Investing in real estate is one of the most powerful tools for building wealth. The great thing about it is that you don’t have to be a millionaire to tap into the industry; any ordinary Joe or Jane can become a real estate investor. One of the easiest ways to enter the market is to dive into the versatile world of rental real estate.
If you want to become one of the over 10 million Americans who own rental real estate, there are many options and investment strategies you can explore. Let’s see how you can start your journey and why this strategy can be a winning one.
Rent part of your house
When it comes to real estate, much more than charity begins at home. Your next stream of income can also start there. You can use your residential property i.e. home to increase your cash flow without much effort by renting a room or basement or turning your garage into an investment gold mine.
According to census data cited by Pew Research, 36% of the nation’s 122.8 million households were renters in 2019, so turning your home into an investment property will give you a large flow of consumers to tap into and you won’t have to. to go beyond your front door to start generating rental real estate income. You won’t have to quit your day job either! This is why rental real estate is so great – any homeowner can turn their home into a wealth building machine.
Buy a rental property
If living with your tenants isn’t your cup of tea, buying investment property may be the best thing to do. Whether it’s a commercial property, an apartment building, or a house, buying an investment property is a great strategy to use. Just like when you rent out a portion of your home, when it comes to buying investment property, you can start as small or as large as you want. In fact, 72.5% of individual rental units are owned by individuals, according to the same Pew Research report.
As a landlord, you can even decide to accept tenants who receive the HUD Housing Choice Voucher, thus guaranteeing a portion of your income each month, or to accept tenants who will pay in cash or by check.
Whatever you decide, when it comes to owning an investment property, you don’t have to go far or return home – you just need to acquire a property that fits your budget and costs. your risk tolerance.
Enter the short-term rental market
If renting to long-term tenants isn’t for you, work with short-term rental platforms like Airbnb or VRBO, which belongs to Expedia, maybe just the best option.
Investing in a short-term rental offers a lot of freedom and flexibility. Investors can rent their property and generate income whenever they want, choosing to rent the property every weekend or year round.
Whatever decision you make, investing in a short-term rental offers peace of mind as owners have the option of collecting payments directly from the online platform, saving them the hassle of the collection of rents.
A great tool for saving tax
Investing in rental property can also be beneficial when it comes to tax savings. Several sections of the tax code favor real estate investors and can help them maintain rental income.
Rental property investors can benefit from the following strategies:
- Tax deductions for mortgage interest paid.
- Tax deductions for repairs made.
- Possibility of amortizing certain expenses.
- Depreciation of rental property.
- Deduction for eligible business income.
- Invest in a “qualified opportunity fund”.
- Invest in a “qualified opportunity zone”.
Consult with a tax professional to see what strategies you can use.
Generate passive income
One of the biggest benefits of investing in rental real estate can be the generation of passive income. This allows investors to earn income that does not involve trading time and money, which ultimately leads to more free time.
Having free time is the real pot of gold at the end of the rainbow. If you are strategic enough, you may be able to retire early and have more time to create the life of your dreams.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.