Real estate is not the most liquid investment but it can be one of the most fruitful investments to make.
Whether you are a seasoned investor or just starting out, there are a number of benefits that come with owning rental properties.
Although, as with any form of investment, being a landlord may not always be smooth sailing and risk free.
Aside from the commitments that come with property ownership, landlords may have to occasionally deal with bad tenants and grapple with current laws that are not practical in recovering losses or damages.
Yet, the benefits of owning rental properties as discussed below are well worth the risks.
- Passive Income
One of the biggest benefits to owning rental property is that it is recurring income that requires relatively little work to maintain.
However, investors must be diligent in doing the necessary research beforehand to identify a property that can yield positive cash flow.
If renting out a unit does not yield the desired returns, try renting out by rooms or per bed. Room and bed rentals generally require more effort in managing tenants but make up for it with higher returns.
The extra income from a rental property can add to savings or even serve as additional financial security during retirement.
Even if rental rates do not exceed mortgage repayments, at least you benefit from tenants paying down your mortgage.
The rental income can be taken into account by banks when evaluating loan eligibility for future properties.
- Hedge against inflation
Real estate is generally considered an appreciating asset given land is a relatively limited commodity, so property values tend to appreciate in the long term given the right circumstances.
Besides monthly income, rental properties can be sold down the road for a hefty profit if the property’s value appreciates.
While the growth of house prices was muted at 3.3% (after inflation adjustment) from 2016 to 2018, property ownership has proven to be an effective hedge against inflation over the long term.
Owning multiple rental properties also allow investors to diversify investments, minimizing the risk of losses and maximizing opportunities for capital appreciation.
If the market conditions are poor although you are ready to sell, try renting out your property instead. Purchasing a property with decent rental yield offers owners better holding power to tide through the rough times.
Renting will give you flexibility in timing your sale until market conditions improve and you’re able to make a profit.
Owning rental properties also means owners can choose to move back into the rental property should circumstances dictate a need to do so.
Job, family or financial circumstances may change beyond our control so having the right rental properties provide you a form of safety net.
- Upkeep & Security
Some owners prefer to flip investment properties and avoid the hassle of dealing with tenants in the interim. Others may inherit a property but choose not to rent it out over sentimental reasons.
However, leaving a property vacant may incur costly repairs over time especially in the case of landed properties.
If left neglected, minor leaks or insect infestations may develop into costly repairs. Continuous upkeep and maintenance either by the tenant or landlord is easier on the wallet in the long run.
From a security standpoint, vacant properties are also more prone to break-ins and unwanted squatters – be it people or animals.
Despite the risks and costs associated in dealing with bad tenants, renting out a property does have strong merits.
This article was written by Vigneswar Rajasurian of PropertyAdvisor.my, Malaysia’s most comprehensive source of property data, property analytics and insights.