Skip to main content

Are Investment Rentals Right For You?

When thinking about investments and retirement goals, many people think about owning rental properties. After all, they pay for themselves, right? They can be excellent additions to a savings and investment portfolio, but there are also risks. Here are the things to consider.

First off, the good news

If you are considering purchasing a rental property, just about all of your expenses are tax deductible (unless you rent to family members). Your mortgage loan interest, property taxes, and maintenance expenses are all allowable deductions. Your accountant may find other deductions for you as well, such as a 27-year depreciation rule.

Now for the risks

Many areas are too expensive for rental investments. You will want to know that your monthly cash flow from the property meets or exceeds your expenses. In pricey locations, you may wind up upside-down and spending more each month than you are taking in. Believe it or not, prior to the Great Recession, many investors did not worry about rental income meeting expenses because they had so much ongoing appreciation in property value. We know how that worked out.
Speaking of appreciation, the best rental properties are in areas with steady appreciation in value. It is tempting to purchase costly investment properties in high-end neighborhoods, but you may get better long term increases in value in other neighborhoods as well. This is important because you will eventually want to sell your property and make a profit.
Ongoing maintenance is necessary, of course, but may cut into your spare time. You may also get those yucky middle-of-the-night backed up plumbing calls. Do you really want to handle this? The solution is to hire a management company, which will add to your (tax deductible) expenses but may provide you with a lot of peace of mind.
Then there are landlord-tenant laws to contend with. Be familiar with your locality’s laws before even considering purchasing. Is there rent control? If your tenant stops paying, what are the rules for eviction? How much notice do you have to give before entering a property? Just about every city has posted laws online. You may wish to consult a real estate attorney if you have detailed questions.
It is tempting to focus on your monthly return. Keep in mind that vacancies and maintenance expenses are inevitable and make sure your budget takes those costs into consideration.
Finally, can you afford another monthly bill and twice-yearly property taxes? If your finances are already stretched, another payment or two might be really unpleasant, even if you are achieving a cash return.
If you have considered everything and still would like investment properties, have fun becoming a budding real estate mogul!
Ali Palacios, ABRMCNETAHS
Realtor
Today's Home Realty
ali.palacios@todayshomerealty.com
Mobile - 832-418-0670
www.ilovehappyclients.com

9119 Hwy 6 S #230-116, Missouri City, TX 77459
Source: http://www.bestrealestateblog.com/investment-rentals-right?m=JnojPGPgYwNqRUqKIeuc

Comments

Popular posts from this blog

Home Buyers and Seller beware - WIRE TRANSFER FRAUD

If you are in the process of buying or selling a home please BEWARE: Online banking fraud is on the rise. If you receive an email for a title company or your real estate agent containing WIRE TRANSFER INSTRUCTIONS call your agent or escrow officer immediately to verify the information prior to sending funds. Here’s how the scam goes down. You’re about to settle on a home. You get an e-mail from your real estate agent or from the title company, requesting funds to be wired to an account for settlement. The e-mail states that there is a last-minute change in wiring instructions. You dutifuly wire the money using the new instructions. Then, the call comes from the title company the day before settlement, asking why you have not sent your funds for settlement. This is the moment you learn that you have sent hundreds of thousands of dollars to a thief. This scheme is not new. But a recent resurgence of wire fraud in the real estate industry, and the increase in its sophistication, prompted the N…

Rental Fraud Alert - Texas - Luz Astacio, 512-222-6876

Rental Fraud Alert: This fraud occurred in Cypress Texas but I found others outside if Texas that have been contacted by these same scammers!
I know I have brought this up before but it's worth mentioning again. There are many rental scammers out there and people fall for it every day.
I had a former client rent a home on their own. The offer they received was too good to be true (that's always a sign). They paid their security deposit and 1st months rent. They were emailed a contract (not a Texas lease) which everyone signed. It all seemed legit. They were given the combination to a lockbox that was on the door that contains the keys. They moved in and shortly after were asked for $1000 to pay property taxes (red flag!).They sent the funds and then they called me.
Unfortunately it took me 5 minutes to realize that they had been scammed. The home is actively on the market for $2550 (their rent was $1200) and the owners listed on the contract provided are not the owners of the ho…

4 Tips For Buying A Home From A Distance

Chances are, if you’re looking for a new home, you’re ready for a change of scenery. And while that might mean just a new property or a new neighborhood, for many potential homebuyers, that often means a new city. And if you’re considering buying property in a city other than the one where you currently reside, you probably have a lot of questions about the process. Will you have to fly to your new city every weekend to look at properties? Will you miss out on hot properties? Is it even possible to buy without physically being in your city? Buying a home from a distance certainly presents its own set of unique challenges, but by no means is it impossible. Here are four tips for buying a home from a distance to make the process easier, faster, and less stressful for you and your family: 1. Gather information When you’re buying property in an unfamiliar city, the first thing you need to do is educate yourself. Gathering information on the city, the neighborhoods, the cost of living, an…