Is Investing In Rental Property A Good Investment?

For many years, rental properties have been an effective way to gain passive income. But before you join the many other people who are earning extra money by purchasing Pagosa Springs real estate, it’s important to carefully consider your financial situation and understand the basics of owning a rental property. Real estate is complicated and requires planning before you can find the right property and good tenants.

What Are The Benefits Of Investing In Rental Property?

Cash Flow

Owning rental property will help you maintain good cash flow as you generate passive income. Most of the time, rental properties won’t need tons of effort to maintain, so they can be a great way to promote financial security for retirement or to put extra money into the bank.

Tax Benefits

When you own rental property, you’ll likely gain some significant tax breaks. In many states, you won’t even be taxed on your earnings from rental property, and may also be able to deduct mortgage interest, insurance, and property maintenance on your tax returns.

Value Appreciation

Real estate values always increase over time, meaning you’ll be able to earn more, whether you decide to pay off your mortgage more quickly or sell off the property later.

Be Your Own Boss

When you own rental property, you’re in charge of everything, including which tenants you want to work with, how you’ll manage your investment, what kind of property you want to purchase.

What Should I Know Before I Invest In Real Estate?

It’s important to remember that owning a rental property will provide financial security and other benefits, but will also take time and effort. Consider these basics from your Pagosa Springs real estate agent.

Can I Manage a Property?

It’s not easy to be a landlord and you’ll likely have to deal with troublesome tenants at some point. Managing property can be time consuming, especially if you have another job. Although you can hire a property management company to do the work, you’ll earn less income than doing the job yourself.

Understand Your Location

The amount of income you can earn from your rental property will depend on where it’s located. You won’t get a good return on your investment if you purchase in an area that’s declining in value, so look for an area that experiencing a lot of population growth. Ask your real estate agent for recommendations on which homes for sale might best meet this criteria. Also consider which neighborhoods are the best in the area, with plenty of amenities, good schools, low crime rates, and plenty of jobs.

Be Careful With Fixer-Uppers

Many first time investors buy a fixer-upper thinking that they are getting a good deal. If you have knowledge and experience with remodeling and enough cash flow to get the job done, a fixer upper might be a good purchase. If you’re unfamiliar with construction or lack cash flow, it will be easier to buy a property in move-in condition.

Secure Financing

If you’re paying with cash, you’ll need to consider your financial situation. Ask your Pagosa Springs real estate agent for lender recommendations so you can discuss investment financing with multiple banks and lenders. In most cases, you’ll need at least 20% down because there is no mortgage insurance available for rental properties.

Watch Out For High Interest Rates

Don’t work with just any lender; some charge extremely high interest rates that will prevent you from breaking even on your property. Shop around for reasonable interest rates and don’t forget to consider other fees sand expenses including closing costs, mortgage fees, and the cost of furnishing and advertising your new property.

Get Landlord Insurance

As with any business, there are risks to becoming a landlord. Protect yourself and property by getting landlord insurance, which will cover property damage, liability protection, and lost rental income.

Learn To Manage Efficiently

Managing your property is one of the hardest parts of real estate investment, and can make or break your success as an investor. Poor management can force you to sell your property prematurely or even push you into foreclosure. Many landlords choose to hire a professional property manager, but you’ll still ultimately be responsible for a smooth and profitable investment.

Is Rental Property Investment a Good Choice For Me?

Rental property can be a great investment if you understand the basics, have time to manage it well, and enough cash flow to get started. It will take time for you to begin earning steady profits and achieve financial security, but if you are successful, you might even be able to leave your day job! If you’re new to real estate, make sure to work with an experienced Pagosa Springs Realtor to get the help you need with a smooth real estate purchase.

Get Advice From Pagosa Springs’ Top Rated Realtors

Whether you’re looking to purchase a rental property or your own home, the Kaufman Team is ready to provide their expertise every step of the way. As the top rated real estate agents in Pagosa Springs, we have developed a proven market strategy that really works! Let us help you find your dream home! Contact us today.

Pagosa Springs Realtor – Tony Kaufman
Pagosa Springs, CO 81147