Real estate ownership is still very much a part of the American dream. For many people, that dream extends to investment and ownership in income-producing residential and commercial properties.
Some obvious benefits that come with rental property investments include consistent sources of passive income, potential for real estate appreciation and positive returns on initial investment. In addition, buying income-producing rental property can provide investors with significant tax benefits.
The potential risks of investing in income property, however, can become complicated and require careful calculation and advanced planning. For example, these types of properties can experience troubles with tenants, physical damage to buildings and structural elements, as well as shifts in neighborhood demographics. It is important for investors to consider price, inflation trends, expense deductions and potential exit plans if they may want or need to sell later.
Obtaining guidance from a qualified real estate professional is a good first step to entering the income property investment arena. Investors can benefit from a professional’s knowledge about stable and desirable geographic locations, market changes and tenant creditworthiness while also calculating the risk-adjusted return, or cap rate, associated with the property. History is a useful barometer for future planning.