Is owning a rental property in Southern Utah still a good investment as it was ten to fifteen years ago? Should you seriously be considering real estate investing as a major cornerstone of your investment strategy? Why should you buy a rental property versus any other type of asset?
The surprising answer is that rental property ownership, rather than growing weaker, is becoming stronger as a viable investment option. There are more reasons to invest in real estate today than there were years back and some of those reasons are not likely to go away soon.
Did you know that the national rate of homeownership has been steadily declining for several decades? Over the last five decades, fewer people are making the move to own their own home, with the result that the current rate of homeownership is the lowest it has been in fifty years.
But while homeownership has been on the decline population has been increasing. The question is where will all these people who are entering the population whether by birth or immigration live? The simple answer is most people are opting to rent their home rather than own it.
As a result, renter households in the USA have been growing at a faster rate than owner households. In the last ten years, the number of people renting their homes has grown by a whopping 4.3million. Some of these are people who can’t afford to own a home, but many would rather not own a home right now.
For property investors in the USA, this is good news. It means they have a massive pool of potential renters to market their rental properties to. For those investors who know how to successfully manage a rental property, there is a lot of money to be made as well as other benefits.
Why should you be one of those investors? Here are a few good reasons why you be thinking of buying a rental property.
The top 7 benefits of owning rental properties
1. Earn passive income
The first and most obvious reason to own a rental property is the potential income from the rent. The great thing about income from a rental property is that it is consistent. Also, you can actually increase how much you earn from the property by reducing your costs and raising the rent. Unlike other investments, the income from a rental property is fairly reliable and substantial.
2. Control of the investment
As the owner of an investment property, you are in control of your destiny, as far as the performance of your asset is concerned. You are not required to rely on the expertise and trustworthiness of a company’s management team or an asset manager. You are in a prime position to make all the critical decisions that determine the success of your investment.
3. Leverage
Real estate is probably the only investment where borrowing money to buy the asset is highly encouraged. As a property investor, you have access to an almost limitless supply of money, as long as you are able to meet the lender’s requirements. Using leverage means you only need at most 25% of the value of a property to own it. Yet you will earn income from it as if you paid 100% of its purchase price.
4. A hedge against inflation
As a rental property owner, you are in the position to profit from inflation, rather than be hurt by it. While inflation erodes the value of other assets, landlords earn more money. This is because the rent on the property increases at a rate that is at par with or even ahead of the rate of inflation. As inflation pushes up the prices of goods and services, it also increases the income from the asset.
5. Property value appreciation
Real estate is one of the few assets with intrinsic value; that value is tied to the basic human need for shelter. Furthermore, that value increases over time. A property owner does not have to do anything to a building to improve its value. The market does that for the investor. Just by buying a property and holding it for many years, an investor can make a lot of money when they eventually sell.
6. Forced appreciation
The second way the value of a property increases is through strategic improvements made by the owner. An investor can make their rental property more attractive to renters by updating the features of the home. These improvements let the landlord charge a higher rent. They also make the property more valuable in the eyes of would-be buyers.
7. Use other people’s money
After the initial investment an investor makes in the asset (down payment and home improvement costs), they don’t have to spend any more money on the rental property to earn income from it. The rent paid by tenants is enough to cover the operational cost of the building and leaves enough money for the owner to make a profit every month. Essentially, tenants help the landlord pay off the mortgage on the building.
Author: Ryan Erwin from https://getpmhelp.com/