Property Management Strategies for New Homeowners
The popularity of investing in real estate in Worcester County Ma has increased as people move away from the volatility of other investment strategies. Buying an investment property for long term financial savings can have its rewards, but like any investment, there are advantages and disadvantages. What should you consider before buying an investment property?
Buying real estate is a good long term investment. Property value rarely declines and is a good option to help fund retirement. Many investors who are intimidated by investing in equities will feel more comfortable with investing in brick and mortar.
Tax benefits can be claimed on your tax return. Any work carried out on the property such as maintenance or repairs can be claimed as tax deductions. If the cost of running the investment property exceeds the income derived from it, the difference can be claimed as a tax deduction. The interest paid on your loan to cover the cost of the investment property can also be claimed.
Tenants provide a regular income. One main attraction of owning an investment property is that tenants help to pay off your investment. A common lease arrangement in some areas includes a clause for rent to increase as per inflation. This factor is appealing, because as time goes on, your loan will be decreasing, but your rental income will be increasing.
You can increase the value of your investment. Unlike other forms of investments such as stocks and bonds, an investment property can be constantly changed to help increase its value. Changes to a property such as painting, landscaping, repairing a roof, replacing fixtures and fittings will all add value to a house. An investor can be more hands on in controlling the way the property is managed, therefore helping to maintain the value of their investment.
Not all tenants are responsible. Unfortunately, we have all heard of horror stories with bad tenants. If you are unlucky to have a tenant that causes problems on your property, the consequences can be costly. They can damage your property, be late in paying rent or not pay at all. Disputes such as these can take months to negotiate. That’s why it is so important to screen out poor risks. You want to find good tenants that are responsible. What’s often not mentioned is good tenants also want good landlords. It is a two way street.
A vacant property means no income. There may be times when you are unable to secure a tenant. Mortgage repayments will still need to be met; therefore any shortfall needs to be paid from your own savings.
Maintenance can be time consuming. As with any house, maintenance is required to keep the property in order and stop it from declining in value.
Real estate is a non-liquid asset. An investment property is a long term financial plan. Unlike shares, they cannot be quickly converted to cash. There is always the uncertainty of how long it will take to convert your investment into cash.
The most important rule with any type of investment is to do your homework. Research the market trends in the location you plan to buy an investment property and work out your potential rate of return. Investing in real estate can be a valuable part of a balanced portfolio to help your financial security in retirement.