Many people purchase an investment property either as an alternative to putting their money in the stock market, or as a way of expanding and diversifying their investment portfolio. If you’re thinking of purchasing investment property, read on for some tips, as well as pros and cons.
When you purchase an investment property, you will most likely rent it out. Let’s say you buy a house in suburban Denver. You will buy it and then probably make some improvements to it. Once it’s in better condition, you can rent it out. The rent money will then go towards the mortgage payment, and if the rental market happens to be strong, you can conceivably charge more than the equivalent of the mortgage payment and make a profit. Of course, once you pay off the mortgage on your investment property, you will be making nothing but profit. It takes a while to get to that point, of course, but many people achieve it.
Beyond profits from renting it out, of course, your investment property is another asset in your portfolio which increase in value over time. So, as you watch the value grow year after year, you can look forward to the sale of the house for a true profit. One positive aspect of purchasing an investment property is a big bump in revenue. Rent brings in extra income that you can use to do more things with. There are also major tax benefits to purchasing an investment property. For example, anything you buy for the investment property – like a brand new stainless steel kitchen – can be written off as a business purchase. You can also deduct money spent on points you paid for your home loan, as well as mortgage insurance.
People who are contemplating buying an investment property should sit down with a financial adviser and go over the idea in as much detail as possible. The rewards could be significant.