Why Owning Rental Properties Is a Great Stream of Income

If you’ve considered owning rental properties one consideration is the stream of income. That is certainly a good consideration. Rental properties can be a great income for you.

Why Owning Rental Properties Is a Great Stream of IncomeThe stream of income involves cash flow, equity, appreciation and taxes. Cash flow is the rent payments. The rent you charge should include the expenses of the property with something leftover, if possible. Those expenses include the mortgage, insurance, taxes, any utilities attached to the home (like water and sewer). One thing to keep in mind is that if those expenses are too high and it makes the rent you want more than the going rate for a property of the same size and with similar amenities, you won’t get any tenants. So make the rent fair. That said, you should be able to make it balance out.

Equity is the amount the property is worth less the mortgage. Over the years you own the rental property your tenants are essentially building equity in your property. Their payments include your mortgage, which means you earn equity on their payments.

Appreciation also works into that. Generally real estate gains value instead of losing it. More free money. Then there are the tax benefits. Rental properties mean tax write offs. You have to claim the income you get in rent, but it is offset by the mortgage, interest, real estate taxes and depreciation of things in the home. Consult a tax expert to make sure you don’t get into hot water, but know that in many situations the income is completely offset by the deductions.

What you have to understand about owning rental properties is that while there is a tone of “free” money, a lot of it isn’t actual cash in your pocket. The tradeoff is other ways to get quick cash in your pocket also mean a huge tax hit. You don’t have that with rental properties.

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