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This post is for investors who want to diversify their portfolio, but don’t have the time or expertise to manage a rental property. I’ll show you how single family rentals are an under-utilized asset class that can give your investment portfolio better returns than stocks or bonds.
Diversification
Diversification is a key component to any portfolio. You want your investments to be spread out across different asset classes, so that if one market crashes or takes a hit, you will still have other assets performing well. Single family rentals can provide this diversification for your portfolio because they are not subject to the same fluctuations as stocks or bonds. In addition, since most single family rentals are owner-occupied homes that were purchased with cash (not on credit), they don’t carry any debt themselves. If you have an investment property and need additional capital beyond what is generated by monthly rent payments and maintenance costs, there are numerous ways of raising money without having to sell off chunks of your real estate holdings: refinancing; taking out equity loans; selling some shares in limited liability corporations associated with each property; etc..
High Cash Flow Potential
The rental income can be higher than the mortgage payment, which means that you are getting paid to have someone live in your home! If you don’t want to pay down your mortgage, then use the extra cash flow to pay down other loans or invest in other assets and change your lifestyle.
Less Hassle with great Property Management
You don’t have to be a landlord. You can hire a great property manager like St. Louis Leasing Co., who has a team to handle the day-to-day operations of your rental property for you, including finding new tenants, coordinating repairs and maintenance, collecting rent, and communicating with municipalities. This wa,y you can focus on building your real estate portfolio instead of worrying about the day-to-day tasks involved with running an investment property.
You don’t need to worry about maintenance issues either, because if something goes wrong with one of your units (like plumbing), there’s someone else who will take care of it for you. Imagine a world where the hot water heater goes out at one of your properties and is replaced without you having to take a call or lift a finger!
Tax Benefits
- Depreciation.
- Tax Credits.
- Interest Deduction.
- Tax-Free Capital gains: When you sell an investment property, the profit is considered long-term capital gains and not income, which means it’s taxed at a lower rate than regular income. There are also strategies that are even more appealing for investors who have plans to invest again shortly after a sale.
Leverage
Leverage is the use of borrowed money to increase your investment. Leverage can help you make more money on your money, but it also increases risk.
Using leverage allows you to buy properties with a down payment of 20% of the purchase price and borrow 80% of the value of those properties. This is called 80/20 financing because 80% is financed by loans, while 20% comes from cash reserves (or some other source).
Single-family rentals are a smart investment.
Single-family rentals are a smart investment. When you look at the total return on your investment, including all of the expenses, they consistently outperform stocks and bonds over time.
- They’re less risky than other types of investments because they are asset-backed investments
- Shelter is one of the five essential human needs from Maslow’s Hierarchy of Needs
- You can diversify your portfolio with single-family rentals instead of putting all your eggs into one basket (like stocks). If one area fails, there will still be others that are doing well!
Single-family rentals are a smart investment. They offer diversification, high cash flow potential, less hassle and management, tax benefits, and leverage. If you’re looking to invest in real estate but don’t want to deal with managing tenants, single-family rentals could be a great option for you!