Benefits of Owning Rental Properties

Author: Tania Dube Mortgages |

Blog by Tania Dube Mortgages

Are you planning to invest in rental properties?

Most people who are dreaming about earning passive income will eventually settle on rental property investing. That's because purchasing a rental property and making smart decisions comes with the potential of growing your wealth.

Throughout the years, property investing is becoming more accessible to many people. Many websites have been created to outline the basics of knowledge regarding rental investing. Plus, it's possible to research and analyze a host of real estate data that helps you make wiser choices.

Even with access to all of these new tools, nothing replaces good old self-learning. As a property investor, you need to understand the ins and outs of the industry to increase the chance of your success.

In this article, we'll go over the main benefits of rental property investments. You will understand how ownership has the capacity to bring you a significant return on your hard-earned investment dollars.

Tax Deductions
A significant benefit of rental property ownership is the opportunity to receive tax deductions. You can decrease the owed tax amount by subtracting many types of expenses as part of your rental owner's income.

These are the main tax deductions in Canada that you could get as a rental property owner:

  • Mortgage interest payments.
  • Expenses tied to rental management.
  • Rental property insurance.
  • Utilities (if these are part of the monthly rent).
  • Property taxes.
  • Costs related to upkeep and repairs.

Keep in mind that it's also possible that the yearly expenses exceed your total rental income. In this case, you may have the chance to deduct the resulting loss from another type of personal income. It's worth checking whether you have the eligibility because you could reduce your annual tax bill.

More Control

More Control

When you are planning your first investment, it may seem that there is an endless array of options available. One aspect to consider is the amount of control and freedom you can exercise over your investments.

A quick look at the inner workings of bonds or stocks shows that you won't have control over what is going to happen after your investment decision. The possibility of growing your wealth is passive.

But investing in a rental property is different. In theory, you can keep an eye on all of the essential processes. And that is a degree of control you would not be able to enjoy with many other types of investments.

These are the crucial decisions that rental property owners face:

  • What is your business model? Short-term or long-term tenancy?
  • What is going to differentiate your rental from comparable properties in the area?
  • What kind of amenities or extras are you going to offer to your tenants?
  • Is the rental property going to be pet-friendly?
  • How are you going to screen the applicants?
  • How much is the monthly rent? Are you going to charge late fees?

The great thing about all of this is that you can give away some of the control in exchange for more free time and fewer worries. You can achieve this by hiring a professional property management company.

Appreciation
Rental property ownership comes with a significant potential of high leverage. You can use more debt to acquire a rental property instead of using equity. As a rental property investor, you could have the chance to get 10-15 times more finances than you put in by yourself. The appreciation effect has a vital role to play here. You'll benefit from the fact that appreciation covers your property's total value instead of the portion of your personally invested money.

Hedge Against Inflation

Hedge Against Inflation

Inflation is something dreaded by all people who have savings. Usually, they try to get a savings account that has a high enough interest to balance the increase or make investments in financially sustainable assets.

You can even cut the loss with capital growth any time the growth of the rental market tops inflation. And focusing on this type of return fails to cover the monthly rent amount, which acts as another increase in your wealth.

Profit
Monthly rental income is another crucial benefit of rental ownership. However, the prerequisite for that requires a steady tenancy in your rental units. The profit you'll make is considered unstable when you have a high tenant turnover rate.

The net profit is the money left on the table after you account for the mortgage and rental budget. The latter should cover all the expenses connected to your regular payments, including repairs, upkeep, and advertising.

The Bottom Line: Why You Should Own a Rental Property.
Rental property ownership comes with a set of distinct financial benefits. Other major types of investments have a hard time competing with this combination of wealth-building qualities.

As a rental property owner, you could enjoy the following benefits:

  • Gain high leverage and benefit from appreciation.
  • Receive regular rental income.
  • Acquire a passive role by hiring a professional management firm.
  • Reap the benefits of numerous tax deductions.
  • Enjoy a higher degree of control over your return on investment.
  • Combat the detrimental effects of inflation.


READ MORE BLOG ARTICLES