Oro Valley Real Estate - Income Properties Pros and Cons
When it comes to investing, real estate has always been touted as a great option for long term investment. Income properties have many benefits, and considering where you're located, they can be a solid option for reliable passive income. As with all things, there are pros and cons to investment properties, and if you're considering buying a home to turn into a rental property, read on for more information.
One of the main pros of rental properties is their ability to generate a passive income for you, meaning you don't have to actively work to earn money. In general, real estate tends to appreciate in value over time, meaning your overall profit should increase if you plan on selling the property in the future. Another benefit is the tax deductions associated with the rental expenses (think operating expenses, depreciation costs, insurance, etc.) which can help offset the taxes paid on the rental income. There will always be individuals or families looking for a place to live, and a rental property fills that need, making it a sound investment that tends to avoid the ups and downs of the stock market.
Making a side income is great, but there can be disadvantages to owning a rental property. One of the main cons is the additional costs that can potentially eat into your overall earnings:
Property and liability insurance
Utilities covered by the owner
Real estate taxes
General upkeep and repairs
Services (management company, landscape maintenance, etc.)
Professionals (attorney, accountant, etc.)
Aside from additional costs, if you don't employ a property manager, expect to spend a lot of your own time managing the property. You'll be the main point person on any issues related to the property, and this includes if there are any issues your neighbors or the community have with your tenant(s).
Expectations and Risks
As with any business venture, there are multiple things to expect with an income property. As the owner, you'll be the first person called if issues arise. You can help yourself by employing a property manager to assist with maintenance, but as the owner you will want to make sure you're aware of everything related to your property.
Renters have their own rights, and it's pertinent to be up-to-date on all local, state, and federal laws pertaining to renters in your area. As the owner, you're responsible for compliance - you may need the assistance of an attorney to understand all regulations.
There are also risks that come with owning a rental property. There's a possibility you'll encounter vacancies (when you have no tenant occupying the home) which will impact your overall return on investment. Bad tenants can be a huge risk toward positive income, especially if you have to do an eviction or the property is damaged. There's also the risk that the property will decrease in value. Real estate is a good long term investment, but if you're looking to get rich quick, it's not the best option.