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Are you considering buying rental property in Washington state? If you are, then it might be one of the best decisions you will ever make.
More and more Washingtonians, just like others in the country, are choosing to rent rather than own a home. Consequently, the demand for rental properties is on the rise across various cities in the state.
And this can be attributed to the rising property prices. As a matter of fact, according to various online sources, home values are expected to increase by about 3.3 percent in 2020. This is obviously good news for rental estate investors as the high homeownership costs will mean more demand for rental properties.
That said, however, you need to buy now before the appreciation fully kicks in and prices go up.
If you are still on the fence about whether or not to buy a rental property in WA, T-Square Real Estate shares 6 benefits you stand to get by doing so.
Benefit #1: Earn rental income.
This is perhaps the main reason for buying a rental property. By owning a rental property, you will be setting yourself up to earn a steady passive income for many years to come.
Suppose, for example, you invest in a rental property that you can rent for, say, $1,000 a month. This means that you will have $12,000 in your bank account by the end of the year if you manage to keep your unit occupied.
While that is certainly an ideal situation, even partial results can be rather satisfactory.
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Benefit #2: Get some tax breaks.
Owning a rental property is not a walk in the park. It certainly comes with its fair share of frustrations. One of these frustrations is having to pay significant taxes. Luckily, you may be to recoup part of the tax you pay to Uncle Sam by deducting some of them.
Below are some of the tax deductions that are available to landlords:
- Repairs: You may be able to deduct the cost of rental repairs in the year they occurred. Examples of such repairs include fixing the gutters or floors, repainting tired-looking walls, fixing plumbing issues, and fixing broken windows.
- Travel: Most of the driving you will do for your rental property may also qualify you for some deductions. You can, for instance, deduct your travel expenses when you drive to your rental property to deal with a tenant problem.
- Home office: Do you have a space that you intend to devote to your office work? If you have, then you may be able to deduct the cost of running it from your taxable income provided you meet certain minimal requirements.
- Interest: This is usually the biggest deductible expense for landlords. Examples of interest that you may be able to deduct include interest on your mortgage, and interest on credit cards for goods and services used in a rental activity.
- Legal and professional services: You may be able to deduct the premiums you pay for almost any insurance for your rental property. Examples include flood, theft, and fire insurance.
- Employees & independent contractors: You may also be able to deduct the costs of hiring professionals to perform services for your rental property.
Benefit #3: Enjoy property appreciation.
Although highly dependent on a myriad of factors, you also stand to gain from an increase in the value of your property.
Broadly speaking, the rate at which you can expect your property to appreciate depends on the location. Some locations usually tend to appreciate faster than others.
Benefit #4: Increase in property value through upgrades.
Any upgrades to your property will certainly help push its value up. Some of the upgrades that may push your property’s value up include repainting the home, adding a new siding, renovating the interior, and landscaping the yard.
Besides boosting your property’s value, these upgrades may also help you command more rent from your tenants.
If you have some solid DIY skills, then this can be a major incentive to purchase a rental property.
Benefit #5: Enjoy 100% control over your business.
Just like any other business, owning a rental property also means that you will have total control over how it runs. You get to decide the kind of tenant to rent to. How much rent to charge every month. What upgrades to make. And, how long a tenant gets to stay there.
Simply put, you become responsible for your success or failure.
Benefit #6: Help diversify your investment portfolio.
The key benefit of diversifying your portfolio is that you are able to balance the risk of losing money with one type of investment. So, if you have money invested elsewhere, say, in stocks, buying a rental property will enable you to diversify your portfolio.
Clearly, owning a rental property in Washington can be lucrative. That said, as with any other type of investment, it isn’t without risks. So, make sure you do as much due diligence before investing as possible.
Have Questions or Need a Mortgage Loan?
Do you have questions about home loans? Are you ready to apply for a mortgage to buy a home? If so, Sammamish Mortgage can help. We are a local mortgage company from Bellevue, Washington serving the entire state, as well as Oregon, Idaho, and Colorado. We offer many mortgage programs to buyers all over the Pacific Northwest. Contact us today with any questions you have about mortgages.