Are you interested in buying investment properties as one of your hobbies that make money? Even in the recent financial downturn investing in property can still be quite a boon for you. If you have it in you, buying investment property with the intent to become a landlord is a great idea. You build credit during this time. Your tenants pay your investment property loans. Sounds like a good deal eh? Well it can be. It can also be a lot of work.
First you need to do your homework. This isn’t some make money quick scheme. This is a real side job that you should plan on being in for the long haul. First you should find some good investment property for sale and try to get a good deal on it. You should check it over for potential repair problems in the future, as having this long term you will be dealing with new carpet, new roofing, new appliance, and all kinds of major repairs that you may not be expecting at first. After you have your investment property and some tenants, start saving the excess money from them that doesn’t go towards the loan. You will need this money for repairs.
Being your own landlord can be a great way to build credit and you could have some property investments paid for without ever having to fork over a single dollar of your own!
Another type of business you might want to try is commercial property investing. It is similar to being a landlord, but you rent to businesses. In this type of property investing, you may have a large office, restaurant or other similar building. You will want to buy investment property in a great location for businesses, such as downtown or in a high traffic area. This has the potential to make more money but you have many more people that could cause problems inside, so be ready for more potential repairs. Commercial property investments might be the way to go if you have a little extra capital to spend upfront as they generally demand more of a premium than residential areas.
Whichever route you choose to go, make sure that you avoid overpaying for your property. With the recent housing crash you can get great property investments right now. You can get them at ridiculously low prices compared to what you could two years ago. In many cases this price is half off or even more. You might want to consult a professional real estate business here. What is key is to make sure that the rent you are being paid covers your expenses. Your expenses included repairs, maintenance, any loans, taxes, and insurance. You also have to keep in mind that 5-10% of the time you may have vacant units. This is something you need to factor in.
Here is a non-comprehensive list of benefits you will receive from commercial or residential property investments:
- Huge Tax Benefits – Generally you get to write your properties off as being depreciated while they are actually appreciating. Deferment of capital gains tax is another savings. If you sell a property and make money on it, you owe a capital gains tax. However if you use a 1031 tax exchange to purchase another investment property you get to bypass taxation.
- Building wealth and credit – This is a form of “good debt”. It either makes you money or breaks you even. You can then use the equity for other things. Also if you can find a good deal when you buy investment property you can use the equity from those properties as additional leverage for other loans.
- Passive income – This could be used for any number of things. Get enough investment properties and you can retire on it. Or you can use it as a supplemental income. Either way is excellent.
- Low Risk – Over the long term, property almost always rises. We recently had a crash, but it will stabilize over the course of the years. If you ride this out long term, the risks are low.
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