Hi there, it’s DeElla with Hoberg Homes back for some more real talk on real estate. Today we are looking at the four ways you make money with a rental property. The four ways to make money with your rental are with rent, appreciation, debt reduction and tax savings.
The first way is the most obvious, you get paid rent every month. That rent allows you to pay the expenses involved in owning the property. These expenses include your mortgage, taxes, insurance and maintenance. The money left over, after you pay these expenses, is your cash flow. Your monthly profit.
Next, real estate is typically an asset that increases in value. Appreciation is awesome! Your property is increasing in value so when you are ready to sell it you make more than your initial investment. Real estate also tends to outpace inflation.
The third way you make money with a rental is with debt reduction. In a perfect world, we buy all of our investments with cash. In reality, most investors put down 20-25% and mortgage the rest of the money needed to buy a property. The beauty of a rental is that the tenant is paying the mortgage for you.
Finally, there are tax benefits and savings that come with owning a rental property. These benefits include being able to write off mortgage interest, expenses involved in owning the property and depreciation of the structure and other depreciating items such as appliances and windows. (I am not a CPA or tax expert so you should always consult a pro with tax questions.)
There you have it! Rent, appreciation, debt reduction and tax benefits are the four ways you make money with a rental property. If you like this content, and want to see more of it, please subscribe below.