Should You Purchase an Income Property?

Posted on: April 30, 2018

Diversifying your portfolio is often a good choice. There are countless ways to invest, but many individuals are drawn to the real estate market. As home prices continue to rise, there’s an unprecedented number of renters searching for housing. If you’re considering investing in real estate, you may be wondering if purchasing an income property is the right move. Here, we share considerations that you should weigh before making your decision.

The Benefits of Buying an Income Property

If you’re looking for a way to increase your monthly cash flow, investing in an income property could be an excellent decision. Seattle, in particular, has a booming rental market. In 2017, approximately 42 percent of residents were renters. If you purchase a home in an appealing location and price it accordingly, you’ll almost certainly benefit from a predictable, steady stream of income. While it’s true that you may need to give the property some TLC, you’ll probably enjoy property value growth as a result of the upgrades.

Drawbacks to Consider

While purchasing an income property is a sensible choice for many investors, you should contemplate the potential drawbacks before beginning the search. Managing property isn’t a good fit for everyone, and you may discover that you’d prefer to pass on this type of opportunity. The regular monthly income and increase in property value are attractive possibilities, but it’s often necessary to take an active role in the rental process. Even if you choose to hire a property manager, you’ll still need to be available to take occasional calls and provide input for important decisions. Moreover, opting for a property manager will reduce your monthly income, resulting in a lower ROI. In addition to property upkeep, there’s also a risk of losing money when tenants are unable to make a payment. Thoroughly vetting each applicant will mitigate this risk, but unforeseen circumstances can derail even the most reliable renters.

Before making any type of investment, it’s crucial to weigh the pros and cons. While real estate is generally considered a safe bet, it may take a few years before you realize any significant profit. If you have an interest in home improvement and you’d enjoy renovating and managing properties, you’ll likely be happy with the decision to move forward with finding an income property or two. Be sure to evaluate your personality traits prior to purchasing a rental home—if you’d become frustrated with communicating with tenants or making occasional inspections, you may be better off by sticking to other forms of investment.

If you’d like to explore the possibility of purchasing a rental property, our team is here to help. When you’re ready to start searching for the ideal home, please don’t hesitate to reach out to us.

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