Pros and Cons of Investment Properties
By Monica Davey, Real Estate Empowered
Last week I visited one of my first clients, now my friend, for her second anniversary as a homeowner. One of the things we talk about is the possibility of buying a new property and renting it out. She had so many questions that inspired me to write this article.
With the job growth that this area is experiencing, there are many people who, for different reasons, prefer to rent a property long-term instead of buying it. On the other hand, we are so lucky to live around the majestic beaches of The Emerald Coast that sometimes we do not take into account how lucky we are, every year millions of tourists from different parts of the world take one to two weeks out of their year to come and enjoy what we have within our reach daily. With the boom of Airbnb, many tourists choose to rent a property instead of a hotel room.
Because of all this growing demand, buying an investment property is worth considering; as I always say, every Real Estate journey is unique. Please take this article as a guide, and if you have any more questions, feel free to call me.
1.- Rental Income: Each month that your property is occupied, you will generate income that will cover the expenses of the house, such as the mortgage, interest, insurance, HOA fees, among others, and also, depending on the value of the rent, it will possibly generate a positive cash flow.
2.- Tax benefits: US tax laws offer multiple deductions for real estate investors, such as operating costs, depreciation, repairs, and/or improvements to the property.
3.- Growth of your Equity: The average sale price of houses sold has increased by 81% in the last ten years (from the third quarter of 2011 to the third quarter of 2021). Thus, if home price appreciation follows the same trend, a $250,000 home today could be worth $450,000 ten years from now.
4.- Reliable Sale: If, for some reason, you decide to sell the investment property to maximize your profits, the appreciation of the property allows you to sell it at a much higher price than your initial investment.
Among the disadvantages of owning an investment property are the possibilities of having a tenant who does not comply with the pre-established rules, an increase in taxes and insurance premiums, variability of the Real Estate market, neighborhood decline, difficulty maintaining the role of landlord, difficulty up-keeping the property and others.
In summary, like everything in life, there will always be pros and cons, and it will depend not only on your financial situation but also on the housing market’s economics.
As always, it is a blessing to be able to help you. Real Estate in the US is intimidating, but with my cooperation and expertise, you will see that we can conquer and achieve the American Dream of Homeownership.
If you are ready to start this adventure or have any other Real Estate questions, feel free to connect with me, you can find me on all social media platforms as: @mdavey.realtor
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