Investing in rental properties is one of the most profitable ventures for an investor. A lot of investors have shown interest in real estate over the years because of the benefits associated with the real estate investment business. Although the number of people who are already in this line of business is large, there are still others who are not aware of the benefits of investing in rental properties. These properties are also known as turnkey investment properties, which means they are completely managed by an independent turnkey company and the investors get their monthly rents.
Some of the benefits of owning these investment properties are:
1. Monetary Benefits
Monetary benefits are those benefits that are directly measured in terms of the cost or returns on the property. The main interest here is how much money can be earned from owning a particular rental turnkey property. It can be divided into three basic benefits:
• Cash flow: This is the money that will be left after settling taxes, debt service and operating expenses. It is the cash flow of the business and there are some things that could influence the income you can get from owning an investment property. Some of them include market competitions such as how developed is the location of your property and a sudden change in the market. In all of this, if the amount of revenue received from the business exceeds the amount of money spent, the excess is your cash flow.
• Appreciation: This is often described as the nominal increase or rise in the value of a property. When the value of a rental property increases in absolute dollar terms, it is said to have appreciated. This normally occurs if the rate of increase in the value of a property exceeds the current inflation rate in the market.
• Financial Leverage: This is the benefit received from the use of other people’s money (borrowed funds). This borrowed fund usually cost less than the return earned from its use. The investor will thus have control over a much larger investment.
2. Non-Monetary Returns
These are the benefits that cannot be measured directly but by the investor’s personal investment aims and opportunity cost linked with a particular benefit. The benefits are as follows:
• Pride of Ownership: When you are the owner and controller of a turnkey investment property, there is this pride that comes with it. As a result, you can confidently manage and make decisions concerning the property.
• Diversification: Investing in real estate can be a way of diversifying your investment portfolio to ensure that the risk is shared across different kinds of investment businesses.
• Security: There is this sense of security that comes with owning a rental investment property. There is a collateral attach to real estate, which can’t be found with stocks.
All these benefits ensure that owning a rental property can help you achieve your financial goals by creating a secure source of passive income. It’s all about getting educated and taking some risks.
Memphis Buy And Hold is specializing in locating, purchasing, renovating and managing single-family and multi-unit properties and possesses from 2007 up to the present of experience in real estate investing and property management in the Memphis and Nashville markets.
