Due to the instability of the stock market, many investors are considering investing in a rental property for the first time because investment properties consistently produce cash flow even when stocks have record losses.
If you’re thinking about investing in a rental property, this article will share with you several ways that an investment property makes money.
Monthly Rent
The first way that a rental property generates income is from rent.
Rent is typically collected on the first of the month, or as late as the 5th when it’s paid online and deposited directly into the owner's account.
Besides the monthly rental income, you can also earn additional income from your property when you add amenities and services that your tenants will want like onsite storage, free WIFI, modern appliances, in-unit washer/dryer, premium parking, and allowing pets.
What’s most important about the income from your rental property is it’s going to be dependable income because people will always need a place to live.
If you own a safe, updated, and habitable rental property, you will continue to enjoy a cash-flowing asset that will produce income for years to come.
It’s A Hedge Against Inflation
Let’s face it, Inflation is one topic that everyone doesn’t want to talk about, but the reality is that it’s a reality in the United States.
The annual inflation rate for the United States is 8.3% for the 12 months ended August 2022 after rising 8.5% previously, according to U.S. Labor Department data published Sept. 13. – Source: inflationcalculator.com
One of the primary benefits of inflation for an owner is that you can increase the rent to bring in additional cash flow to cover your increased costs instead of covering those costs out of your own pocket.
Rental Property Tax Benefits
Taxes are something that every owner is going to have to pay each year but that aren’t as bad as you think because your rental income could ultimately be tax-free each year if you file your taxes correctly.
Most residential rental property is depreciated at a rate of 3.636% per year for 27.5 years—what the IRS considers the property's "useful life." - Investopedia
The main way to enjoy tax breaks when you own rental properties is from write-offs, and some of the most common write-offs include expenses like management fees, insurance, and property taxes to depreciation.
Note – Income taxes are constantly changing, and the IRS is collecting more money from small business owners than ever before so it’s best to work with a licensed accountant who stays on top of the latest IRS rules and regulations, so you don’t have to.
You Build Equity as You Pay Off Your Mortgage
Last of all, but most important, another great way to earn income from your rental property is that you build equity in your property each year as you pay off your mortgage.
Even though that equity isn’t liquid right away, as you pay off your mortgage it grows each year, and within 30 years, or less, you can pull that equity out of the property and potentially use it for funding your retirement.
Contact Us
At GoldenWest Management, we specialize in managing single-family and multifamily rentals in San Diego, Phoenix, and Las Vegas.
Our team will save you the time, money, and hassle of DIY management so you can enjoy passive income from your properties.
To learn more about the property management services we can offer you, contact us today by calling (866) 545-5303 or click here to connect with us online.
