Disclaimer: The author has no affiliation with any of the products, services or companies discussed in this article.
Most investors are limited by the choices they are given. This is true especially for retirement plans where the investor can not take advantage of owning residential real estate. And although there is an exception for self-directed Individual Retirement Accounts, it has limitations, one of that is the balance of the account.
Investors have tax benefits which is one of the advantages of owning a single family rental property. The IRS enables tax deductions for ordinary and necessary expenses for managing the rental property, and repairs.
The cost for maintenance and repairs needed to keep the property in good condition as well as of materials and supplies, are also deductible. The biggest benefit which can save you thousands each year in taxes is writing off depreciation..
The second benefit of owning rental properties is the investor can take depreciation on the first year. Because of the Internal Revenue Service’s treatment of rental property, this can reduce the tax burden over time.
Mutual funds and stocks can not be depreciated to decrease the tax burden. They can however, be in accounts which are tax-deferred. Rental properties also grow tax-deferred.
The third reason is this is a great way to save for retirement. It is a good source of regular passive income. The rent is commonly used to pay off the mortgage for the property. Once the mortgage has been fully paid, the landlord may choose to hold the rental property for a monthly check or sell it for a great profit.
The fourth benefit of real estate market is not susceptible to unexpected and severe fluctuations of price. Because of this, Single Family Rental property gives you a stable income unlike the stock market. Some components such as increase in population and growing demand for housing and rentals makes sure that the investment you make will be a profitable one.
The fifth reason, and best reason for many, is that people can see and touch real estate. Real estate is tangible. Some investors want to see their property with their own eyes. They want to work their butt off on these properties to improve the positioning and value of that asset, therefore generating greater yields through increased rent.
The owner can “harvest” profits by taking out a new loan or refinancing, thus cashing out as a rental house increases in value. This new money can then be used to buy other properties, which increases the value of the portfolio and creates a higher profit. If this is implemented every few years, an investor could own up to ten rental houses after making one first purchase.
The sixth reason is the investor can either buy a property and make money for a long period of time. The investor can also buy a real estate property, renovate and upgrade the property then selling it to make great profit.
Travis Cadman says there are a lot of advantages when investing in real estate. Whatever other people believe, eventually the small investor gets the ability to diversify and deliver sold gains that may yield significantly larger profits from single-family rental homes rather than any other investments.