The Pros and Cons of Owning an Investment Property

If you’ve ever been interested in owning a rental property, now may be a great time to start. Rental properties give you a chance to earn extra income, among other benefits. However, there are also several cons to renting out a home. For those who want to explore real estate investment, this article will cover the basics of owning a rental property.

 

THE PROS

 There may be only a few advantages to renting out a home, but each of them carry significant weight:

It can supplement your income.

In the ideal renting situation, your tenants will pay each month, and the funds will go directly into your bank account. So if your property rents out for $1,200 a month, that’s $14,400 a year. There may be no guarantees that your property will be rented out all year, every year, but even if you receive payment for nine or 10 months out of the year, you’re bringing in a decent amount of money.

It’s also worth noting that you stand a chance of experiencing growth in property value over time. However, if and how much the value grows depends largely on the demands of a property like yours, as well as on its location.

 DIY improvements can raise the value of the home.

Another pro is that you can take steps to raise the value of the property by doing home improvements yourself. Whether it’s repainting the interior, framing a bathroom mirror, or making upgrades to the landscaping, minor changes can raise the value significantly without costing a lot up front.

You can stay there yourself.

When you rent out a home, that means you own it, which means you can always use it if you decide later you need to live there. Maybe you want to rent the property out as a seasonal home and stay there for a few months out of the year. Or maybe you decide that rather than selling it it’s better to move in to avoid capital gains. Whatever the case, owning a rental property can provide you with both vacation lodging and another way to save money.

THE CONS

There are also some disadvantages to owning a rental property that you should be aware of:

Maintenance can be stressful.

There’s a lot of maintenance that comes with owning a rental property. That’s where a property management company comes in. Hiring professionals to keep your property running smoothly will save you a great deal of stress, and it’s well worth the investment.

You could have a terrible tenant.

Another disadvantage of renting out a home is that you can’t always know for sure whether your tenant will be a good one. Sometimes a prospective tenant seems great when you meet them in person, but four months down the road they begin to miss payment after payment. Or maybe they neglect to clean up after themselves and disturb the neighbors. You can, however, avoid all of these issues by contracting with a reliable property management company that performs extensive background checks on all tenants. With Orlando averaging $1,401 in rent for a single-family home, you want a piece of that pie, and having a solid management team can ensure you’re getting the most out of your investment and that it’s inhabited by reputable tenants.

One property isn’t diversified.

Last but not least, when you own just one property, there isn’t much diversity involved. For instance, you can lose money if the neighborhood, block, or home itself loses value or experiences damage. If you plan to own more rental homes, however, you can then better diversify your investments.

There’s a lot that goes into renting out a home. The most important thing is to do your research and consider all the pros and cons. Then you’ll be able to make an educated decision on whether to pursue a rental property as an investment.

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