In general, owning rental property is considered one of the best ways to achieve financial independence. For this reason, rental properties have become popular investment choices. However, not everyone who invests in rental properties succeeds—as with any investment, renting property comes with several risks.
It’s important to weigh the pros and cons of owning rental property before deciding if this is a worthwhile investment strategy. If you’re thinking about owning a rental property in Charleston, SC, read on.
The Pros of Owning Rental Property
It Can Be Used as Leverage
A rental investment can be leveraged by putting down a deposit and financing the remainder with a mortgage. As the rental income grows, equity can be built up, and the mortgage can be paid off. Leverage allows you to purchase more with less than if you were to buy the rental property outright. As the investment property appreciates in value, leverage also helps increase your investment return.
It Can Generate Positive Cash Flow
Possessing a rental property has the potential to generate positive cash flow. If your rental income is sufficient, it should cover the cost of your mortgage and operating expenses and, hopefully, leave you with a surplus.
It Can Be a Good Passive Income
Renting out your property is a good way to earn passive income and focus on other things. Having multiple rental properties is possible while maintaining a full-time job.
It Can Provide Tax Benefits
There are significant tax benefits associated with owning rental property. Rental property investors can save on taxes each year by claiming many deductions on their properties.
Be sure to consult a tax professional if you have questions about rental property tax benefits or how to file your taxes. Keeping detailed records of all your rental property income and expenses is also important.
The Cons of Owning Rental Property
It Can Lead to Tenant Headaches
Renting property involves a lot of risks, especially with tenants. Many problems can be associated with bad tenants, including nonpayment of rent, property damage, or even lawsuits. Additionally, tenant evictions are expensive and time-consuming.
It Requires Active Management
Renting a property requires more time and expertise than owning stocks, mutual funds, or bonds. Landlords are responsible for finding tenants, screening tenants, performing house inspections, maintaining and repairing properties, answering tenants’ complaints and requests, and collecting rent.
A property management company is a good option if you do not want to be involved actively. Outsourcing management will, however, incur additional costs.
It Can Lead to Unexpected Extra Expenses
An additional disadvantage of owning rental property is the possibility of unexpected expenses. There are a number of factors that can cause this, including unexpected significant repairs to keep the home profitable, an increase in interest rates, or vacancies. It is important to remember that even without a tenant, you are still responsible for paying property taxes, insurance, and HOA dues. Additional expenses may also be incurred to find another tenant.
It Has a Lack of Liquidity
Rental properties are not liquid assets. Unlike shares, which can be sold quickly for cash, selling your rental home can take several weeks or months. Completing the sale can also be expensive, considering the possible costs of repairs, legal fees, and other costs associated with a rental property sale. It might be necessary to sell below market value if you need cash for other purposes and need to make a quick sale.
Work With Trusted Cash Home Buyers in Charleston, SC
If owning rental property sounds like too much of a hassle or you’ve already made up your mind to sell the property, we can help! At Favor Home Solutions, we buy houses as-is, so you don’t have to worry about agent commissions, closing expenses, repairing your home, or even lawyer fees.
Avoid the headaches and expenses that can come with a rental property. When you’re ready to sell my house fast in Charleston, SC, we’re the ones to call! Our team can provide you with a no-obligation cash offer and close the deal in as little as 7-10 days. Contact us today!