Purchasing a Rental Property
Purchasing a rental property can be a great investment to generate passive income. Plus, it’s great to have a second home for personal use or to rent to visiting family and friends. There are many considerations to keep in mind if you are considering buying a rental property, so keep reading for some helpful tips from the team at Hudler Homes.
What is a Rental Property?
To start, let’s define what a rental property is first. A rental property is a home that is purchased as an investment that is then inhabited by tenants through a lease, or some other type of rental agreement. A rental property can include a single-family home, apartment, condominium, mobile home, vacation home, or similar property.
Why Purchase a Rental Property?
As we mentioned above, there are many financial incentives to owning a rental property. Here are some common reasons why people purchase rental properties:
Passive Income: Owning a rental property can mean that in addition to your regular job, you are making a passive income. This is earned income on the side that is generated from collecting rent. Passive income earned, or cash flow, from a rental property can go toward paying off the property’s mortgage or covering personal expenses.
Increased Value: Like most other investments, a rental property can rise in value as the property’s market value increases, also known as appreciation. Plus, real estate is a relatively stable investment.
Tax Incentives: There are tax deductions available to owners of rental properties. This can include repairs, mortgage interest, insurance, property depreciation, and more. You’ll want to speak with a professional tax specialist to confirm eligibility.
Risks Associated with Rental Properties
Like all investments, there are some risks you should be aware of before purchasing a rental property:
Difficult Tenants: You may find that you’ve signed a lease agreement with a difficult tenant. This can cause a big headache as you are forced to either make a compromise with them or have them evicted. It’s important to thoroughly vet all potential tenants before signing a lease agreement.
Less Liquidity: When you have a rental tenant living in your property, you can’t quickly sell your home when you need the cash.
Maintenance: As the homeowner, you are responsible for all maintenance and repairs at your rental property. This includes the mortgage, property taxes, homeowners insurance, regular maintenance, repairs, and unforeseen events. You may also need to hire a property manager to advertise your property for rent and help facilitate rent collection and other maintenance needs.
Work with Hudler Homes
Are you thinking of purchasing a rental property? Or maybe you are just considering buying or selling a property soon? You want to be sure you are working with a licensed and experienced real estate professional. The right real estate agent will guide you through the complicated process of negotiating to make a sale happen quickly and efficiently.
If you are looking for a real estate agent who knows the Baltimore area and can help you explore your options, I’d love to meet with you. Reach out to me through my website or give me a call at (302) 545-8569, and follow my blog for more home buying tips!