Owning a rental property can be a great way to create extra income and build wealth. But like any investment, it comes with its fair share of pros and cons to consider. Here are a few things to think about before you begin investing in rental properties.
Pros and Cons of Owning A Rental Property in Denver
Someone Else Pays Your Mortgage!
Sounds great right? Well, it really can be if you have the right tenants! Owning a rental will create an income stream you can use to pay the mortgage itself. With the right rental, you will create enough income to pay all of the operating expenses for owning it, plus a profit on the side. This is known as a “cash-flowing property”. This is the ideal situation.
People Will Always Need Somewhere to Live
Real estate is a sound investment. Andrew Carnegie once said that ninety percent of all millionaires become so through owning real estate. More money has been made in real estate than in all industrial investments combined. People always need somewhere to live and there if a finite amount of land.
Income Tax Deductions and Tax Advantages
You can deduct all sorts of things on a rental property. You must keep detailed records and receipts of everything you intend to write off. The available deductions are very advantageous for real estate investors to reduce their taxable income and are a big reason that real estate is such an attractive investment. You should check with a qualified professional accountant regarding any tax matters and tax preparation that you need.
Retire in Style
Have you found a home you love? But maybe it’s not in the ideal location for your work commute. Or maybe it’s not the right size for your family. It’s never too early to think about retirement! If you find a home you absolutely love, a strategy many use is to purchase it and rent it out until they are ready to move in! The home can usually pay for itself, and you are able to hold on to your dream home.
Passive Side Income
If you get all your ducks in a row, and have a low-maintenance rental with great tenants, owning a rental can be excellent passive side income.
If you are able to buy property in an area where the values go up you can potentially generate a lot of wealth for you and your family.
You Get “No Respect!”
Aside from the usual wear and tear, some tenants will do little to nothing to take care of the home. While you are in charge of maintaining a livable house, you cannot control what they do. You could have to deal with a hole in the wall broken windows of faulty plumbing you haven’t been made aware of. Sometimes you can have nightmare tenants to who could trash your home, destroy your property, and/or stop paying and continue living in your property forcing an eviction (“squat in your home”)
You Might Get Sued
Hey, it happens. People could take you to small claims over a deposit you kept, or an injury sustained on the property. Their claims can be frivolous and without merit, but it can still take time and energy to deal with (not to mention very expensive lawyer fees).
The home needs to be properly maintained. Even if it is in the lease that they are in charge of mowing or maintaining the pool, it ultimately your investment. The repairs and yearly costs to maintain the property should be considered before you make an investment. And the property is aging as you own it and things breakdown (roofs, plumbing, electrical, furnace, window sealants, etc.).
Plain and simple, being a landlord can be stressful. If you get a high maintenance tenant, your phone could be ringing at 11pm at night because they saw a bug. In addition, if the rental becomes run down over time, the repairs bill could be continual. Also, with some tenants, you might be chasing down your rent each month. And if you use property management you are paying a hefty monthly fee to manage the property (and how good are they going to manage the property – some property management companies are great and others much less so).
What happens if the price of rental drops, but your mortgage stays the same? Or what if property taxes go up, but you are not in a place to increase the rent? You will want to consider all scenarios and make sure you have some wiggle room with the rent you are charging. Don’t cut it too close that you get yourself in a bind. In addition, financing the second property can have additional hurdles before a bank can help with financing. What happens if the neighborhood turns and your property value decreases. You can end up owning more on the property then it’s worth (being “upside down” on your property.
As with any investment, make sure you thoroughly research the pros and cons. Find a property that will be low maintenance and make sure to thoroughly screen all prospective tenants and property management companies!
“I Need To Sell My Rental Property Now”
Unfortunately not all rental properties end up with more “pros” then “cons”. Sometimes a rental property can end up being more pain and stress than it’s worth. We buy houses in Denver fast for cash, and we can buy your unwanted rental property. We want to create a Win-Win situation where we can buy your unwanted rental property for cash fast and you can get on with your life with much less stress.
If you want to learn more about selling your unwanted rental property in Denver fill out this form now or give our team a call today! (720) 208-7055