Why invest in rental property when there are so many alternatives? Learn why rental property is a good investment as we explain its unique benefits and advantages.
Besides generous tax deductions, investing in rental property also brings about another big tax benefit - tax reliefs for rental losses.
When your rental expenses (e.g. mortgage payments, property insurance, repair costs, utility bills etc.) exceeds your rental income (rent from tenants), you will end up a negative rental cash flow aka loss.
While all losses are bad, the silver lining here is that you can count these rental losses as tax deductions against your taxable income.
That being said, tax reliefs shouldn't be your sole or primary reason for investing in rental property. Whenever possible, you always choose a rental property with positive rental income.
Why choose rental property over stocks? Stocks are liquid investments that they can be bought and sold very easily and quickly. That's why stock prices can fluctuate a lot more than property values. It is quite common for the stock price of a company to move as much as 5% in a day.
On the other hand, the property market is less volatile because most rental property investors view real estate as long term investments.
Buying and selling properties also takes more time and effort - A seller needs to find the right buyer and the buyer needs to find a lender who is willing to grant him a property loan.
When you buy rental property, you share the real estate market with a large pool of home owners. Since most home owners will hold to their own residences (regardless of market condition), they help to stabilize real estate prices... shielding you from the overnight market crashes and massive sell outs that you see in the stock market.
Your rental income is more frequent and stable when compared to cash flow from other popular types of investments.
Most rental property owners receive rent from their tenants every month. On the other hand, most bonds pay interest every 6 months while stocks dish out dividends every year (if the stock does pay any dividends in the first place).
Another unique reason to invest in rental property: If you hire a property manager to run your rental property, then owning rental property becomes a hand-free affair.
With a property manager at the helm, rent payments from your tenants becomes a true source of passive income - Click here for the reasons and costs to hire a property manager.
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