In recent years, there has been an influx of people eager to enter the property investment industry. For some, they accomplish this by buying run down houses and flipping them in hopes of making a profit. For others, this may mean buying properties to build a rental portfolio. If you’ve been thinking about becoming a landlord, you might be wondering what the advantages and disadvantages are of becoming one.
In part one of this two-part series, we’ll take a look at some of the more common advantages to becoming a landlord. At Cash 4 Kansas Homes, we pay fast cash for houses in the Kansas City area that are in any condition and we work to conclude the closing process within 14 days. If you decide to take the plunge and try your hand out as a home investor only to decide it’s not for you, don’t worry! We’ll gladly assess your property and work with you for a seamless sale.
No More Time Cards
This might be one of the most exciting benefits to becoming a landlord and a common reason why many people leave their nine-to-five job to be a home investor. When you own rental properties, you’ll no longer have to go into the office Monday through Friday. You’ll have more freedom to schedule personal appointments and errands, and you’ll have endless vacation days. Although much of your free time will be consumed with managing your properties, this notion extra time and freedom can be very tempting for some people.
When people consider entering the property investment industry, this is probably the first item listed under the “pros” column as their are weighing their options. The amount of profit you can potentially make on a rental property depends on various factors. First, if you own the property outright, you stand to make the most profit from your rental income since you won’t have to make a mortgage payment on the home each month. Also, your profit will depend on how consistently you’re able to keep tenants in the home. When you’re weighing the pros and cons, it’s always a good idea to tally up the possible expenses that will come off your rental income to help determine what kind of profit you stand to make.
Aside from the allure of steady, supplemental income, another appealing benefit to owning rental properties are the accompanying tax write-offs. Amongst the many ones possible, the most common include:
- Home office. When you are a landlord, it’s likely that your home will become your personal office. If you dedicate a certain percentage of square footage in your home to your office, this can be written off.
- Mortgage and Credit Card Interest. This is usually the largest deduction landlords can take. It can include anything from interest on mortgage loans to buy or improve a property to credit card interest incurred on rental-related purchases.
- Property depreciation. All physical property is subject to some kind of depreciation for tax purposes, and real estate is no exception. Landlords can write off the depreciation of their rental home at tax time.
- Repair expenses. If you have to perform any kind of repairs on your rental property, such as replacing a toilet, repainting, or repairing drywall damage, the expense of the materials for this is deductible.
In addition to these four deductions, you may also be able to deduct your travel expenses for traveling to and from your rental property. This is beneficial for those who own investment properties out of state, or many properties that require a great deal of travel. These deductions are frequently audited by the IRS, so take care to properly document your expenditures if you plan on claiming travel expenses on your taxes.
Increased Property Values
Beyond the additional income and tax deductions, another benefit of being a landlord is that real estate often has the potential of increasing in value over time. This is the meat and potatoes of property investments because you make the most profit when you buy low and sell high. For example, if you bought a home in the late 2000s when real estate prices were at an all time low and you still own that property today, chances are it has increased significantly in value. If you bought that home as a rental property, the corresponding amount you’re asking for rent will likely have increased, potentially resulting in higher profits.
What if I Change My Mind?
Some people dream about the financial freedom that can come along with being a home investor. Once they’ve made the leap, however, many will decide that it’s not as easy or as profitable as they thought it might be. If this sounds familiar and you have a Kansas City rental home you’re trying to sell, contact Cash 4 Kansas Homes at 913-276-0769 today! We’d love to speak with you and complete an assessment of your property.
We look forward to hearing from you!