When it comes to investing money, many of us hesitate, whether talking about buying stock, starting a business, or purchasing a property. And it’s not surprising because big money and your time, effort, and sometimes personal liability are involved. At Bay Property Management Group, we are no experts in the stock market or joint ventures, but we know a great deal about income properties and why they are a good investment. Read along as we review five ways you can benefit from an income property.
Contents of This Article:
- What Is an Income Property?
- 5 Ways You Can Benefit From an Income Property
- How Can Professional Management Help?
What Is an Income Property?
There are plenty of ways to make money with real estate, with income property being one of the most popular choices. An income property is a real estate that’s purchased or developed with the goal of earning income through rental payments or appreciation. These properties generate passive income through renting to tenants or through long-term value growth. That said, income properties are generally residential or commercial and may be one of the following property types.
- Single-Family Rentals- Homes rented by individuals or families, generally for a 12-month lease term.
- Duplexes or Triplexes- Multi-unit buildings with two or three separate apartments for tenants to live in.
- Apartments- Larger buildings or groups of buildings with multiple rental units.
- Short-Term Vacation Rentals- Properties rented to tourists or other individuals for a short-term stay, usually listed through sites like Airbnb or Vrbo.
- Office Buildings- Commercial spaces that individuals or businesses can rent out.
- Retail Spaces- Properties leased to stores or shops to use for their business.
- Industrial Properties- Warehouses or factories leased to companies for manufacturing or storage purposes.
As property managers in Baltimore, we work with several investors who make a living from their properties. But what are the benefits of this type of investment? Read along as we review them below.
5 Ways You Can Benefit From an Income Property
Making money is just one of the many benefits of owning an income property. While that may be the main idea, there are several more advantages to choosing this investment type over others.
- Earn Supplemental Income
- Property Appreciation
- Control Over Your Investment
- Build a Relationship With the Bank
- Claim Tax Deductions
Earn Supplemental Income
When you have an income property, your daytime job is not your only source of income anymore. Of course, you will need to allocate money to pay the mortgage, utilities, and other rental-related expenses, but in the end, you will be left with a profit.
Profits might be small initially, but as the property gets paid off, market prices climb, and your expenses decrease, you are in for a hefty payoff. However, be sure to make careful calculations before you invest in a property: the last thing you want is to end up with more bills than you have money to pay for.
Property Appreciation
It’s not always guaranteed that your property value will increase. However, it’s a general tendency if your property is located in a good, stable area, such as a city or a fancy suburb.
That said, the value increases due to increased demand or inflation, so you should be very selective about the location of your income property. As a professional property management company, we recommend consulting with real estate experts to better understand prices and value appreciation.
Control Over Your Investment
Can you control shares and the stock market? No, you can’t. Quite the opposite, the stock market is so unpredictable it makes owning shares almost a gamble. The real estate market, on the other hand, is quite stable and gives you more control over your investment.
By renovating the house, adding a pool, a fence, or other features, you can increase your property’s value. In turn, you can charge more for rent or sell at a fair price when you’re ready.
Build a Relationship With the Bank
If you prove you can make timely payments on your loan, it will greatly improve your credit history and help you obtain future loans. You should have no problem investing in another income property if your first one turns out to be a success.
Claim Tax Deductions
Claim Tax DeductionsOwning and paying off a rental property qualifies you for various tax deductions based on expenses, depreciation, interest, and points. Expenses may include traveling to and from the property to conduct business or do repairs, maintenance costs, agent fees, etc. Some of the most common tax write-offs for investors include the following.
- Mortgage interest
- Depreciation
- Insurance
- Advertising
- Property taxes
- Travel expenses
- Repairs and maintenance
- Property management fees
- Legal services
How Can Professional Management Help?
There are several ways for investors to benefit from income properties. However, they can be a ton of work–especially if you own more than one. If you buy a property with the intention of it being a side job, you may find it turning into a full-time job. So, if you ever decide that managing your Baltimore rental property is too much work, contact us, and we’ll help you out.
Need More Advice? contact us today!
Bay Property Management Group offers comprehensive rental management services, from rental marketing to tenant screening, maintenance, inspections, and more. Learn more about our experienced team servicing Baltimore, Philadelphia, Northern Virginia, and Washington, DC.
