A lot of people resist Detroit rental property investing because they think that it will use up too much time, which will lead to lower net returns compared to investing in stocks. However, many smart investors continue to invest in rental properties. Why? You can get the four benefits listed below from Detroit rental property investing, while stocks only give some of these benefits.
Income is a considerable advantage that real estate investments have over stock investments. Income is defined as the profit that is left over after paying any other debts and expenses. Rental properties provide income or “cash flow” each month. Stocks, on the other hand, often do not offer regular income.
Detroit rental property investing uses leverage, or a loan, to purchase the property. If you own a home, then this is familiar. But with a rental investment, the mortgage payment comes from the monthly rent instead of your own pocket. If you think about it in these terms, it seems great because when was the last time someone offered to buy stock for you?
The top benefit of real estate investing is that you receive tax benefits, too. Owning a rental property is one of the most powerful tax benefits that you can get. Even if you earn income, property depreciation allows you to claim a loss. Although this benefit fades slowly in the long run, there’s another aspect that can help you with your taxes. You can use a 1031 exchange when you choose to sell your rental property, and buy another rental without paying any tax on capital gains. After that, you can start the process all over again. Now of course we do not recommend you do all this on your own, but instead with the right guidance and accountant.
Appreciation is when you sell an asset and receive back more money than you originally paid for it. This is the reason why people invest in the stock market. Real estate can appreciate, too. You need to monitor the economy, but smart investors can gain from this type of buying and selling.
Doesn’t real estate require more work than stocks? In a self-management scenario, then, yes, it requires more work. You will need to do all the maintenance tasks and answer every tenant phone call. But you don’t have to suffer this way. You can hire a professional property manager to do those tasks for you, and this not only saves you time, but can also help you make money. When you pay property management fees, with a good management company, you can be seeing income. This occurs because a property management company works to make your tenants happier so that they stay longer, cut down on vacancy time, resolve problems quickly, and work to get you the best maintenance costs.