Savings interest rates have been hovering around 1% for the past 10 – 12 years, while inflation has been exceeding 5% per year for the past two years. The stock market has had its ups and downs, some sectors have done well and others have gotten clobbered.
It’s difficult for most of us to figure out how to grow a nest egg without getting it being eaten up by inflation, devaluated by the sudden whims of the stock market, and erosion by the numerous fees on investments vehicles.
After the great recession (circa 2008) our company started going all-in on Rental Houses, buy-fix-hold-rent, in particular, is our flavor of choice but we will also do buy-hold-rent of turnkey properties if the numbers make sense.
We’ve come to look at each rental property like a small 401(k) retirement saving account. Of course, rental houses aren’t actual 401(k)’s but when acquired and managed properly they can provide significant long-term savings benefits such as appreciation, monthly cash-flow, cash-out ability as well as several short-term and long-term tax advantages.
There are at least 5 potential areas to profit from with a rental house investment:
- Appreciation – the increase in value of the home over time
- Monthly Cash Flow – the amount of money left over each month, or each year after paying all expenses such as mortgage, taxes, insurance, property management, repairs..etc.
- Cash Out Ability – the equity over 30% of market value in a rental property can be unlocked/withdrawn in certain conditions by refinancing.
- Annual Tax Savings – being able to claim legitimate business expenses against the property, taking generous depreciation deductions, and extending the SALT (State and Local Tax) deduction limit are some of the most popular tax savings methods available to Real Estate investors.
- Long-Term Tax Savings – capital gains treatment, 1031 exchanges, and tax-deferred retirements accounts are some of the long-term tax savings vehicles available to real estate investors.
Not all properties will always realize all of these potential benefits as real estate investors often have different wealth-building objectives and tax situations. It’s always helpful to seek the advice of attorneys and accountants who are well versed in real estate investing before taking the plunge.
One of the things that tend to hold would-be investors back is Fear of Tenants, as there is no shortage of bad tenant stories. Attracting, selecting, and retaining quality tenants, providing and enforcing a strong lease, and dealing with repairs on a timely basis are key to operating a successful rental property.
Bassett Property Management takes the stress out of the day-to-day tenant side of the business by providing management services to their clients. Visit our website at http://www.bits.ws to learn more.