With the cost of living continually on the rise and inflation driving the value of the dollar down, it is more important than ever to build a long-term financial plan for the future. Having a form of passive income and building your investment portfolio is a great way to grow your wealth. If you’ve ever played the game of Monopoly, you will know that rental properties are very beneficial. They serve as both a source of immediate income as well as a long-term investment for when you retire.
Appreciation and Equity
While cash flow is the primary consideration when looking at rental properties, appreciation in the value of the property over time is also very important. There are two ways that you can build equity in your rental property – appreciation in the value and paying down your mortgage. As you pay down your mortgage and as your property appreciates in value, you will build up equity.
There are many benefits to building up equity. You can pull from it later when needed or borrow against it to secure an additional property. Having a tangible income from rental properties can be used to pay down the mortgage or have in pocket once the property is paid off! Now why wouldn’t you want to invest in some real estate?
While there are benefits to long-term appreciation and equity growth on rental properties, they aren’t the only benefits to investing in real estate. Owning and managing rental properties offers you the chance for some very valuable tax breaks. Landlords can deduct items like interest, insurance, and maintenance. So, understanding which deductions you qualify for can reduce your salary income considerably, which means less taxes that you will have to pay.
An advantage to rental properties that not everyone thinks about is leveraging. Many banks are happy to lend money to people for real estate investment. They regularly cover approximately 80-90% of the cost of the property, which leaves investors only to make a down payment. This means that your money can so MUCH further and your returns can be a lot higher.
You can invest in many properties by just making a down payment since you aren’t paying 100% cash for a property! This will generate you more cash flow and appreciation since you can own multiple properties, instead of just one. The best part about this, is that it will grow your net worth at a much faster rate.
Real estate is a great way to help build security for the future. It will give you the advantage of owning a tangible asset and will put you in control. If you have more questions around rental properties, get in touch with us here and let’s discuss your future!