It seems like the more you hear about the recession and bank-owned homes, the more it makes sense to consider buying a second or investment property of your own. So what are the benefits of owning an investment property?
Cash Flow Choosing an investment property requires plenty of research and knowledge of the market. Your property should have a cash flow of at least $200/month to ensure that you’ll have extra money in case a tenant leaves the place a mess or if you have to evict them. If you’re just breaking even on your investment property, you’re still building equity by paying down the mortgage with someone else’s money, but even when you have a clean, on-time tenant you’re roped into additional expenses each time you get a new tenant.
Taxes Many people enjoy the tax benefits they receive from home ownership. A second property is no different. You can deduct mortgage interest and operating expenses, like homeowner’s insurance. Not only can you deduct the usual expenses but you may be able to deduct business expenses in the field of real estate as well as depreciate your home in ways that are most beneficial to you. Any investor will tell you that saving money on taxes is one of the biggest benefits of owning real estate.
Equity Many people have turned their backs on the real estate market as an investment, considering how the U.S. housing market lost over $480 billion in value in the 11 months of 2009. If that sounds bad, it’s nothing compared to the $3.6 trillion lost in 2008. Any good investor realizes that markets are cyclical, and that one industry will only be at the bottom for so long.
Obviously as soon as the economy picks up and offers more jobs to Americans, the real estate market will follow shortly after. Buying at the bottom is one of the best things you can do to build equity. Buying while at the bottom allows you to maximize your equity, especially when you can capitalize on the record-low interest rates.
So you’re ready to get started but don’t know how? If it’s your first investment property, you may want to consider partnering with a more experienced investor or hiring a mentor to be your point of contact. Always know your market, including comparable sold properties as well as comparable rentals. First time investors may not want to take on a project and would most likely be better off buying a move-in ready property to learn the ins and outs of being a landlord. If you’re looking for homes for sale in Denver CO, contact an Agent from PorchLight Realty to assist you.