property business is one of the salient but profitable businesses to venture into and having several reasons to back up this claim isn’t a bad idea to do.

There are several reasons why you should start a rental property business and I will be writing 5 of them

1. Increase in property value

This does not mean an approach where you work on your property and sell it off, in fact keeping it for a couple of years would be better.

Generally, the longer you keep your property and also watching the trend of such an environment where the property is located, the more value will be attached to it and one of it is its increase in it’s worth which will eventually tell on your return on investment (ROI).

2. You have your mortgage reduced.

This is a really salient benefit and often times people discard it. To fully maximize this benefit, you first need to purchase your property with the necessary wisdom so that you don’t lose out.

Once you have purchased your property, you can then begin to expect a break even as you begin to have renters who are obviously paying the mortgage for you through the rent they pay.

The major decrease within the mortgage is the continuous tax fee that you don’t pay on those properties.

3. Constant Income

One of the major reasons why should start up a rental property business is the direct income stream you get exposed to. It depends on your agreement with your tenant, the payment period could be monthly or annually.

For example, if you own a property that you rent for $2000 per month, you can be rest assured that you would have $24000 within the year provided that property is fully occupied.

4. Cash flow

When you have a well-managed rental property, you can be assured of a flow of steady cash but when your property isn’t maintained properly, it won’t bring in as much cash as it should.

Having a bad property can lead to a couple of negative effects to your business. Some of the major effects include a drop in revenue due to happenings like excessive repairs due to mismanagement of property.

Cash flow contributes to the return on investment (ROI) of the property therefore you will need to take into account the expenses to determine what your returns should be even as you try to cut down all unnecessary expenses.

5. Tax savings and cut

It is obvious that rental properties lose money when it comes to documentations but when you have the knowledge of depreciation you can still get your money by reducing the mortgage interest your tenant has to pay along with other miscellaneous expenses like repairs and service charge.

When venturing into this business you need to make sure that you are seen as the person you want to be seen as either as a professional, passive or an active investor. To distinguish them, you need to first understand what they stand for.

  • The professionals –This are people whose main source of lively hood is from real estate and to be a part of this you need to commit to a lifestyle of spending a lot of time into it In terms of its management.
  • Passive Investors – For these people, anyone can get involved in it but once losses comes in, they only affect other passive income.
  • Active investors – To be an active investor, you need to make some decisions as whether you are just going to be buying properties or selling or whether you’ll just hire a property manager. Whatever you choose just know that the losses are limited to a particular amount until it phases out completely.

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