There’s a difference between earning money and building wealth. The latter requires a strategic investment of capital into assets that–as you may have heard people say–make your money work for you.
If the money you make is dependent on the time you put in, you’ll have to work a lifetime for your money, and you still won’t be able to achieve financial freedom and security by the time you retire.
That’s why putting your money into an investment property is a fantastic idea. It can be a source of passive income–as in, you make money in your sleep–depending on how you manage it. Read on to learn why you should consider diversifying your portfolio with investment properties and what the best way to manage it is.
Investment properties are smart because they generate a steady source of income for you, and it comes at little to no work on your end. The work involved will vary depending on how you wish to manage your investment property, but we will discuss this further in a later section.
For now, consider only the stream(s) of income that investment properties can provide.
Depending on your occupancy rate and the type of investment property you have (single-family vs multi-family), you stand to make enough on rent to pay down your investment property mortgage. That means, aside from putting down the initial cost of owning your investment property, you pay little to nothing to own this asset. In fact, it generates a steady source of income for you in return.
That’s a smart way of making your money work for you.
Are you looking to invest in properties in Memphis? Join our buyer’s list to browse our current inventory of available investment property for sale in the Memphis area.
Enjoy Tax Deductions
As a real estate owner making income on your investment property, you are also considered a business owner.
The government taxes the rental income that you make, but you also enjoy tax deductions on common operating costs for your business. By taking advantage of these tax deductions, you can lower your total taxable income and save money at the end of the year that would have otherwise gone to the government.
Common tax deductions for investment property owners include:
- advertising costs for marketing the property
- investment property interest on the mortgage
- fees for hiring property management companies
- typical maintenance and repair costs
- investment property taxes
Aside from these common tax deductions, you can also depreciate your investment property and large capital expenditures such as new appliances or remodeling projects.
Do consult a qualified tax professional for a full list of tax deductions you can enjoy as an investment property owner.
An Increase in Asset Value
Investopedia published an intriguing article about trends in the real estate market. This article took an unpopular stance on the overall stability of this industry, emphasizing the crashes and recessions of the market that may scare away first-time investors like yourself.
However, if you take a look at the abundantly-clear graph that this article included, you will notice a positive trend in sales prices of houses over time. Between the years 1975-2021, the average sale price of houses in the United States increased from $39,500 to $420,900.
Of course, we’ve got to take into account inflation for differences in prices. A U.S. inflation calculator has determined that a house costing $39,500 in 1975 would be equivalent to $204,070 in 2021.
The average price of real estate in the United States has more than doubled since 1975, and if history is indicative of real estate prices in the future, you can expect your investment property value to increase as well.
If you’re considering purchasing investment properties to build wealth, right now is the right time to jump in and take a slice of the pie. Take into account your bigger financial picture to calculate potential investment property loans for your property.
The Smartest Way To Handle an Investment Property
If you’re looking to put your money into an investment property, this is likely a side hustle for you, which is the route that most investors go. You devote your time to more important things like:
- a partner
- a job
- living life
Investment properties are great because you can set your business up to run with as little hands-on work on your end, as possible. You set the wheels in motion and let it work for you, bringing in a steady cash flow each month.
The smartest way to handle and manage your investment property would be to hire a property management company and no, this is not an unnecessary expense.
Property management companies do all the work of managing your money-tree investment properties so that you can kick back and relax. They take care of a whole range of operations including:
- property advertisement
- tenant screening and placement
- property maintenance work
- rent collection
- tenant communications
When you purchase a Memphis investment property (or a few) with us, you receive in-house property management services for each of your properties. We tend to and water your money tree so that it continues to produce a positive cash flow for you every year.
That’s really the best way to go about working with investment properties. You get to continue living your life the way you were before becoming an investment property owner, and have extra money to try new things or reinvest into assets that help build lasting wealth.
If you ask us, that sounds like a win-win situation.
Build Wealth Today With an Investment Property
In the modern age, you’ll find many get-rich-quick schemes that sell you a dream that few actually achieve. Real estate has been and will continue to be a safe and reliable way to build lasting wealth with little to no work.
Start by choosing an investment property in a fast-growing market, such as Memphis. Set up your business to run on its own by working with a trusted property management company. Then, sit back and collect your earnings.
If you’re ready to get started building wealth now, contact us today!