In this time of historically low interest rates, it makes sense to consider investing in rental property. If the biggest chunk of the monthly cost of ownership – the mortgage payment – can be frozen for 30 years while rents gradually increase, the resale value of the property escalates and all the while you enjoy the income and tax benefits, then you could have a win-win on your hands.
Rents on the rise
The reasons are manifold, but the two main factors to rising rent are the pressures of increased demand for units and low inventory. It is estimated that rental rates could rise by an average of 8% through next year – which can become a boost for income potential.
Do your research
Researching rental properties should be at least as rigorous as if you were buying a place to live in. You must know the market specifics, zoning laws and trends for both rentals and home sales of the type and in the location you are contemplating, including schools, transportation, recreational resources, shopping, etc. With a qualified Realtor® like me, this can be easily handled.
Consider different types of property
If you do decide you want to invest in a rental property, you can do it a lot of different ways.
- a rental unit in your existing home or on your existing property
- an apartment in an existing multifamily condominium or cooperative
- a house or apartment in a community that you might want to retire to
- a house or apartment in the area where your children are attending college as an alternative to student housing
- a vacation home by a lake, beach or ski slope, where you can use it for two weeks of the year without compromising the tax advantages
Don’t forget about foreclosures
Don’t forget to consider foreclosures, since all the foreclosing bank usually wants is the balance owing on the mortgage. In many ways, second home purchases are similar to the primary home purchase. Putting 20 percent down or more is common for second homes to avoid the expense of mortgage insurance and given today’s tightened lending practices.
Buying a second home is an exciting investment opportunity that can yield great results. If you have any questions please don’t hesitate to call, text, or email me today and we can tackle them together.
Sources: investopedia.com; fortune.com