A viable financial strategy calls for having more than one source of income streams coming your way.
This invariably means that besides generating income through your profession or business venture, you have to take care of your future needs and aspiration through “Investment.”
Owning a Rental Property can turn out to be a good source of investment.
In fact, you can generate income by renting your property.
Here, we look at how you can benefit by generating rental income through the property.
If you happen to own property, then let me tell you that it can be a source of rental income for you.
If you own property such as a house or an apartment which can be rented out, then you are in for a good monthly income with your property.
So, you can generate income with the property.
In fact, by renting your property or your rental property opens the doors of positive cash flow for you. For many who own a rental property, being a landlord is a profitable vocation.
However, before you embark upon renting your property, you still need to be convinced that it is a profitable venture for you.
Well, there are obvious benefits of renting your property.
Having said this, you still need to ask some questions to yourself. The answers will determine whether you would be able to handle the role and responsibilities of a landlord.
Things You should consider before Renting your Property
A successful landlord can only profit by renting out property.
Do you like to “Do it yourself?”
In fact, it is not advisable to hire outside contractors for every petty task such as light plumbing, yard work, or some construction.
These are tasks which can crop up anytime.
If you involve outside contractors, you can end up paying a good amount of money to them.
So, it proves an expensive affair.
However, doing the work yourself saves money. Thus, you can keep accumulating your rental income and go on to minimize your expenses.
Likewise, ask yourself – Are you prepared to handle 24-hour responsibilities?
Managing your rental property often turns out to be a 24-hour game. You even have to be prepared for calls in the middle of the night.
The situation might worsen if you have two or more rental properties to look after.
Well, you can go for hiring a property management company who can fix any household problem that might arise.
However, it proves to be an expense that eats your profit.
So, with rental properties, you have to learn to prioritize and manage your tasks that include handling the responsibilities of your rental property.
Then consider this question.
Are you an expert in dealing with people?
Well, the tenant/landlord relationship is not one of those relationships that are easy to handle. Moreover, dealing with strangers is not for everyone.
Sometimes, choosing a tenant can come out as a difficult task. There are people who do not prove as good tenants. So, being a landlord demands that you are proficient in dealing with people who are different than you in values and personality.
Coming on to the actual rent that you receive on renting your property, the important thing for you is that, are you able to charge enough rent so as to cover your expenses and give you profit.
So, the question to consider,
Are you able to charge sufficient rent that gives you overall profit?
In certain locations, monthly rental properties are extremely competitive. On top of that if you have mortgage payments then you certainly find it difficult to net in some profit for yourself.
So, these are some of the issues that face you as a landlord when you go about renting your property. If you manage to come to terms with these issues and can net in some income by renting your profit, then nothing like it.
If you consider yourself a suitable and capable landlord and possess a rental property, then get ready for an alternate source of income which comes when you go on to rent your property.
Renting Out your property can be a smart choice and a vital step forward in creating a good recession-proof secondary source of income for you.
Why should you rent your Property?
Let us see the benefits of renting out your property by taking few examples.
Suppose as an owner of a property Mr. A has decided to sell out his property.
The market condition is worse, and there is a continuous fear that it may further slide downwards. Fearing such a situation, he opted to sell his house.
In return, he received a good lump sum amount of money, but he had to forgo his property.
Now Mr. B is also the owner of a house, and in the same kind of global economic situation, he opted to rent his house.
Mr. B has clearly created a double advantage for himself.
Firstly he has safeguarded his property which may become valuable as time goes by and secondly he has created a guaranteed secondary source of monthly income in the form of House Rent.
Though this income might be low as months pass by this accumulate into a large sum of money. And also he does not have to search for an alternate work or stress out in his present main job.
So if we take out the learning from the above two examples, Mr. B is the clear winner.
Renting his property has guaranteed him a secondary source of monthly income for which he practically does not have to devote much of his time, and by this, he has safeguarded his property and giving it a chance for further appreciation in the times to come.
Thus renting out your property is a smart choice. If you have purchased the property through a bank loan, then you can pay a good part of the mortgage payment through the monthly rent which you receive.
And if the property you have purchased through your earlier savings then this rental income can be saved for renovation and other improvements in the house.
Retirement Planning with Rental Income
Rental income is a fixed and guaranteed source of income.
Plus, every year there is a marked increased in the rental income you receive. Moreover, with the passage of time, your rental income increases.
So, rental income can be a good source of retirement planning.
You can further invest the money that comes in the form of rental income to build a retirement corpus.
For example, you can go for having a systematic investment plan which has the potential to give good returns.
Further up, if you are grown old and living a retired life, then rental income is a welcome source of additional income that can help you to meet your daily expenses.
You can also save some money out of the rental income you receive each month for any emergency situation.
From whatever perspective you look, renting your property is a source of secondary income for you and a profitable decision in the long run. And most importantly you have the control on every aspect.
The property is yours; you can decide the amount of monthly rent and select the tenants according to your preferences and so on. So, you see Generating Rental Income through Property can be quite beneficial for you.
Note: In India, there is a standard Deductions under Section 24 of 30%. This help to lower your income tax. For example, you rented a Property at Rs. 1 Lakh per month now your annual income from renting property is 12 Lakh Per year.
With a standard deduction of 30%, your income from rented property will be calculated only Rs. 8.4 Lakh.
This is how you can save tax on your rental income. A win-win situation.