Owning and renting out a condo or home comes with many financial and personal advantages. With an investment property, you can:
- Earn a steady, passive income and cash stream. As long as you have a tenant, you’ll earn rent, and with a rental located in a great location or neighborhood, your property will always be a hot commodity.
- Pay off your mortgage quickly. The rent you charge can pay a sizable portion or even all of your monthly mortgage payment. In addition to your day job, you can make extra payments to pay down your mortgage quickly and build equity.
- Receive tax breaks or deductions on your property. Depending on state and federal property taxes and laws, you can potentially file for specific deductions.
- Build an investment portfolio. Owning and renting out a home can help diversify your portfolio, which can grow your net worth, help you finance other dreams, or save money.
- Keep a home you love. Renting allows you to keep the home in your possession, especially if it’s a home you want to return to later on in life. Whether you’re renting it out year-long to a college student, or to a vacationing family for the summer, you know it will be there for you in the future when the time comes to move back.
HOW CAN I START?
There are many ways to start your journey with an investment property, each with their own advantages. Two common situations include:
Buy to Rent
Some people buy their first home with the intention of leaving it later on in life, either because of a new job requiring relocation or a growing family that requires more space. However, holding on to the property and transforming it into an investment can be a great way to build equity. Some mortgages will require an occupancy of at least 1 year before renting it out, and you will eventually have to switch from a homeowner’s insurance policy to a landlord’s policy. Buying to rent is a great way to make renovations and adjustments before you search for a renter, and can give you a better idea of how much your rental is worth.
If you want to get your feet wet, start small. Some people begin by renting out a room or basement in their current home or by building a side studio apartment adjacent to the house or detached on the property. Starting small allows you to learn about your responsibilities as a landlord and allows you to gradually become more comfortable with maintaining a property and responding to a renter.
If you live on a property with a renter, you’re considered an owner-occupant, which can give you access to more financial options (such as an FHA or VA loan).
At Plaza Loans, we can help you find the perfect home, apartment, or condo for you to invest in. Whether it’s a home you intend to live in before renting, or a place you want solely for investing, we can help you find the right mortgages and options for your goals.
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