I'm finally at a point where, I think, I am ready to dip my toe back in the real estate world. Much like the first time I did this, I'm leaning heavily toward an investment property. All that really means to me is that I'm not buying this property to simply live in and call home. The idea behind an investment property is it affords you options beyond simply being a place to hang your hat. As someone who does not have a lot of extra income, it is important to approach this strategically. Today, I'll explore a few benefits to this path.
While there are varying factors to the financing of your purchase, in general, the rates are still very low. I have to chuckle when I hear people complain that the rates are creeping back up to 5-6%. Seriously? Take a quick and very short trip down memory lane with someone who isn't still wearing diapers and you'll hear tales of rates in the upper teens. We have been spoiled, in my humble opinion, with rates down in the upper 3-4%. If you are still pondering getting into the market, the rates are simply great. That's not to say you shouldn't still shop around. Just don't let me hear you complaining about your 5.2% rate. I think you'll be just fine.
And speaking of interest rates, rates in the other direction have been doing better than even the stock market. There has always been a trend of people putting at least some of their money in real estate, and that is not slowing down. Folks are realizing, especially in certain areas of the country, that there IS no more earth being built. In areas where the buildable or buyable acreage is limited, real estate is a solid bet for your investment dollars. When you look around mountain towns like Lincoln, this could not be more true. The town is bordered on three sides by the National Forest. I think those owners are going to be in good shape for a while, or at least until it stops snowing for good (cue ominous music).
We have mentioned this before, but the idea of having someone else pay your mortgage simply sounds like a fairy tale. Only this one is true. When reviewing properties in the area, my first thought is, "How much can I rent it for?" My first property was a duplex, so I always planned to live in one of the units. That's still the case this time around, or at least that's my goal. If I can purchase a place that has at least two units, I can live in one of them and rent the other to help offset the mortgage. One of the tertiary benefits of this is the bank will actually attribute 70%, give or take, of the rental income to your salary in order to determine your approved loan amount.
I can't currently afford to grab a place solely as an investment property. If you can, there are other options here as well. With the current and growing trend toward short-term rentals, you could put your place up for rent and, especially with quick turn-arounds, cover your mortgage in no time at all. Of course these programs do require a bit more hand-holding with faster turn-arounds, cleaning, hosting, and more, but the benefits are plain as day.
In terms of investment benefits, you can also consider this purchase part of your long-term retirement goals. "Numerous buyers have invested in real estate both for the short-term benefit of having a place to come enjoy the White Mountains as well as having an investment property to sell after a decade or two of appreciation," notes Badger Realty agent Amy Rogers, and she's right. Not only can you enjoy the property in the short term, but it can also be a jumping off point for the home of your dreams down the road. It is a great place to tuck away that extra income while you have it.
Lastly, investing in real estate has a number of tax benefits. While I know there may be nothing more boring than taxes, saving money is always exciting. As a standard property owner, you can take advantage of deducting your mortgage interest. And that's about where it ends. If it is an investment property, you can also deduct any depreciation, property expenses and, for a limited time, a percentage of the rental income. It goes without saying that I'm not a tax expert, so give a tax preparer a call to get the details on the benefits of owning a rental property.