Creating Wealth Through Property Investment

You may think that owning property is out of reach or just an activity for those who have money to make more money.  Actually, property ownership is within reach of many people, even if you don’t think you have a lot of extra money to invest.  Property ownership can make a nice addition to your investment portfolio.

Creating Wealth Through Property Investment

How to Afford Property Ownership

Use the equity in your own home to purchase the rental property.  If you have enough equity in your own home, you can take out a home equity line of credit to purchase the next home.  Use a home loan calculatorto determine how much your new monthly payments will be.  With a home equity line of credit, you will be using your own home as collateral, so you want to make sure that you are not overextending yourself financially.  Make sure you are comfortable making the payment for both your mortgage and your home line of credit.
Use the equity to fix up the rental property, if necessary. Or, if you are buying a fixer upper, you might take out a small mortgage and use the home equity line of credit in your current home to fund repairs on the rental property.  Make sure to compare home loans to get the lowest interest rate.  Also, you may get a discount if you take out another mortgage through the same bank that holds your current mortgage.
Benefits of Rental Property Ownership
While you are taking a risk by taking out a home equity loan, if you choose your rental property wisely, there are plenty of financial benefits.
Rent Should Cover the Cost of the Mortgage. If you are wise about your investment, the rent you earn from the property should cover the cost of your monthly mortgage payments, and ideally the annual cost of the property tax.  (Of course, you should have a business emergency fund set up to offset those times when your property is vacant, because that will occasionally happen from time to time.)
There Are Many Tax Deductions to Take Advantage Of. Did you know that many of the costs of owning your rental property are deductible?  Some deductions you can take include interest paid on the loan for the rental property, insurance premiums, and ordinary and necessary repairs, to name just a few.  There are many others; consult with your tax preparer to find out which ones you would qualify for.  The more tax deductions you can utilize, the more you are able to reduce your overall cost.
The Property May Appreciate.  Of course, in this housing market, there are no guarantees, but if you do your research and find a good buy now, your property can appreciate, especially if you take care of it and it is in a good neighborhood.  As it appreciates and you pay down your mortgage, you gain greater financial freedom.  When you are ready to sell, you should make a nice profit.
Ability to Generate Income to Invest in More Properties. As you pay down your property and make more money in rental payments than you need to pay the mortgage (especially as your property value increases and you are able to charge more for rent), you will generate excess money that can be utilized to invest in your next rental property.  Continue to follow this succession of reinvesting your income in new properties, and you can have an excellent investment that will serve you well as you approach retirement.
Many people make the mistake of thinking that they do not have enough money to invest in rental properties.  However, if you have equity in your home, you can tap that equity to help finance your first rental property.  Often, just taking this first step is enough to get started in a cash positive cycle of investing in rental properties and generating a side income (or at least breaking even) while building your wealth.