You think about being landlord and collect the rent. This idea is the primary purpose as reason why people buy residential property. On the other hand, this kind of investment has some benefits that you must consider. Residential building includes house, apartment, or anything for staying. It does not include hotel and commercial ones.
List of Benefits for Investing In Residential Property
Property has been the top choice as investment. You can choose several types of properties including the one for residential. The good thing is you do not need much money because bank and credit union will provide a loan and mortgage. Some experience people apply mortgage and buy house then rent to get income. This is first benefit you expert while investing in residential property. Check more at the following list.
- Rental income
You have another house and someone lives there then pays rent to you. This is the basic profit you get after having property. If the house is completely yours, a rent will be passive income. It sounds exciting and simple, but it takes time to implement. You start taking mortgage and buy new house. Rental income will be source of money for paying the mortgage. You also consider costs for maintenance, taxes, and others. Make sure you have enough saving after all payments are done. If this continues, you may apply again for buying new houses.
- Tax benefits
Residential property receives some tax benefits. The income is not part of self0employment tax. Moreover, you can get deduction regarding depreciation value. You buy a house with mortgage that can be subject for tax benefit related with increasing interest and insurance. In fact, you may get tax return.
Another advantage is appreciation value. As you know, house or building will have higher price when generating income. Appreciation is something investors expect when buying property. This is long-term investment that involves patient and excellent analysis. Before buying new house, you must check the area and location. The value of building will increase significantly when the city includes the area for the future development. You buy when the area is just for residential but changes next years to be commercial and business district. Therefore, you get more profit at all.
Leverage is the next benefit you get after buying residential property. You have asset that is capable to be leverage. When you apply mortgage or loan, it is useful as collateral. Bank will consider this property even increase the loan. In fact, you may finance a second mortgage event though the first one is not done yet. At least, you still have a house with high value.
- Cash flow
The next advantage is cash flow. The most common problem when investing in property is cash. The asset is not easy to liquidate. On the other side, you may keep the property but still receive income from rental.