Whether you are just starting as an investor or have years of experience investing your money
profitably, rental properties should be one of the asset classes in your portfolio. Owning rental
properties offers certain advantages that are not available with other kinds of assets.
First, land is a finite resource; land supply will always be inadequate to meet the demand. Due to
population growth, urbanization, and economic growth, humans will always need more land.
Therefore, land is a resource that will never lose its value.
Second, the demand for real estate is based on real human needs. People need land to build
houses. We need land to grow food and build industries. Unlike assets where the demand is
artificial or seasonal, demand for real estate (and rental properties, by extension) will always be
These are the fundamental reasons why an investment in rental properties is a good choice. Even
if rental property prices fall during certain periods or in specific geographies, in the long run,
investment in rental property always proves to be highly profitable for its owner.
If you still need to invest in rental properties, here are ten reasons why you should.
10 benefits of investing in rental properties
1. A source of passive income
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The number one reason to invest in rental properties is cash flow. A rental property in a
good location will produce substantial income on a steady basis for its owner. The rent
from an investment property is often enough to cover the cost of owning the property,
and there can be some money left over for the owner to declare a profit.
2. Access to unrivaled leverage
As the owner of a rental property, you do not have to pay 100% of the value of a property
to own it. This is because real estate investing offers the kind of leverage that is not
available with other investments. Lenders are willing to give you money to buy a rental
property if you can provide just 25% of the selling price of the property.
3. Real estate is diverse
There are two major categories of rental properties: residential and commercial real
estate. Within these two categories, there is a large array of subcategories. Investors in
rental property have the option to choose what kind of rental property they want to own,
and they also have a range of investment strategies to choose from.
4. Investors have control
If you are the kind of investor who likes to be deeply involved in managing your assets,
rental property investing offers you just that. Unlike with stocks and mutual funds, where
the decisions that affect the performance of your investment are out of your hands, with
rental properties, you choose the level of involvement you are comfortable with.
5. A self-sustaining asset
In contrast to stocks, which are self-depleting assets, rental property is a self-sustaining
asset. It would be best if you liquidated the asset to get your profits from an investment in
stocks. This is not the case with rental properties; you do not have to sell them to make
money from them. You can earn from the monthly rent on the property. You can also
benefit from your equity in the property.
6. Profit through capital gain
Two ways investors make money from rental properties are cash flow and appreciation.
Real estate values always go up long-term, even if there are short-term price dips. If you
buy and hold a rental property, you are guaranteed to make a profit when you eventually
sell it. Moreover, you can influence how much money you make on that property by
7. You can tap your property's equity
When you use leverage to buy a rental property and make the monthly payments on the
mortgage faithfully, with time, you will build substantial equity in the property. Lenders
will let you borrow money against that built-up equity. This borrowed money can be a
down payment to buy another rental property to help you expand your portfolio.
8. A slew of tax benefits
As a rental property owner, you can maximize profits through tax-deductible expenses on
the property. The list of tax-deductible expenses is long and includes many everyday
costs you incur in managing and maintaining your property. These tax-deductible
expenses offer you an avenue to boost your profits.
9. A way to diversify your investment portfolio
Savvy investors minimize risk through diversification. By spreading their funds across
several asset classes, they ensure that adverse events in one asset class do not wipe out
their entire portfolio. Buying rental properties can diversify your portfolio further if you
already have significant investments in stocks, commodities, or bonds.
10. You can start building generational wealth
Almost all families with wealth that spans many generations have some of that wealth
held in real estate. Because land is finite and demand for real estate never goes away,
owning rental properties is one of the best ways to hold your wealth and safely pass it on
to your heirs.
If you plan on investing in rental properties, contact Balance Real Estate Group today to see how
we can help you buy your first rental property!