Owning a property portfolio is a life ambition for the many Americans who see it as a path to financial prosperity and security.
The capital growth of property, combined with rental income and certain tax benefits, make real estate investment an attractive option.
Some Americans will invest using a more hands-off approach, taking a financial stake in a real estate investment group or buying dividend-paying stock with investment trusts (REITs).
These are fine options to consider but do not offer the excitement, pleasure and security of owning land and property, managing the income and enjoying the capital growth that comes with a long-term strategy.
As an investor, you can choose to buy a property and retain ownership for years or become a “flipper” – folks who find a rundown asset, fix it up and sell at a profit.
While it’s traditional for a lender to seek a down payment of up to 25% of a mortgage, that threshold has fallen to as low as 5%. And the effect has been to open up the market again to new investors.
As an experienced real estate agent, I work with many individuals and families who are building their wealth through property ownership, helping them find the right investment property and even source a suitable tenant.
Here is my guide to building wealth with a property portfolio:
- Capital appreciates – While never guaranteed, history shows that if you take a long-term view, the value of a property will increase. Values fell during the GFC but are on the rise again. They’ve gone beyond crash levels in many instances.
- Rental income – This is a great way to meet any mortgage payments on the property, or to supplement your income. The best way to find quality tenants is to use an agent who will undertake all the necessary social and fiscal checks on candidates.
- Flipping – You need to be cashed up to not only buy the property but to pay for the remodeling. Make a great job of the upgrade and you can make a handsome profit from your labors.
- Tax deductions – Repairs and specific improvements can count as tax deductions against the cost of running the property. You should use professional advice to make the appropriate claims.
- Long term ‘savings’ plan – If you need a loan to buy your property, you can pay for your asset over a long period. While there is interest to pay – of course – the benefit is that you don’t have all your cash continually on the line. So in this way, your mortgage payment becomes a kind of enforced savings plan while your asset both earns you income and appreciates in value.
- Managing tenants – You can choose to manage yourself if you have the time – and are prepared to do the work. But you should also consider using specialist services who will manage your rents, ensure you are always tenanted, and keep an eye on the condition of the property for you. It can become complicated and time-consuming if there are problems.
- Vacancies – Nothing will lose you money faster than an empty property. So, it’s crucial to stay on top of a tenant’s intention to renew their lease. If you need to find a new tenant, your marketing and agent costs will all be tax-deductible.