Rental Real Estate: The Advantages

While it is impossible to list out every advantage to having real estate rental property, we are going to cover some major advantages to owning rental property to help you decide whether being a landlord is for you. This article is part of a two part series about the disadvantages and advantages of owning rental real estate.

The first thing to recognize about owning any real estate is that you have something physical that you own like a house, commercial property, vehicles, machines and land. One the other hand, owning stocks in the stock market are not something tangible that you can physically put your hands on.

When you have rental real estate there some definitely advantages that can fall in your favor in terms of investment strategies that you won't get from owning intangible investments.

• Rental Income - As long as your house or rental property is occupied, you will have some type of consistant income every month. If what you owe every month is less than what you rent - you have positive cash flow. This is the best scenario as your renter is paying your mortgage as well as putting real money into your pocket every month.
• Property Value Increases - This is called appreciation. Without exception over the course of time, real estate's value continues to increase whic makes owning real estate a positive proposition for growing one's wealth.
• OPM - Other People's Money - you can leverage rental income and rental properties with other people's money. Meaning you get to own rental property by borrowing against and to have other folks (renters) pay your mortgage while the value ofyour property over time increases as well as the principal balance of your property goes down. The net effect of each of these processes increases your net worth.
• OPM (part 2) - Depending on the equity position of the rental properties you own, you can borrow against them to acquire new property. This is another form of leverage where you are using one property to purchase additional properties.
• Tax Considerations - Last but not least, depending on what state you live in, and how much you owe per month versus how much you make in income through rent per month you may even be set up to have additional income tax advantages coming your way that you won't get if you do not own real estate. You may also be in a position to refinance to cashout a rental property which may be tax free money as well. You may also be in a position to exchange the profits of one rental/investment property for another one of equal or greater value in a tax free way. (For real estate related tax considerations SpeedyTenants.com recommends that you consult with a real estate attorney and tax consultant to determine your legal and tax positions.)

Read about Rental Real Estate: The Disadvantages