Rental home real estate investing in Colorado Springs is exciting and can be quite profitable if you’re willing to take some risks and do some work.
Apart from investing your money into your rental property, you will be assuming the position of landlord and this means responsibility for the overall property maintenance and upkeep – and more.
A Landlord Has Many Responsibilities
You’ll also be responsible for finding qualified tenants to rent the property as well as the technical end which includes writing a lease, doing credit reports and much more. This can be work and, for a newbie, can be overwhelming or even disastrous depending on if any critical mistakes were made in the tenant selection process.
That’s why many who own rental properties in Colorado Springs place their trust in an experienced property manager.
Within the past few years, the rental industry has developed as more and more people leave their homes for a more affordable and flexible living situation by renting a home vs. buying a home.
Rental Real Estate – It’s A Business
You should think like a business owner rather than a home buyer or a homeowner if you’ve chosen to rent a property.
Do thorough research on the rental market for housing in the specific area you’re considering buying. Be sure to evaluate the property and the area of town where you want to buy – just so there are no surprises before you purchase.
Know every expense before you buy. As in any business, there must be a profit for that business to actually survive – and thrive. The rental real estate industry is no exception. Even though the residual value of the property (which will fluctuate) will be there through the years, you need to be rewarded with positive cash flow as an incentive to invest your hard-earned money in rental real estate.
If you are not careful all through the process – from the purchase to the selection of tenants to the maintenance and upkeep – the chance of a positive cash flow may be small indeed. This is where a professional property manager with years of experience can really pay off for you!
Amy Scheller, a top Colorado Springs property manager, practices what she preaches by owning and managing her own rental properties for years. Amy can then use that experience to not only manage your property, but to help you turn it into a great investment that makes you a steady stream of income while holding its value in the market.
The following are the top 5 reasons you should consider investing in rental real estate.
Leverage is the art of using very little of your cash and using the banks’ money instead. Hypothetically, if you only have $30,000.00 of your own and buy a rental property for $300,000.00, you will then own an asset that’s worth $300,000 – 10 times your initial investment.
Of course you will have a mortgage on the property but we’ve learned that the return on the initial investment when factoring in the rental income is usually way more than interest in a savings account or a conservative stock portfolio.
This is a very simplified explanation – but you get the picture!
Tenants Pay The Mortgage
Your tenants will help purchase the property for you with their monthly rent payments. While they pay you their rent, you’re mostly paying off your particular mortgage with the money. Really, what else would you want?
Full disclosure: You will have to pay the mortgage if you have no tenant. That’s one of the risks of rental real estate investing. A good property manager can often get a qualified tenant into the home quickly – thus avoiding a loss.
Any incurred costs on your initial investment can be subtracted directly from the specific incomes that it generates. Depreciation is part of these costs. Depreciation is measured as the amount of money that your property is reducing in value over time.
Definitely, we all hope that the value of the building will rise, and if it does, there surely will be taxes to pay. However, if you’re making money, paying the taxman shouldn’t be easier.
Should your property value decline, you could save on tax money every other year with depreciation.
Note: We are not tax accountants nor do we give tax and direct financial advice. Please be sure to consult with a qualified CPA on any tax matters involving rental real estate.
By combining cash flow, tax planning, and leverage, you can create a very nice business in buying and renting real estate.
Although your cash flow might initially be negative or neutral, it should become positive in a short time if you have done your research and have made some good decisions.
Positive cash flow over time might be enough to help you invest in another rental property.
5. Capital Gains. You can also take or leverage capital gains over time. Although it doesn’t always happen (real estate has a good long-term appreciation rate), it can be a massive windfall when it does.
If you’re seeking an ideal way to come up with positive monthly cash flow and create wealth, investing in rental real estate may be the best option.
Not only can you earn life-changing income, but you can also build your net worth with real estate rentals. It’s definitely not easy and there are many pitfalls along the way. But, the rewards for those who can stay for the long term can be very good indeed!