Advantages to Renting an Investment Property

If you plan to invest money to build your portfolio and save for retirement or future investments, investing in real estate property may be an attractive option. Buying real estate can help you quickly build your investment portfolio and increase your net worth. Although you can rehabilitate and sell real estate properties, renting out your investment properties may offer several advantages.

Rapid Return on Investment

Unlike other types of investments such as stocks and bonds, which may not produce a return for months or years, rental investments can produce returns quickly. If you can locate and secure tenants as soon as you close on a real estate investment property, you can begin receiving income on the property within days of closing. This means you can begin using your returns to apply toward the property mortgage, savings or future investments.

Predictable Income

Unlike stocks and business investments, renting real estate investment property offers the advantage of predictable income. As long as you screen prospective tenants through credit reports and past rental history verification, you can reasonably predict how much you will earn from a rental property each month. This allows you to accurately plan savings or include rental income in your budget for personal expenses.

Tax Benefits

Buying and renting out real estate investment property offers tax benefits that other types of investments do not provide. As a rental investor, you may deduct depreciation of the property, interest on loans used for property improvements, insurance on the rental property, travel for rental activities and a home office necessary for administrative functions related to maintaining your rental business.

Considerations

Although renting investment properties may offer several advantages, this type of investment strategy also poses risks. You are typically responsible for performing repairs or hiring contractors to perform repairs, even if your tenants cause the damage. You are also responsible for collecting unpaid rent and executing eviction if the tenant refuses to pay, which can be time consuming and costly.

References

• "Real Estate Investing for Dummies, Second Edition"; Eric Tyson, et al.; 2009
• Nolo.com: Top Ten Tax Deductions for Landlords; Stephen Fishman