The real estate sector has been very turbulent during the past few years, and you might be wondering why you should purchase rental property right now. Prices have continued to go up, the Federal Reserve continues to raise interest rates, and you might be wondering if this is the right move for you. In reality, there are lots of reasons why it is a good time to purchase a rental property in 2023.
What are some of the top reasons why you need to purchase a rental property, and how can you make sure you get the best possible deal? Learn more about some of the top benefits of owning rental property in 2023, and consider reaching out to an expert who can help you.
1. Passive Income
If you take a look at the list of reasons why you should consider owning rental property, passive income will be close to the top of the list every time. Passive income means that you can make money without necessarily having to spend time on a regular basis. It is true that rental income is not truly passive. After all, you will have to put in some work from time to time to manage the property, find renters, and ensure you comply with all local regulations.
On the other hand, it is highly unlikely that owning a rental property is going to create another part-time job for you. Therefore, you have the opportunity to draw income without necessarily having to spend time managing your property every day.
2. Diversify Your Investments
Another major benefit of owning rental property is that you can diversify your investments. You have probably heard that it is smart to diversify your investments among stocks, bonds, and mutual funds. On the other hand, it is important to look outside of traditional financial investment vehicles.
Historically, the price of real estate has gone up gradually over time. Therefore, owning rental property presents you with an opportunity to diversify your investments and helps you build wealth for your family. If you are looking for a way to expand outside of the traditional stock market, you should consider owning rental property in 2023 and beyond.
3. You Get Leverage
One of the biggest benefits of owning rental property is that you get leverage. What this means is that you can use someone else’s money to make money. It is true that you can purchase a rental property in cash, but it is highly unlikely that you have hundreds of thousands of dollars sitting around. Instead, you will take out a loan to purchase a rental property.
Even though you might have to take out a loan to purchase a rental property, 100% of the capital appreciation of that rental property is yours. That means that just because your property goes up in value doesn’t mean that you magically own money. All of the capital gains from the property are yours, minus the amount of money you might have to pay in taxes. Leverage is a powerful thing, and it is how you can use rental property to build wealth.
4. Protection Against Inflation
Inflation has been in the news a lot recently. Broadly speaking, inflation takes place when the price of goods and services goes up across the board. Historically, inflation has been relatively low, but right now, inflation is very high. The good news is that owning real estate provides you with an opportunity to protect against inflation.
Owning a rental property means that your cash is located in a rental property instead of a random account that might lose value against inflation. When you sell that property, you should get significantly more money than you paid for it, and it provides you with a layer of protection against inflation. Rental property not only generates income but also goes up in value, meaning that it could be perfect for protecting your wealth against inflation.
5. Tax Benefits
There are a variety of tax benefits you might enjoy if you decide to purchase rental property. It is true that you will have to pay taxes on the rental income you generate, but there are several tax deductions that you can take advantage of that you might not otherwise have access to.
Any expenses related to managing your rental property could be tax deductible because they can be categorized as business expenses. A few examples include landscaping costs, insurance costs, repair costs, and property taxes. If you hire a property manager to help you, you might be able to deduct the fees you pay to the property manager as well. Importantly, it is critical for you to reach out to a tax professional before you start claiming deductions.
6. More Flexibility
Finally, owning rental property provides you with an extra layer of flexibility that most people do not have access to. Once you purchase that property, you own it. You can hold it and continue to rent it out, or you can sell it and pocket the profit. If something happens in your family, you also have an extra home in which someone can live. This type of flexibility is invaluable, and it is one of the biggest reasons why you should consider purchasing rental property in 2023.
Work With Hard Money Lenders AZ for Help Financing Your Rental Property
Even though the real estate market is turbulent right now, there are opportunities for you to make money. You need to work with someone who can help you find the financing you need, and Hard Money Lenders AZ is here to help you.
It would be our pleasure to help you take advantage of all of the benefits of owning rental property. We have already helped people of all backgrounds make their rental dreams come true, and it would be our pleasure to help you as well. We have plenty of loan options that we can customize to meet your needs, so contact us today to speak to a member of our team!
