Why You Should Invest in Rental Properties

As you contemplate investing for your future, you want to put your money where you can get the returns you want based on the risks you are willing to accept. If you are not clear about the concept of risk/reward, it is something you might want to research.

As a brief tutorial, you can invest risk free in a savings account, but your returns will be next to nothing. Vice versa, you can purchase stock in new companies that offer a chance at big returns, but there is a risk the company could fail, leaving you with nothing.

Good investors always take the risk/reward concept into consideration before making an investment. That is why rental property investment is considered a good investment by a lot of astute investors. They know that because rental properties offer both financial and practical returns/benefits with little risk for a variety of reasons. Here are a few of the reasons why you should invest in rental properties.

 

Taking Advantage of Low Interest Rates

Anytime you can pick up any kind of real estate when interest rates are low, that is going to be a good investment. This is even true if the lender knows you are purchasing a home as investment property. The biggest potential benefit comes from holding an asset that most likely is going to appreciate while the holding costs of the asset are low. If by chance the loan is assumable and you are selling the collateral property, the loan could be a good marketing tool in a real estate market where rates are increasing.

 

The Owner/Occupied Option

A good rental property investment is one that offers you flexibility. While you might purchase a rental property with the intent of renting it out to another party, you always have the option of living there yourself and just renting out space to a renter. This could serve you well if you ever found yourself in a difficult financial situation. You could be living there in lieu of paying rent else ware while collecting money from your renter to cover some or all of your mortgage payment.

 

The Vacation Home Option

In popular vacation destinations, hotel rooms can be expensive. As an alternative, a growing number of travelers are showing a preference for renting vacation homes from online real estate sites like Avery Rentals. This affords travelers an opportunity to secure more space for more people at what could be pricing that is in line with a top-level hotel room. For you, it could provide you with a nice revenue stream to cover your mortgage costs while the property appreciates. Success depends on location, location, location. Alternatively, you could purchase a property abroad using a holiday let mortgage broker which not only would give you a second home but could also be used as an alternative form of income if you chose to let your holiday home.

 

Benefit from Buying Homes in Down Markets

You do not have to buy a new home, and you do not have to buy when the real estate market is strong. Timing is everything when buying rental properties. Here is what is true about the residential real estate market. It is a cyclical kind of investment. Over any 10 year period, homes will increase about 6% a year on average. However, there will be a year or two where the property’s value will likely take a hit. That is your buying opportunity. When you buy a rental property on the way down, you get all of the “bounce back” appreciation. Meanwhile, you collect rent while waiting for the bounce.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.