Owning an investment property is a great idea if you want to get extra income. But it also has some pros and cons related to it. In this blog post, we will discuss a few things you need to consider before investing in rental properties:
The Pros of Owning a Rental Property in Michigan
Someone Else Pays Your Mortgage
The idea of someone else paying your mortgage sounds excellent. However, it depends on your tenants. With the rental property, you would generate additional income that you can use to pay off the mortgage. With the help of the right rental, you will earn enough income to pay off the mortgage and the payment to maintain the property and the profit aside.
People Will Always Need Somewhere to Live
Real estate is a significant investment. Andrew Carnegie
believes that a bulk (90%) of the millionaires we have today became so by owning real estate. He says people have made money by investing in real estate rather than holding industrial investments. And advises that wise young men and wage earners invest their money in real estate. If Andrew were alive today, he would be worth $309 Million.
Income Tax Deductions
On a rental property, you can deduct everything; you just keep the record and everything else in written form.
- If you have a loan on it, you are at liberty to deduct the interest.
- Costs associated with traveling to, maintaining, and inspecting your rental property
- You can remove maintenance and repairs, which includes everything from a new roof to replacing a light bulb.
- Homeowners Association Fees
- You can also deduct any portion of the utilities you are paying for.
Retire in Style
Imagine you have found the home you love and dream about, but unfortunately, it is away from your work commute. What you should do is purchase that property and put it on rental. That way, you can move to your dream home when you retire. Until you start living there, you can get lots of profit by putting it on rental. This helps you get your dream home, make profits, and spend a life there after retirement.
5. Passive Side Income
Owning a rental property may be a terrific source of passive income if you get your ducks in order and manage it well with nice renters.
Cons of Owning a Rental Property in Michigan
Apart from the usual wear and tear, you must always take care of the home and keep it in living condition. The truth remains that the tenants living there wouldn’t take care of the property as you would. You wouldn’t be able to take care of the home as you cannot visit it every day. You also cannot control what they do or how they care for things while living there. Thus, you have to manage all the tasks, from a hole in the wall to faulty plumbing.
You Might Get Sued
It often happens as people can claim security deposits or repairs you had to cover, but you didn’t. While this might not sound like a big issue, it requires a lot of energy and time to deal with.
It needs to be appropriately maintained to keep the property in livable conditions. For example, the lawn must be mowed regularly, pools must be kept clean, and maintenance is essential as it is your investment.
Before investing, you should consider the yearly costs 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, as they might see a bug and call you straight to fix it. In addition, if the rental gets down for some time, you are still supposed to pay for the maintenance. At the same time, some tenants aren’t punctual, and you might have to chase them monthly or yearly for rent.
Some situations might put you in challenging scenarios, like cases where the price of the rental drops yet the mortgage remains the same, and you are not in the situation to increase the rent? You should be prepared for worst-case scenarios and ensure 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. There are a lot of things to consider if you are thinking of becoming a landlord in Michigan
Before investing, make sure you know about all the pros and cons. Try to find a property with low maintenance and do thorough research on tenants before starting this process.