Pros and Cons of Purchasing a Rental Property
Tuesday Feb 08th, 2022
If you are interested in purchasing a rental property, there are key pieces of information you need to be aware of so that you make an informed decision regarding this very big investment. There are advantages and disadvantages to buying a property and renting it out, and knowing this information will help you determine whether or not you are ready for this kind of commitment.
- You will pay less tax. You will be able to deduct certain expenses from your income which would reduce your taxes, and this would be a key advantage. Property taxes, insurance, mortgage interest, maintenance and property management are examples of expenses you will be able to deduct, and if you include utility bills in the rent, you can deduct this expense as well.
- You may be eligible to deduct your losses for tax purposes. If your expenses exceed your rental income, it may be possible for you to deduct that loss from any other sources of income you have, and this may reduce your total tax bill.
- You will receive a regular monthly income. This is a huge advantage as you will get a regular monthly income when you rent out a property, and you will be able to rely on these monthly payments. Other investments will not provide you with this source of income, but when you rent out your property, you will have peace of mind because this aspect will be predictable.
- You will have the same responsibilities and challenges as a landlord. When the rental unit needs repairs, you will be responsible and dealing with tenants is not always easy, so you have to be prepared for this challenge. Some tenants will not pay their rent on time, and if you decide to hire a property manager to deal with these issues, you will have to factor their salary into the overall cost.
- It can be hard to sell the property in the future. Market conditions and legal fees are just some of the things that may affect the sale of your rental property if you want to get rid of it down the line. The process can be costly, time-consuming and unpredictable, so you have to be prepared for this disadvantage that you may face.
- You may have a hard time financing your purchase. When you buy a second property, you will need to put down a certain percentage for the down payment, and you will need a mortgage. You have to be ready for high monthly expenses and be sure that you can handle these payments that are part of owning a building. The income you receive from your tenants should help you cover these expenses, but you cannot rely on their payments at all times.
If you are looking for houses for sale in the Winnipeg area, Martin Marques can help! We have access to all of the homes and townhouses for sale in the River Heights, Royalwood, Sage Creek, Charleswood, St. James and St. Vital areas, so if you want to work with a reputable realtor, contact us today!