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Investing in rental property seems easy. Buy a rental house, find some tenants, and let the money roll in. It's not as easy as it looks. Before jumping into this glamorous business be sure to investigate and get some buy to let mortgage advise .
The Upside to Being a Landlord.
For some people, investing in anything but land is dumb. Owning a mutual fund or stock is like owning air, it's intangible you can't hold it or see it. Then we have the land owners who think that a piece of land is a real asset. It's solid, you can walk on it, if it is a house you can paint it or just look at it. It's real. For many, they would have it no other way.
1. Cash Flow.
As a landlord, if you have done it right you have a positive cash flow that puts money in your pocket every month. Your rental income, minus your mortgage and expenses is your profit. Your property is producing something for you.
2. Appreciation.
Your property is increasing in value every year if you purchased it right. Appreciation, though a small amount, over the years it can turn into a substantial amount. Even if there is not appreciation you still are going to experience an increase in the house value because of inflation.
3. Leverage.
Unlike buying a mutual fund or stock, with a rental home you only have to invest a percentage of the homes value. You control the entire investment, but only pay a small fraction of it's cost. The property is the security for the debt and not your personal property. Only the purchased property is at risk.
4. Tax Advantages.
Even if you do not receive a positive cash flow you still are deducting expenses. You are paying down your mortgage and are not paying taxes on this money. There are many types of deductions that can be beneficial in reducing your tax liability overall.
There are some good financial reasons to own rental property. Especially the tax advantages. But there are also quite a few downsides to owning a rental house.
1. Bad Tenants.
Getting the tenants from hell is a distinct posibilty in the rental business. Many people do not respect other peoples property and treat your lovely rental like it's a dumpster. The nightmare scenarios are infinite.
2. Liability.
If someone gets hurt on your property you are responsible and could be in line for a lawsuit. Having adequate liability insurance is an absolute must or someday your tenants will be owning your nice rental home.
3. Vacancy.
There is the distinct possibility you may not be able to rent the home. Are you able to cover the mortgage and expenses for an extended period of time. It's important to have enough cash in reserve for this occurrence.
Investing in rental property can be a very profitable business but can also be a nightmare if done improperly. Make sure to check out your tenants with a background check. Get all your deposits upfront and have good lease that protects you in all contigencies.
Real Estate Investment in Australia is a business that many people would like to have. A business that can lift you up from poverty just be successful. Many people had changed their lives and that is what my goal is.
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