You probably know someone, a friend or a family member, who owns one or more income generating properties and they’ve gotten your attention especially, once they started explaining how this simple financial move was the best decision they’ve ever made since it improved their financial well-being and gave them the financial flexibility they were looking for.
As a newbie, you’re still unclear about such an investment?
And you’d like to find out more.
Let me ask you this…
Do you know how to invest your money?
There are endless ways for a person to invest their money such as the stock market, investment bonds, mutual funds, savings accounts and the list goes on and on…
When my husband and I started investing in real estate back in 2015, our savings were hidden in bank accounts that barely generated any profits in a year.
We were told our money would be blocked in mutual funds and savings accounts and will generate 4 % in profits within 3 years.
We didn’t know better at the time since we hadn’t discovered real estate investment opportunities.
It wasn’t until a family member approached us with an opportunity and we now own two triplexes and a sixplex and we see profits on a monthly basis.
I’m talking 10% return on your money on annual basis and higher.
Now, this is exactly what I call the advantage of income generating properties.
What is an income generating property?
Simply put, it is a property you buy or you build in order to start earning income with.
These income generating properties can be residential, for example a single family home or multiplex (i.e. Duplex and higher), or commercial, for example a mini-mall.
Once you own such property, you can then rent it out on a nightly, daily, monthly or annual basis or you can sell it and make profit once the value of the property goes up.
Now that you understand what an income generating property means, you’re wondering why owning such a property is a great investment?
Why an income generating property is a good investment?
Here are some simple reasons why you should invest in an income generating property.
Cost of living
Home prices are continually rising based on recent reports from the National Association of realtors.
This is the perfect time to invest in an income generating property to help you live stress-free.
If you are buying an income generating property and you plan to rent it out, good for you. You’re on the right track.
If not, think about the profit you’ll be missing out on as soon as you find tenants, which is a great income to either reinvest in your property, buy another property or spend on yourself (i.e. pay bills, travel, etc).
So, if your plan is to buy a house to live in, you can still do so by buying a house you can afford as to avoid debts and/or bankruptcy and have plans to rent out some space (i.e. rooms, basement, parking space, etc..) to help with cost of living especially if you are young and single.
You can easily find bargains when you hire an experienced real estate agent as there are homes you can buy under market value and these homes are called distressed sales due to foreclosure so banks are trying to get rid of them as fast as they can.
Banks are usually more willing to lend you money to buy a property if it is an income generating property since they know there will be tenants to pay the mortgage and chances for bankruptcy are lower.
When you decide to buy an income generating property, you are required to provide 20% down payment if you’re not planning to live in the property.
If you do plan to live in it, 5 to 10% down payment will do and you can apply with any bank you wish.
If you have a bad credit, the Federal Housing Administration Loan exists to help you become a homeowner and can finance your purchase.
All you have to do is live in the property which is a plus since you can live almost for free depending on the price of purchase especially if it’s a 3 unit and up property.
The other tenants will pay your mortgage and other expenses.
Plus, when you’re living in your property, you will save up on some services such as snow removal during winter, gardening during the summer and tenant visits and such.
Important tax write-offs
I think that this is the most important point.
There are so many tax write-offs to take advantage of when you own an income generating property.
You can literally claim so many deductions which do not apply if you own a house and live in it.
For example, renovations to your property and maintenance repairs; insurance costs; interest on the mortgage; interest on credit cards or any line of credit used for purchases related to the property; legal and professional fees; property taxes; etc..
Also, there is the possibility of offsetting any income made with the property using the depreciation expense of that property.
This helps avoid paying taxes on the rental income.
Make sure you speak with an experienced accountant to better understand how to use your property to write-off income tax.
Interested by an income generating property?
If your goal is to live comfortably and not have to worry about having enough money to pay your bills, then investing in an income generating property is a great idea.
Speak to a financial advisor is a must to help you better understand all the options available to you.
You can also reach out to individuals who already own such properties (like myself) to learn all the ins and outs.
I hope you enjoyed this post and if you have questions or concerns, you can leave them in the comments below and I’ll be glad to respond.
Have a great day!