Turning residential properties into rentals is such a substantial investment that REITs, or Real Estate Investment Trusts, have been buying large portfolios of single-family homes, and holding them as rentals.
This type of investment is not only available to REITs. If you're considering renting out your property, here are five reasons why renting out your property is a smart investment.
1. Recurring Revenue
At the fundamental level, every month that you rent a property, you receive income from it. While some investments can fluctuate, rent does not. Securing quality tenants in the right neighborhoods ensures that you will receive a steady cash flow each month, backed by a lease.
Annual rent increases for tenants who remain with a property are standard, allowing you to budget the income you earn from your investment accurately over time.
2. Sellable Asset
A standard 20% down payment to purchase a property gives you control over an asset of much higher value that you can sell down the road. Not only can you count on regular rent payments from your properties, you can apply that rent to the mortgage creating not only immediate profit but also equity in your investment over time that you recover when you decide to sell the property.
If you find the right opportunity, you can buy low, collect rent, and then sell high when the market shifts in your favor. Even if the market does not grow, you can be confident that you can sell the asset without losses due to the equity your renters help establish.
3. Recession Resistant
Even in the worst of times, people will always need a place to live. Owning and managing rentals allow you to make recessions work for you instead of against you. During a recession, people are less likely to purchase a home due to the economic hardships they either are facing or fear they may encounter. People who want to live in a house often opt to rent, because it is the next best option.
Even if property values drop, you can rest assured that you will be able to continue to rent your properties until the market recovers.
4. Highly Profitable & Consistent Over Time
Long term tenants are standard; no one likes to incur the expense of moving every year. Securing the right tenants will often lead to renewals, making an already consistent income even more so. As mentioned above, investing the rent payment into the loan increases the equity in the investment property, leading to a win/win with income now, and equity down the road.
5. You Don't Have To Manage It
Hiring a property management company probably costs less than you think. Managing your rentals on your own can be a full-time job which is why some people choose not to invest in real estate.
Hiring a property management company can cost as little as 10% of the monthly rent. A good property management company shouldn't need much of your time either - meaning you get to reap the rewards of your investment without the hassle.
Investing in real estate makes sense. If you're ready to turn your property into income, JMZ Management is here to help. JMZ professionally manages our portfolio of properties (because it is a significant investment) as well as properties for owners in the Detroit, Michigan metro area.
Why do you love investing in real estate?