There are many ways for consumers to invest that can lead to a good return on investment. Options such as RRSPs, bonds, mutual funds, and the stock market quickly come to mind.
Despite the advantages of investing in an income property, many don’t even consider this as a viable investment. To help you discover whether this is an investment option for you, here are seven reasons to buy an income property.
While a majority will likely up their money in some kind of interest-bearing investment, there's a much smaller number of people that could invest in an income property.
These are usually people that already own a home, would be able to purchase another at a low-interest rate, and be able to provide a large down payment. After all, there's no sense purchasing an income property if you aren't able to make a profit.
If you have the ability to make an investment like this, consider doing so.
Why invest? You’ll make more money!
While rental rates in Edmonton have dipped slightly in the past year, it's still very worth the investment. Interest rates won’t remain at a record low forever, and when they rise it will lead to lower vacancy rates and higher rental pricing as some won’t be able to move into the housing market as quickly.
Having additional income generated from tenants in an income property allows you to diversify your sources of income. This is especially handy when you experience a job loss, work on a seasonal or contract basis, work on commission or even own your own business.
This will provide an additional income during periods where you aren’t making an income, or are making less.
When you rent out your income property, there are a wide variety of different expenses that are tax deductible. This includes property taxes, home insurance, maintenance and repairs, and legal fees. This will allow you to maximize the profit you make on your property and make it worth the investment.
While some investors prefer to put their money in high-risk, high-yield investments, income properties provide a steady and reliable asset for conservative investors. It's true that there are fluctuations in the housing market, but unlike the stock market, is not prone to drastic market movements over a very short period of time.
An income property will incrementally increase in value and help you build more equity into your financial standing.
Unlike other investments such as RRSP’s, bonds, and other investments that set guidelines for when and how much capital you can liquidate, an income property gives you more control over your investment.
Whether your life circumstances create a need for you to sell the property, or it's advantageous to do so, the only thing stopping you is the state of the housing market. However, Edmonton has had a stable housing market for quite some time, and many don’t foresee this changing in the near future.
Parents always want to provide the best they can for their children, and an income property can help you with this in two different ways. More and more parents are helping their children enter the housing market by assisting them in their first home purchase. You may decide to expedite their home buying process by simply giving them your income property.
If you decide to do this, it's important to remember that you'll have to pay taxes on capital gains. Another alternative would be to rent the home to your adult children; it’s not the same as simply giving them the house, but you're still able to help them out in a significant way.
When mapping out your investment options, consider the advantages to purchasing an income property. Whether it's to help you through the lean times, build a nest egg for retirement, or to leave something for your kids, there are profitable reasons to examine this opportunity.
If you're interested in purchasing an income property and looking to learn more, check out our previous "Income Property 101" series of posts, including Income Property 101: Steps to Becoming a Landlord.
Have you bought an investment property? How have you benefited from an investment like this? Feel free to leave your comments below.