As you have probably heard many people say over and over again, real estate is one of the most lucrative ventures you can go into. For those who know the tips and tricks to make money with properties, real estate offers numerous opportunities to make a steady income. While this works in different ways, one of the most common ways of earning for budding homeowners is by renting out their property.
Generally, if you own an apartment or house, one would expect certain regular expenses on such a property. This comes in the form of taxes, repair and maintenance fees, utility bills, and mortgage interests among others. This means in most cases the house would be a liability of some sort. However, things change considerably when you put such property up for rent or for lease. In this case after paying up all the running expenses of owning the house, you will still be left with some positive cash flow in the long run.
This makes owning a reasonably priced, well-located real estate property a pretty good investment and a viable way for homeowners to make steady cash flow and possibly make a fortune in time. Generally, there are different ways homeowners make money on the rental property. These include:
Steady cash flow from rent
After removing all the operating expenses of running your home from the rent you charge per month, you should have a considerable amount in cash flow every month. This becomes even considerably higher for those who have enough money to purchase the house in cash rather than on a mortgage. Also, homeowners with sufficient skills and time on their hand to manage the property themselves rather than hire professional managers will also be able to save a little bit more on the operating expenses at the end of the month thus earning more in the long run.
While this isn’t peculiar to rental properties alone, it is one of the viable ways homeowners with rental properties make some long term profits on their properties. Being an Asset, there is a very good chance that your property will appreciate by an estimated 3 to 5% annually. However, this depends on a number of factors including supply, population growth, and supply among other local factors.
Generally, real estate benefits from a number of generous tax benefits and owning a rental property is one of the ways homeowners can fully take advantage of these. It is possible to depreciate your properties each year to offset the cash flow. This way, all the maintenance and other running expenses of owning the property will be deducted from the profits made on the house.
For those who hold rental properties on a mortgage, a major advantage is that they can conveniently hold the mortgage without necessarily paying with their own money. Thanks to Amortization, they can conveniently make progressive mortgage payments using the tenant’s rent and still be left with enough money on the property.
At the end of the day, home rentals is a pretty viable and smart way to earn an extra living. However, there are still a lot of factors to put into consideration and a lot to learn before making the decision to venture into it.