When it comes to making wise real estate investments, few present more attractive opportunities than rental income properties. With rental income properties, buyers get the chance to build passive income, often with leveraged investments. The decision to purchase a rental income property is one that shouldn’t be taken lightly, but buyers who do their due diligence often reap considerable rewards. If you’re considering buying a rental income property, are you ready for the risks that abound without a home inspection?
What is a Rental Income Property?
A rental income property is a residential or commercial property that is purchased, rehabilitated and rented out to tenants. Each month, the investor collects rent which is then used to pay down the loan’s principal balance as well as any expenses related to owning and maintaining the property. In some cases, if the property is free and clear, investors can rent the property and use the rental income to fund their retirement or build wealth.
Advantages of Owning a Rental Income Property
1. Builds Passive Income
2. Often Leverageable Investment
3. Appreciation Potential
4. Tax Benefits
5. Ability to Create Equity
Investors who want to build passive income will find owning a rental income property appealing. With rental income properties, investors don’t have to work for the income, instead it is produced from the asset. Leveraged investments also make rental income properties attractive. Investors can use borrowed money to help purchase the property, turning a small amount of equity into a much bigger investment.
Rental income properties also can appreciate in value over time, increasing the total return of the investment. Meanwhile, investors also can take advantage of tax benefits, including deductions on maintenance and property taxes. Finally, rental income properties also build equity over time.
Finding a Rental Income Property
When it comes to finding the right rental income property, buyers should consider these points:
1. Identify Problem Areas
2. Evaluate Liquidity
3. Understand Financing
4. Check Exper Group Comparables
5. Get Expert Assistance
By paying attention to problem areas such as failing home systems, buyers can better understand the cost of ownership. In addition, buyers should also consider the liquidity of rental income properties. Investing in rental income property can be a long-term endeavor, so understanding the total costs and estimates for return is an important factor. Both financing and understanding the local real estate market are important considerations as well. For inexperienced buyers, getting expert assistance can save time, money and headaches.
The Risks of Not Having a Home Inspection
Inspections are an important part of the home-buying process and that’s true even when it’s a rental income property. Without a home inspection, buyers are taking a big risk and may be liable for expensive repairs. When you’re teaching an investment property, you won’t be there to monitor the condition of the home, and that’s why a home inspection is so important. Home inspections can also reveal issues within the home that must be addressed before they become serious problems.
In Rockwood, ON, there are several experienced home inspection companies that can help provide you with the detailed report you need before purchasing a rental income property. An experienced home inspector will be able to provide a thorough report that covers the condition of the home, including structural issues and the age of certain systems. With this report, investors can make a more informed decision about a potential property.
Selling a Rental Income Property
Selling a rental income property is often no different than selling any other property. However, you should pay close attention to the motivation of the buyers and provide them with as much reference material and evidence of property condition as possible.
The major benefit of selling a rental income property is that investors may be able to take their profit immediately. Depending on the MLS® listing, investors can also get the opportunity to showcase the home to buyers who are usually qualified and ready to purchase.
Conclusion
Rental income properties can be a great investment for those who understand the risks that come with them. Before making a purchase, a thorough home inspection conducted by an experienced home inspector is crucial to reveal current issues and future liabilities. Furthermore, investors should also understand their local real estate market and financing options for rental income properties.
FAQs
1. What is a rental income property?
A rental income property is a residential or commercial property that is purchased, rehabilitated and rented out to tenants.
2. What are the advantages of owning a rental income property?
Advantages of owning a rental income property include building passive income, often with leveraged investments, potential appreciation, tax benefits, and the ability to create equity.
3. How can I identify problem areas before I purchase a rental income property?
When it comes to finding the right rental income property, buyers should pay attention to problem areas such as failing home systems.
4. What are the risks of not having a home inspection?
Without a home inspection, buyers are taking a big risk and may be liable for expensive repairs.
5. What is the major benefit of selling a rental income property?
The major benefit of selling a rental income property is that investors may be able to take their profit immediately.
