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Is Owning A Rental Property Right For You?
That's the very question many amateurs ask when considering getting into the world of residential property investment. After all, you don't know what you don't know and it's very smart to learn as much as possible before you make a commitment.
By: AAmerican Property Management
Is owning a rental property right for you? The answer really depends on a few key factors. First and foremost, is how you'll acquire the property in the first place.
If you've inherited a real estate asset that's already a rental, this really isn't much of an issue at all. However, if you're going to buy a residential property, this is perhaps the most important aspect. That's because too many people get into the mindset that the tenants will pay the mortgage. In reality, very, very few people can make this work. This is due to the fact that they do not truly reconcile the actual, real-world expenses of owning a rental property. There's not only the mortgage but property taxes, insurance, maintenance, repairs, replacements, emergency situations, they can see. And other very expensive carry costs.
So, it is extremely critical that you detail all expenses associated with owning a rental well before you go into the process of buying one yourself. You'll also need to account for paying income tax on the money generated from the rent you collect. Once you add up all these carry costs, you'll quickly see it is very difficult to purchase a rental property at a market rate and make any sort of profit.
Out-of-pocket expenses aren't the only thing you have to deal with. Although, there are actually more than what's already been listed. These include fees for paying a property management company and or legal fees to pay an attorney when an eviction situation becomes inevitable. Speaking of eviction, that's another very unpleasant reality about owning a rental property. Though this type of situation certainly isn't guaranteed to happen, there's always a distinct possibility.
Moreover, you'll have to either hire a property management firm or manage the property yourself. That means taking the time to hire contractors to make repairs or going the very time-consuming route of doing it yourself. Regardless if you hire a property management team or do the work yourself, you'll still have a huge commitment either way.
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