Whether you’re a brand new empty-nester or you’ve recently decided to upgrade from your starter home, you may have considered making your house a rental property.
You may have even thought about buying additional properties to create a diversified rental portfolio. After all, rental property is an easy way to consistently bring in income and it has innumerable tax advantages. Your house can continue to gain equity while you cash in, and you can even use your rent money to help pay off your property’s mortgage.
Of course, with any big life change there comes a bit of trepidation. You may find yourself asking, “Will this be the right choice for me?” or “Will the costs outweigh the benefits?” You should consider the pros as well as the cons of becoming a new investor in rental properties.
Tax benefits: If you decide to rent out your house as a way to make money, you should consider the tax benefits associated with owning a residential rental property. Just like any source of income, you’re required to report any income you make from your property.
However, you’ll be able to claim the cost of upkeep and maintenance on your taxes. Through a qualified Brisbane quantity surveyor you’ll also be able to take a tax deduction by using a tax depreciation schedule that will be drawn up by the quantity surveyor. Additionally, the cost of your property taxes, association fees (if applicable), mortgage interest, letting agent fees and insurance are tax-deductible.
Meet your financial goals: Of course, the most obvious benefit of owning a rental property is that you’ll have access to an additional income source that consistently appears in your bank account. Not only that, but as your property’s value increases over time (as you repair and improve the house), you’ll stand to make a profit if you decide to sell the house.
Cost of upkeep: Of course, as the landlord of a property, you’ll be required to cover any repairs or damages that occur. This means basic upkeep like paying for a cleaning crew at the start of every new lease, as well as larger investments like new siding and paint. Though these costs are tax deductible, consider whether or not you’re willing to commit to taking care of your property in such a way.
Concentration of assets: If you’re new to the rental property world, it’s important to remember that putting all your eggs in one investment basket is ill-advised. Diversification is the name of the game. If you only have one investment property, then if anything happens to decrease the value of the home (e.g. if the neighborhood around the house becomes more dangerous), you’ll lose both rental money and the money from a potential future sale.
Instead, if you’re determined to make extra money through rental property investment, consider purchasing additional properties in other neighborhoods, towns, or even states. Look for areas that are growing in population and in popularity. For example, Kansas City, Missouri is a growing market that would be a great place to investigate, so local Kansas City mortgage lenders can be helpful if you choose that particular location.
The best way to sidestep the cons of renting out your property is to make life as easy as possible for yourself as a landlord. Nowadays, through new websites like turbotenant.com, you can source new tenants, conduct background checks, and store your leasing documents all in one place. There’s still some work involved, but it’s a much easier process than it used to be.
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