Investing is a very commonly used avenue to make money. There are many different types of investments, ranging from stocks to savings accounts. There are pros and cons to all investment types. Of all the investment opportunities there are, property investment is one of the most intriguing ventures. Let’s take a look at what makes it so tantalizing.
1. Need for Housing
The Beginner’s Guide to Buying Rental Properties (A Case Study)
Literally everyone wants to have a place to live. A roof over your head is something just about everyone would list as a top priority in life. Yet homeownership in America is below 64%. So close to a third of the population still needs a place to live, and where do they find that place? A rental.
A need for housing will never go away. Some areas might get overcrowded, but there is always a need somewhere for more available living quarters. A huge bonus would be if you lived in or near a college town. Students are always looking for a good deal on housing, so if you are nearby to campus, you’re in business. You would need to check that particular university’s website to see if they require anything specific from students or landlords.
While just about every industry is hurt by a dip in the economy, people will still need a place to live. That isn’t to say that property investment is immune, there have been several real-estate market issues over the past 20 years, so do your due in knowing market trends before jumping in.
Is anyone ever really in control? There are so many factors outside our control. As a property owner, you can take control of a number of things. You get to control things like rent, whether you provide any utilities or furniture, and who your renters are. This gives you a feeling of comfort and control that buying other investments can’t provide. Unless you own a large portion of stocks, your opinion is not going to matter to a company.
While you are in control, that puts a lot of responsibility on your shoulders. You have to ensure that the apartment is a decent place to live, or it won’t be filled. You have to be responsible for repairs, insurance, and other fees. Owning a rental property comes with a number of costs, and you need to be prepared for that.
3. Cost of Rent
Like warm air, rent rises. Well, it usually does. That is a definite pro for property owners, as they can make more money off their investment. Raising the price of your rent will allow you to potentially see an increase in your cash flow, which is the whole point of investing, right? Seems like a win for the owner, although as a renter I can verify that increasing rent is not cool.
Usually, when rent goes up there is a reason for that. It may be a higher cost on your lot fee or another unexpected fee. That seems logical, you get hit with a higher fee, so you raise the rent to compensate. The problem is that you aren’t actually making any more money. A very rudimentary example would be if you charging $900 a month for rent and your average monthly costs are $500, you are making $400 a month. If one month your costs go up to $600, you may raise your rent to $1000 monthly, but as you can see by doing simple math, the profit is still $400.
Note: These numbers are just figures and I am not claiming in any way they are realistic. There are a lot of costs and fees that go into owning property and this does not reflect those, these numbers are simply being used to prove a point.
4. Save Costs
As a property owner, you have the ability to cut some significant costs. If you are handy, you can do necessary repairs and avoid having to hire someone to do them. Even if the part is pricey, you are still saving on the labor costs.
Many property owners hire property management companies to do the work for them. Repairs, inspections, and other duties are relieved from the to-do list of the owner. That sounds nice, but they won’t come cheap.
The downside to this is simply that you will be spending more time at your property, Being a hands-on property owner isn’t bad, and many people prefer to do it that way. If you are already a busy individual, having to visit your property all the time is not going to help your schedule or attitude.
Property investment is a great way to go if you are looking for a solid investment to last over many years. If you are smart and do your research well property ownership could suit you very well. Some people buy a little house and rent it. Others build apartments. Regardless of the size of your property, it can be profitable if you invest the necessary time and effort into your investment.