From time immemorial, investment in real estate is one of those few investments where loss is rarely incurred, rather profits appreciate everyday. Admittedly, there are advantages and disadvantages to everything. Regardless of that, doing it right with rental properties can yield bountiful returns to investors and their families even after the investor has passed away.
Some common forms of investment in rental properties in the bay area housing market include commercial buildings, condos, unit buildings (for small families), detached family homes, mobile homes and apartments.
Investing in the Bay area housing market through owning any of the above rental properties is a profitable way to generate consistent passive income. Below are the details of advantages of owning rental properties.
Owning a rental property entitles the owner to depreciation which means they can take advantage of tax benefits that allows them pay reduced tax. Depreciation is based on the principle of wear and tear.
Income from Renters
Without much ado, this is the biggest benefit of owning a rental property. Tenants of the rental property owner will provide a steady direct income in the form of rents which could be weekly, monthly or annually. The rent checks will simply keep coming so long as a tenant occupies the house.
Here’s a simple illustration, if an investor pays $30,000 to purchase a rental property and then rents out the same property at $1,500 per month, this means in less than two years, the investor would have recouped the investment made. Who wouldn’t want to make such an investment?
However, this is not a guarantee to expect automatic profits when one invests in real estate. The point being made here is that at least, one can expect good results. Plus, it’s an open secret that real estate value in the bay area appreciates daily.
Income from Property Value Growth
The beauty about the Bay area housing market is that a real estate property’s value will continue to appreciate even where no significant changes were carried out on the property. As the owner of the property, and as positive developments happen around the bay area, the owner would greatly benefit. Understandably, property value appreciation is a variable phenomenon with other factors like inflation and location of property having a bearing upon it.
Borrowing and Mortgage
An investor without sufficient funds to purchase a rental property, can mortgage some or use the property as collateral to obtain a loan to purchase the property. Income from rents is then used to pay off the loan and mortgage.
It’s normal for owners of rental properties to carry out improvement and renovation projects on the property that would upgrade its value or simply preserve its appearance. These projects could be things from landscaping, expansions, new roof, painting, refinishing of surfaces, etc. This is generally called sweat equity, affording the owner the opportunity to demand for high rents. Sweat equity would add more value to the property which the owner can still cash on even if the property is sold off later.