Understanding Many Of The Investment Benefits Of Owning A Rental Property
If you are looking for a way to invest your money that results in the increased value and monetary potential over time, then a rental real estate property may be something that you should consider. Both rental homes and apartment buildings are a good investment. While you may understand the value of the property itself as an investment and the rent that the property will generate, there are a few other types of investment benefits that are not quite so obvious.
Sweat Equity
Many houses will increase in value over time and this is obviously one of the main reasons why they are a good investment. However, some of that value increase will depend on the things that you do to update and modernize the building. This does not mean simply completing maintenance tasks. It means investing in the space itself and completing value enhancing improvements. The hard work that you put into to the property is called sweat equity.
Simple tasks like completing landscaping, painting the property, and adding features like pavers and window boxes can increase value. While your monetary investment is minimal, the hard work you put into making the home more presentable directly increases its value. While it is hard to put a direct figure on sweat equity, simple curb appeal can substantially raise property value.
Sweat equity can increase value even more if you are a DIYer and complete tasks like updating a kitchen or bathroom, repaving a driveway, or residing the home. If you are up to the task, then consider completing some of these things when there is a need.
Increased Assets
If you decide to loan money to purchase a rental property, then you will need to look at the type of income you will receive from the space and how quickly you can pay off your loan. In many cases, you want to charge a market rate for rent, and this is typically about two times the monthly minimum mortgage or loan payment on the home. If you decide to reinvest this money in the home, then this is a good choice. You can also pay an extra one-quarter to one-third on the loan to pay off the property sooner.
While a rental property is a direct financial asset and a property that you use as collateral for other personal ventures, the property will become a direct asset once your loan is paid in full. This can be of great benefit to you if you decide to expand your rental portfolio or if you want to diversify your investments over time.
