The term “investment property” has always been enticing. The thought of someone else paying down a mortgage for you and then selling for a nifty profit is almost too good to pass up.
As a Real Estate Agent with Bowes and Cocks, Patrick McAuley knows all too well that for every peak there is a valley, and suggests that potential buyers consider everything before making a final decision.
Let’s change things up and look at the disadvantages of a rental property first!
Disadvantages Of A Rental Property:
1. It might be tough to finance the purchase. If the rental property is your 2nd property, then you will need to pony up a down payment of AT LEAST 20% of the purchase price. Most people will need to take a mortgage out on a property, and the initial expenses could be quite high and unexpected.
2. As the owner, you take on the responsibilities and challenges of being a landlord. Unless you can afford to pay a property management company to take on this job for you, you could encounter a few headaches. Rental units will always need repairs to be made, along with clean ups between tenants. Dealing with tenants can also be tricky—especially when it comes to receiving rent payments.
3. It could be difficult and costly to sell the property later. It can take time to sell a property, no matter how nice it is, and the unseen costs of keeping up a 2nd property with tenants potentially leaving while the house is listed can add up quickly!
Advantages Of A Rental Property (Don’t worry, There Are Quite A Few!):
1. You gain an additional monthly income. Assuming the home is rented to its potential, the money coming in for rent is generally more than the cost to run the house. Other forms of investment can be less predictable in pay outs.
2. You pay less overall tax. You can deduct certain expenses from your income—reducing the taxes you owe. The list includes:
•Utility bills (if they are included in the rental agreement)
3. You may be able to deduct losses for tax purposes. If expenses exceed your rental income, you may be able to deduct that loss from any other sources of income you have. This could reduce your total tax bill.
So... Do Your Homework
With all of this info to consider, Patrick suggests doing your homework before making any hasty decisions. Accountants, lawyers, mortgage brokers, or other financial experts can help shed some light on a subject most people aren’t entirely educated in!
If you are considering entering the rental property market, Patrick invites you to contact him and ask as many questions as you need. He understands the importance that this decision can play in people’s lives and would be happy to steer you in the right direction!
**This is not intended to solicit clients already under contract**
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