Blog

Should you Buy an Investment Property?

Should you Buy an Investment Property?

August 14th, 2019

Real estate can be a very profitable source of investment. Property values generally rise over time, giving owners equity and rental income at the same time. Owning an investment property is not without risks and challenges though. There are several factors to consider in deciding whether an investment property is right for you.

Pros

Investment properties can provide many financial benefits. They can produce a steady, fixed stream of income for you and plenty of equity should you decide to sell down the road.

In addition to increasing equity over time, rental properties can provide some protection against inflation. As prices for goods and services increase, so can rental prices.

There may also be tax advantages to owning investment properties. If your annual taxable income is below $157,500 if you are single or $315,000 if you are married, and your rental business operates via a pass-through entity, you could qualify for a 20% deduction on the rental property income. You may also be able to deduct things like mortgage interest, property taxes and repairs.

In terms of mortgage financing, rental property loans have relatively low interest rates that help owners save money. And once you gain significant equity in your investment properties, you may be able to tap that equity to obtain another mortgage for more rental properties, increasing your potential real estate earnings.

Cons

Investment properties require time and energy. They are not passive investments like stocks. Whether you hire a property management company or handle things yourself, it will require work and money to keep the property in good condition and to keep tenants in place continually.

And while interest rates are relatively low, mortgage loans for investment properties are typically more expensive (higher down payments, higher interest rates, more cash reserves required) than owner-occupied property mortgages. 

Plus, there is always the possibility that your rental property may decrease in value during major economic downturns or if the surrounding neighborhood falls into disrepair.

Other Options

If you are interested in diversifying your investment portfolio but are not ready to take the plunge on rental property of your own, you could explore investing in REITs or Real Estate Investment Trusts. These are companies that buy up and manage lots of real estate. When you invest, you are buying into a small piece of all these properties and their profits. Investing in REITs can give you many of the financial benefits of real estate without much of the risk. However, with a REIT you are not an actual property owner and will not have a physical asset in your name. And you have no guarantees about the profits or stability of company.

While real estate investments are not for everyone, if you have sufficient cash reserves and a hands-on attitude, rental properties can help generate great cash flow and equity for your portfolio.

Comments



Leave a Comment

Contact Us


Not readable? Change text.


Cornerstone Mortgage

MAIN OFFICE:
5940 S. Rainbow Blvd., Suite 201
Las Vegas, NV 89118
(702) 840-1500
NMLS ID 340311
NV: DML License: 4814
CA: DBO License: 60DBO100130
CA: DRE License: 01848420

NEVADA:
5940 S. Rainbow Blvd., Suite 201
Las Vegas, NV 89118
(702) 840-1500
NMLS ID 340311
NV: DML License: 4814
CA: DBO License: 60DBO100130
CA: DRE License 01848420

CALIFORNIA:
1500 Standiford Ave., Suite A1
Modesto, CA 95350
(209) 578-9000
NMLS ID: 1741490
CalDRE License: 01848420

319 E. Mian St.
Turlock, CA 95382
(209) 633-3222
NMLS ID: 1739798
CalDBO License: 60DBO100691
CalDRE License: 01848420

HAWAII:
91-110 Hanua St., Suite 201
Kapolei, HI 96707
(808) 784-1239
NMLS ID: 1669660
HI: MLOC Liense HI-340311

Legal

Cornerstone Equity Group, Inc., dba Cornerstone Mortgage is an equal opportunity lender.

Nationwide Multistate Licensing System (NMLS) ID: 340311. Additional NMLS branch licenses: 1739798, 1741490, 1669660.

Cornerstone Equity Group, Inc., dba Cornerstone Mortgage is licensed by the Nevada Division of Mortgage Lending, license number 4814.

Cornerstone Equity Group, Inc., dba Cornerstone Mortgage is licensed by the California Department of Corporations under the Residential Mortgage Lending Act and Finance Lenders Law. CA Finance Lender #60DBO100130.

Cornerstone Equity Group, Inc., dba Cornerstone Mortgage is licensed by the California Department of Real Estate, License number 01848420.

Cornerstone Equity Group, Inc., dba Cornerstone Mortgage is licensed as a Mortgage Loan Originator Company by the Hawaii Department of Commerce and Consumer Affairs, license number HI-340311.

Any concerns, complaints or suspicions regarding the misuse of any personal data should be directed to our Operations Manager by telephone at (702) 780-1500 or by email at admin@cornerstone.us.com.