Should You Buy a Rental Property in a Hot Market Like Denver?

The real estate market in Denver has definitely heated up, so is now the Should You Buy a Rental Property in a Hot Market Like Denver?time to purchase a rental property? In a word, yes. Hot market or not, now is a great time to jump into being a landlord.

Low interest rates

As with buying a residence, buying to invest now while interest rates are at historical lows is a good idea that will save you money over the long term. Lower interest rates mean lower mortgage payments and that fixed rate mortgage will stay the same while rents will increase.

Tax advantages

Another reason to buy an investment property now? Tax advantages. Interest, taxes, insurance and other expenses of the rental unit are deductible against the property’s income. Any losses can usually be deducted against your other income. Depreciation is also tax deductible.

Depreciation

Depreciation is an allowance for wear and tear, usually over 27.5 years, or 3.636% of the purchase price of the building per year. Even better, rental properties can be sold and the proceeds used to purchase another investment property without you being hit with capital gains. Be sure to talk to your tax advisor about these and other tax advantages.

Different investment properties

There are a lot of different ways to have an investment property. You can purchase an existing home and break it into separate rental units, or create one in or on your existing home. You can purchase a unit in an existing condominium. Purchase a home in a place where you would like to retire later and rent it for the time being. Don’t forget about a vacation home that you can use for a set time a year without risking the rental tax advantages (again, check with your tax advisor about this). The options are endless.

Landlord risks

Just keep in mind that you will be a landlord and that comes with risks. Bad tenants, property upkeep and repairs and being saddled with that second mortgage if the property isn’t rented are all risks you take. So before buying, talk to a realtor who knows the local rental market. They can tell you what average rents are, how hot the rental market is and possibly help you get your property rented as well.

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