I’m heavily biased in favor of own rentals, so my short answer is “yes”. Read on to find out why I love owning rental homes and think everyone should.
There are so many reasons to keep rental properties, including:
- get incredible tax breaks (deductions and depreciation) for as long as you own
- tenants pay your mortgages for you
- when the property is free and clear, you have significant passive income for life
If you rehab and resell an investment property, you make a quick profit. However, Uncle Sam takes about 1/3 and you have to go out and do it all over again.
The goal, while maintaining rents, is for them to pay enough rent to cover the cost of ownership and maintenance until it is paid off. If you shop right, this shouldn’t be a problem. There are areas of the country, however, where mortgages are higher than rents can cover. Know your local market.
The glory of having properties for rent comes when they are paid for. There are ways to speed up your down payment so you can pay them off in no more than 10 years, and at that point, you’ll never have to worry about working to pay your bills again.
A free and clear rental property is good, 10 is awesome, for a retirement most Americans can only dream of.
So what are some of the downsides of being a rental owner?
- They usually cost money until they pay for themselves. If the cash flow is only $300 per month, you will spend it on vacancies and maintenance; you will often spend more.
- Celebration issues. Many investors think that tenants are not worth the hassle of owning properties. I disagree, but North Carolina is a homeowner-friendly state. Many states, like New York, are more tenant-friendly, which can cost landlords a lot of time and money.
- Managing takes time (if you manage your own properties) or costs money (if you hire a property management company). I use property management companies because managing properties does not produce income.
Ultimately, the decision is up to each investor, but I highly recommend the value of owning rentals. For today, they give generous tax breaks while I still have mortgages on them. For retirement, it’s endless ongoing income because the mortgages are paid off.
There is no way to earn enough in a 40-hour-per-week W2 job to save enough to make the kind of retirement income that paid rental properties will produce. And I don’t count on social security or medicare being enough to take care of me in my old age.
Do you believe in rental properties? What can you add to the list of pros and cons?
