The decision to become a landlord is not one you should make lightly. If you are looking to invest in real estate, there are quite a few things to consider. It is true that becoming a landlord can be a lot of responsibility, but there are also tons of advantages which may not be known to new investors.
Wealth building: If you hold on to property long enough, it will almost always go up in value. This is termed “appreciation” and is a good way to increase your net worth.
Cash flow: If managed properly, a rental property can bring in a steady stream of income from AAA tenants.
Investment diversification: A diversified investment portfolio is one of the most important rules of investing. Owning a property, which tends to be lower-risk, is a good way to diversify your investments.
Leverage: In real estate, a little cash will go a long way – unlike other types of investments.
Being your own boss: There can be a lot of personal satisfaction that comes with being your own boss, especially for those who love independence in their work lives.
There are also tax benefits to owning a property. Here are some of the things you may be able to write off as a landlord:
- Interest: Mortgage interest payments on loans and interest on credit cards related to rental activity can all be deducted.
- Repairs: The cost of repairs to your rental property is fully deductible.
- Travel: Landlords can deduct travel expenses related to the rental activity.
- Depreciation deductions: landlords can also deduct the depreciation value of their house over 27.5 years, even while they are increasing in value. This will help save some of the positive cash flow without having to owe income taxes.
- Property taxes: You can deduct property taxes that relate to the rental property for the period that it is being leased.
As mentioned, this is not a decision that should be made quickly. Potential landlords have to ask themselves if they really feel suited for the job. Additionally, certain factors need to be looked into. For one, it is important to calculate the expected cash flow that will be generated from the property (taking into account vacancy time and other expenses).
As always, it would be best to speak to an expert real estate agent about questions or concerns. So, if you have questions about becoming a landlord, we’d love to help! We offer a full range of services for our landlord clients and can make the transition as easy as possible for you. Call us at (416) 929-1660 or email us at resupport@axoncapitalrealty.com to begin discussing your options.
Sources:
http://www.thestar.com/business/2013/05/09/money_monitor_is_being_a_landlord_right_for_you_.html
http://www.marketwatch.com/story/the-tax-advantages-of-being-a-landlord-2013-04-23
http://www.nolo.com/legal-encyclopedia/landlord-benefits-renting-property-29596.html
http://www.nolo.com/legal-encyclopedia/landlord-pros-cons-29494.html
