Top 5 Reasons to Invest in Fix & Rent Properties
Being an entrepreneur can be enticing and exciting, but how do you start a business?
How do you decide what product to make, where to sell it, how to price it, and what experience do you need to make all of this happen? Investing in rental properties can be one way to enter the entrepreneurial sphere. You don’t need a finance degree, you usually do not need a load of permits and licenses, and there are many properties on the market that can be great investment opportunities. And whether you live in an apartment in Denver where the rent prices are rising or a house in Melville, New York, it makes no difference. Real estate investing can be done from anywhere and it is truly an equal opportunity venture.
Following are the top five reasons to get involved in rental property renovation:
Someone Else Pays Your Mortgage
You’ve seen it on TV numerous times. Someone buys a fixer-upper, renovates it and then rents it. What happens next? The tenant pays rent and you use that rent money to pay your monthly mortgage payment. Of course, things are usually not that easy as tenants do move out, you can have longer term vacancies, and there may be repairs to be made along the way. The main idea, however, is that if you are careful, prudent, and well-organized, you can keep problems to a minimum, and while your tenant is paying monthly rent, you can watch your mortgage balance fall and your equity increase.
Easy to Get Started
Elon Musk almost did the impossible by starting an electric car factory from scratch. You can imagine the intense planning and the hoops he had to jump through to get his project from a dream to reality. Luckily, buying your first fixer-upper is not nearly as difficult. Yes, you must do your homework, find financing, find contractors—if you can’t do the renovations yourself—and find a tenant, but if you are determined and single-minded, it’s not all that hard to get into the property business.
Inflation Will Benefit You
A little inflation—say two percent—is generally good for the economy. Higher inflation rates, however, can lead to economic difficulties. But in the property rental market, if you have a fixed rate mortgage, inflation is not necessarily an issue because your mortgage payment will stay the same. The rental market can be very inflation-sensitive, though, and in expansive economic times, you will be able to command higher rents while your monthly financing costs stay the same. You pocket the difference!
A savvy accountant and a good business lawyer will explain how to structure your business for maximum write-offs and tax savings. Owning your own business—no matter how small it is at first—is a great way to take advantage of tax breaks that you may have thought were only available to big corporations.
We alluded to this before, but this one is a no-brainer. Rent your property for more than your mortgage payment and you pocket the difference. Even if you only make $100 monthly on your first investment property, think what you can accomplish with five or six units!
Being in business for yourself can be lots of things:
- Frustrating (!)
If you’re up for the challenge and want to be in control of your income, consider buying and renovating a property that you will rent. You can start looking for opportunities right now!
Disclaimer: The views expressed in this blog post are solely the views of the blogger and do not necessarily constitute the views of First Rehab Lending. This blog post is not and should not be construed to be advice or counsel offered by First Rehab Lending.
Sam Radbil Sr. Communications Manager