If you want to get extra income then owning an investment property is a great idea. But it also has some pros and cons related to it. In this blog post, we will discuss few things you need to consider before investing in rental properties:
The Pros of Owning a Rental Property in Michigan
1. Someone Else Pays Your Mortgage
The idea of someone else paying your mortgage sounds great. It depends on your tenants. By having the rental property, additional income would be generated that you can use to pay off the mortgage. With the help of right rental, you will be able to generate enough income to pay off mortgage as well the income to maintain the property as well with the profit on a side.
2. People will Always Need Somewhere to Live
Real estate is a great investment. As stated by Andrew Carnegie, “Ninety percent of millionaires becomes so by owning real estate. More money has been made in real estate than in all industrial investments combined. The wise young man or wage earner of today invests his money in real estate”. If he would be alive today, he would be worth $309 Million.
3. Income Tax Deductions
On a rental property you can deduct all sorts of things, you just need to keep the record and keep all the things in written form.
- If you have a loan on it, the interest can be deducted
- Travel and mileage costs to visit, repair and inspect your rental property
- You can deduct maintenance and repairs. This includes everything from a new roof to replacing a light bulb.
- HOA Fees
- You can deduct any portion of the utilities you are paying for
4. Retire in Style
If you have found the home you love and used to dream about but it is away from your work commute. You should purchase that property and put it on rental. So that when you retire you can move to your dream home. Until you don’t start living there you can get lots of profit by putting it on rental. This is how you can achieve your dream home and get to spend life after retirement there.
5. Passive Side Income
If you get all your ducks in a row, and have a low-maintenance rental with great tenants, owning a rental can be excellent passive side income.
Cons of Owning a Rental Property in Michigan
1. No Respect
Apart from usual wear and tear you are supposed to take care of the home and always keep it in the living condition. But the tenants living there wouldn’t take care of the property like you could do. You wouldn’t be able to take care of the home as you cannot visit it every day. You cannot control about what they do or how they take care of the things while living there. You have to manage all the tasks starting from a hole in the wall to the faulty plumbing you are unaware of.
2. You Might Get Sued
It happens a lot as people can claim for some security deposits or some repairs you had to cover but you didn’t. All of this doesn’t sound like a big issue but it requires a lot of energy and time to deal with it.
3. Additional Cost
In order to keep the property in live able conditions, it needs to be maintained properly. Lawn must be mowed regularly, pools must be kept clean, all the maintenance is important as it is your investment.
Before making the investment, you should consider the yearly costs that could be needed for maintenance.
It is quite evident that being a landlord is stressful. If you’ve got high maintenance tenants you should be ready to hear them out at any time 24/7 as they might see a bug and call you straightforward to fix it. In addition, if rental gets down for some time period you are still supposed to pay for the maintenance. Whereas some tenants aren’t punctual and you got to chase them every month for rent.
Some situations might occur that can put you in tough scenarios like what if the price of the rental drops and mortgage remains the same and you are not in the situation to increase the rent? You should be prepared for all the worst-case scenarios and make sure you have some wiggle room from the rent you are charging.
Don’t get it so close that you have to face problems in the future. In addition, financing the second property could cause more issues before a bank can help with the financing.
Before making any investment make sure you know about all the pros and cons. Try to find the property with low maintenance and make sure to do a thorough research on tenants before starting this process.