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Renting – Advantages

Renting can have a few advantages depending on the part of the country you live in. The primary advantage is your

monthly rent payment may be less than an equivalent mortgage. A secondary advantage is the fact that maintenance

and improvements to the property are the responsibility of the landlord. Still, these advantages pale in comparison to

the disadvantages of renting.

Renting – Disadvantages

The disadvantages of renting are significant. If you have any opportunity to purchase a home or condominium, it

almost always makes sense to do so.

The biggest disadvantage of renting is the loss of value. Assume you rent a residence for $1,000 a month and you

live in the residence for two years. You will have paid a total of $24,000 in rent, a pure expenditure. The $24,000 is

simply gone and you will have nothing to show for it other than the time you spent in the home. Compare this to what

your landlord has gained.

Rent payments are closely aligned with a landlord’s mortgage payment. Using the above example, lets assume your

$1,000 rent exactly equals the mortgage payment. For two years, you have indirectly paid the landlord’s mortgage,

helping them build equity in the house by paying down the loan. In addition, the landlord has benefited from the

appreciation of the property.

 

 

Become A Landlord?

So you are interesting in becoming a landlord? Investing in rental properties can be an exciting and very profitable business. Not only can real estate provide current income through rental property but it also can increase your personal wealth or networth. Make no mistake, this is not a sure thing to easy money and investing in real estate is not for everyone. There are risks as with any business or investment but with careful research and the help of a real estate professional you can find the right property in the right location for maximum return on your investment. 

 

Steps to purchasing your rental property:

Meet with a mortgage broker to determine how much you can borrow and to obtain approval for a loan. 

Next you need to determine the type of property you are looking for. Will it be a single family home or commerical property with multiple units? 

When you have a potential property identified estimate the possible rental income you could expect from this property based on comparable rentals in the area. 

Determine your anticipated cash flow from the rental. You will need to consider income from rent compared against all expenses including the mortgage, insurance, property taxes, maintenance, and repairs. 

Because of the potential financial and tax consequences of your decisions, it is very important to consult with aprofessional real estate agent throughout this process. You will also likely need the assistance of an attorney and a tax advisor.  




 

 

 

 

 

 

 


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