For many folks adept in the real estate world looking to bring in some extra income, a potential option is becoming a landlord through renting out a property or part of a property. Such a situation allows you to collect rent and gain income and tenants that goes toward your mortgage and paying down the home, plus other potential benefits.
At VIP Mortgage Inc., we’re here to help you get the best mortgage rates for any mortgage type you’re interested in, including those that work best for potential property landlords. What are some of the distinct benefits that come with owning a rental property? Here are some of the most important areas to consider.
For starters, unlike certain other small business formats where it can be very difficult to obtain initial financing, it’s not usually very hard to get financed for a rental property you’re going to purchase. These kinds of situations are almost always profitable, and so long as you have a reasonable credit history – and especially if you have other rental properties already owned – you are likely to get a good deal from lenders.
This is because lenders view rental properties as safe investments. They can charge rent just above the monthly mortgage payment level, ensuring there are never any issues with late or missed payments.
The single most common reason individuals choose to own a rental property is to bring in a profit. As we noted above, you can charge just above the actual mortgage cost each month – you pay the mortgage with the amount needed, and the remainder is yours.
In addition, paying down the mortgage in this way builds equity in the home over time. This can become valuable if repairs or major replacements are needed, as you can use the equity for this purpose. Some also may convert that equity into cash and buy another rental property to increase their profits.
Landlords have several potential tax deductions available to them at the end of each year. They may be able to deduct mortgage interest, property depreciation and any repairs that are made on the property. Also generally eligible are insurance premiums and home office expenses if you work from home.
Being a landlord carries twofold benefits for retirement. For one, the profits you make can be put toward retirement accounts to help build them up faster. For another, you can continue to make rental income even once you’re retired – simple hire a property management company to take over the heavy legwork for a small fee, then watch the profits continue to come in (some do this even before retirement, allowing them to focus on other work).
For more on buying a rental property and becoming a landlord, or to learn about any of our home loans or refinancing services, speak to the staff at VIP Mortgage Inc. today.