There is a statistic that is commonly quoted on Google searches that says that 90% of millionaires made their money from real estate investing.
Investing in revenue properties has long been a popular avenue for generating income and building personal wealth. With good planning and careful selection and execution, revenue property strategies offer many benefits which justify their popularity as a preferred option for building wealth and freedom.
Steady Cash Flow
The most obvious advantage to be realized is the income from a revenue property. With diligent tenant screening and proactive lease management, property owners can enjoy cash flows to supplement their monthly income.
The reliability of this source of income is excellent. Regardless of economic conditions, people need housing, making rental properties relatively recession-resistant, and people in general will prioritize paying rent. The biggest risk to steady income is the reliability of the tenants you choose, but with due diligence and reasonable management this risk can be minimal. Property selection can also help predict reliability of good tenants. Furthermore, cultivating positive tenant relationships further reduces the risks of issues, and helps ensure longer tenant retention.
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Asset Appreciation and Asset Leverage
Real estate historically appreciates in value over time, providing revenue property owners with the potential for capital gains, in addition to the income they provide. Demand for rental properties, coupled with limited housing supply in many markets, can drive property values higher. You can also strategically enhance your property to drive value up, prioritizing certain renovations, such as updating kitchens or bathrooms, which tend to have a higher return on investment, boosting property value more than some other upgrades. And then, there is the very attractive proposition of adding a line of credit that is tax deductible to invest in additional properties using the Bank’s money and not yours. Robert Kirosaki the author of “Rich Dad Poor Dad’ repeats this over and over. You use someone else’s money and it is not taxed money like your own personal money supply would be.
Thinking of selling your primary residence or revenue property in the near future? Find out more about our selling services right here.
Tax Benefits
Revenue property owners benefit from a number of tax deductions and incentives, reducing their overall total tax liability. Deductible items include advertising, management and administration fees, mortgage interest, repairs and maintenance, and many more possible items and can be deducted from rental income, lowering overall taxable income. A good accountant can advise what you can and cannot deduct.
Portfolio Diversification
Property is something real to add to your investment portfolio; not just paper. Rental property ownership stands out in portfolio diversification due to its resilience during market downturns. Unlike stocks, property values tend to hold steady or even appreciate during economic recessions, providing a reliable hedge against market volatility. This unique characteristic allows investors to maintain stable returns and mitigate risks associated with traditional investment avenues.
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Types of Properties
Residential rental properties encompass single-family homes, apartments, condos, townhouses, and legal suites within or near an owner’s residence. They can offer consistent income and the chance for capital growth, especially in high-demand, low-supply areas.
Multi-family units allow for economies of scale, simplifying property management. They help diversify more, and an owner is not as heavily impacted if a tenant moves out, as there are others.
Commercial rental properties typically yield higher rental incomes than residential ones, but are more complex. Nevertheless, they can be lucrative, especially in prime locations with robust economic activity.
Vacation rentals are typically furnished and rented nightly or weekly, often generating higher incomes than long-term rentals, especially in tourist hotspots or peak seasons. However, they demand careful management and may face regulatory limitations in certain regions. Many of our local municipalities have these restrictions so check with The Weeks Group regarding any communities you are interested in.
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Passive Income
Investing in a revenue property offers another key benefit – the potential for passive income. While rental properties require effort in tenant management and property upkeep, savvy investors can mitigate these tasks. Employing a reputable property management service can efficiently handle tenant interactions and property maintenance, reducing owner involvement. Members of The Weeks Group are landlords and we do use local property management companies and find the small cost to be offset by the huge advantage of arm’s length ownership. Though not entirely hands-off, this approach allows investors to enjoy income streams with less direct involvement.
When in doubt, simply refer to the “High Five” of property investment here:
Contact us for a consultation!! It is easier than you think with the right guidance. Email us directly at hello@weeksgroup.ca or call us at 705.305.4174 today.
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