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The highs and lows of owning property

by Maureen Jordan

The positives of owning property

Owning property that is rented out can deliver you many benefits. Here are the three main ones:

1. The tenant gives you income

You can use the rent you receive from the tenant of your investment property to repay the loan you took out to buy the property.

2. The expenses of owning rental property are tax deductible

In effect, you’re now in business. Having an investment property allows you to take advantage of a number of tax deductions.

3. Property gains value

Property prices tend to keep rising with inflation and often well beyond that. If you bought your investment property in the right area, you stand a good chance of reaping handsome rewards when the market rises. As property values rise in your area, so do rents. And if you decide to sell and time your sale correctly, you can profit nicely.

The negatives of owning rental property

Guessing what the negatives are doesn’t take too much imagination. Here we outline just three of them: 

1. The tenants from hell

Some landlords have all the luck and are able to attract long-term tenants who look after the property as if it was their own. Terrific tenants like this are worth keeping and rewarding with minimal rent rises. But you don’t find the tenant from heaven every day. Quite often they come from the other place and are a pain to any landlord.

2. An oversupply of rental properties

When there’s a glut of rental properties on the market, it’s called oversupply. This is when the law of supply and demand kicks in to the tenant’s advantage. In a situation like this, property investors may have to take certain measures in order to attract tenants, ranging from asking for a lower rent than the market average to offering special deals, like waiving the first month’s rent. The worst-case scenario is when you can’t attract any tenants at all, and you still have to make payments on the loan you took out.

3. Regular maintenance costs

Some property investors overlook the fact that owning a property incurs upkeep and repair costs similar to those for their own home. These costs can mount up and money needs to be set aside for them.

When all’s said and done, the trick is to buy properties in areas where values are likely to rise faster than elsewhere. Keep your eye on the ball – continually educate yourself about property investment by reading eBooks like this one.

The rules for buying an investment property are similar to the rules that you need to follow when buying your own home. However, an investment property has a few extra rules because the aim is to make money — buying it does not usually generate the same emotion as buying your own home does.

Published on: Thursday, January 02, 2014

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