Investing in Rental Property

What really makes investing in rental property a worthwhile endeavor? Well, you may be surprised to learn that as a whole, investing in residential income property offers many financial benefits that are just not available with other types of investments.

To provide some insight, the major financial benefits that make it worthwhile for you to invest your time, effort, and hard-earned cash in a rental property are...

1.) Market Value Appreciation: The market value of real estate generally tends to increase over time as a normal result of inflation. In this manner, if you own real estate, inflation actually becomes your friend and ally. The rising price of your property (over time) can be a large contributor to your future financial net worth. This is one of the greatest benefits of investing in rental property.

2.) Inflation Protection: As we discussed above, inflation causes the value of real estate and other items to go up over time. In this manner, owners of real estate simply ride the inflation wave and keep up with it. In this situation, real estate becomes their "hedge", or protection, against inflation. On the other hand, individuals who do not own real estate are at a severe disadvantage. By not owning this kind of asset that keeps pace with inflation, they are really handicapped in the battle against the rising prices of inflation.

3.) Tax Shelter Benefits: Uncle Sam becomes very generous at tax time if you own residential investment property. Basically, he will allow you to actually "depreciate", on paper, the value of your rental property each year. This depreciation, when combined with the regular operating expenses of the property, will have a big impact at lowering any income tax owed on the rental income produced by the property. As an added benefit, if the property shows a "net loss" for the year, this loss can be used to lower the income tax owed on your regular W-2 job wages. This is a huge benefit of investing in rental property.

4.) Positive Cash Flow: A rental property will produce real; spend able cash for you each year if its annual rental income exceeds its annual expenses. A positive cash flow allows a property to support itself and should be one of your primary goals when investing in rental property. As rents gradually rise over time, the cash flow produced by the property should also increase.

5.) Equity Buildup: With a standard principal and interest mortgage, each time you make a mortgage payment on the property, a certain amount of that payment goes towards reducing the mortgage principal. This reduction in principal, or amount owed to the bank, directly goes towards your portion of equity (or ownership) in the property. You gain a larger piece of ownership with each mortgage payment that is made.

6.) Income Growth Potential: Owning rental property can provide several different opportunities for you to increase your income. These opportunities can range from increasing the monthly cash flow of a property (by lowering its expenses and/or increasing rents) or purchasing an additional rental property that generates an additional positive cash flow. With rental property, you are more in control of your financial destiny as compared with the ordinary income growth potential of a 9-to-5 job.

7.) Retirement Income: Company pensions are going the way of the dinosaur - they are quickly becoming extinct. On top of that, social security doesn't provide enough for the average retiree to make ends meet. Owning a few rental properties that produce a nice positive cash flow each month can provide the income that is necessary for you to live comfortably in retirement. With this in mind, investing in rental property sooner rather than later will put more time on your side to build your retirement estate.

8.) Estate Creation: The financial benefits enjoyed by owning residential investment property can make it possible for you to increase your property holdings over time. This can result in an impressive estate and legacy for you to pass on to your loved ones.

In addition to all of the above financial benefits, there are also intangible benefits that exist when you invest in rental property. When all of these benefits are combined, rental property investing offers many advantages when compared with other standard investment alternatives.

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