Are you wondering what to do with your surplus savings? Putting your capital to work for you in a rental property is a great way to create an income stream and build wealth.
Building wealth is a strenuous process and requires a great deal of work on your end, and property is a great route to allow that wealth to accumulate over time.
Here are three reasons why you should invest in rental property.
Reason 1 – Create Passive Income
You make money in real estate when you buy the property, not when you sell. With a rental property, the idea is to pay less on your mortgage than you charge in rent. This situation creates “positive cash flow” in the property.
When you’re earning more in rent than you pay on mortgage costs and management expenses, you create “passive income.”
Passive income can change the game you play for moving forward with your time as a renter. Sustained passive income sets you up really well for the future, and can allow for generational wealth to be instilled into your family long-term.
Reason 2 – Build Generational Wealth
As mentioned before, rental properties can create passive income, which is a critical component of building generational wealth.
American real estate in select states and neighborhoods is always going up in value. With the right location, your property grows in value, building generational wealth for your family. As you pay down the mortgage using the tenant’s rent, you get to access the property’s equity. This leverage allows you to invest in more properties and grow your real estate portfolio.
Passive income is money that you earn without having to actively work for it – it flows into your bank account regularly, regardless of what else is going on in your life.
This means that you can set up a system in which the rent from your property pays your mortgage, and you can essentially live for free while the property appreciates in value. Over time, this will create a valuable asset that can be passed down to your children or grandchildren.
Reason 3 – Hedge Against Inflation
When you invest in a rental property, you’re not just investing in real estate – you’re investing in inflation protection. Inflation is the increase in prices of goods and services over time, and it can have a serious impact on your standard of living if it’s not managed correctly.
By investing in a rental property, you’re essentially putting your money into an asset that will always have value (provided the property is well-maintained). Rental properties offer stability and security in an uncertain world, and they can be a great way to ensure that your money is working for you even when the stock market is crashing.
Reason 4 – Build a Business
Investing in rental property is more of a business than an investment. You’re looking to create income more than relying on the appreciation of the asset.
When you invest in rental property, you’re taking on a lot of responsibility. Between finding tenants, managing repairs, and dealing with paperwork, it can be a lot to handle on your own. That’s why it’s important to hire professionals to help you manage your rental property business.
An attorney can help you draft leases and rental agreements, and make sure you’re following all local zoning and housing laws. A CPA can help you keep track of your expenses and tax deductions, so you can stay profitable.
Hiring professionals to help you manage your rental property business is the best way to ensure that your investment is profitable and stress-free.
If you’re on the fence about whether or not to invest in rental property, hopefully, these three reasons have helped sway you. But if you’re still unsure, it’s important to get educated on the topic before making any decisions.
There are a lot of resources available to help you learn more about real estate investing – from books and articles like this one to online courses and podcasts. The most important thing is to arm yourself with information and make an informed decision about what’s best for your financial future. Are you ready to invest in rental property? Contact us at Eagles Mortgage Company, Inc. for help purchasing your first property.