How to Create a Steady Second Flow of Income with Your Home
If you want to create a second stream of income, real estate is the best way to do that right now, specifically via rental properties. The basic premise of using your home for income is taking in revenue and lowering your expenses. Here is some practical advice based on what savvy investors are doing in this market to build wealth.
Why Now is the Best Time to Create Income with a Rental Property
There’s never been a better time to use your current home to create a stream of income. The market conditions are ideal with rental rates are at an all-time high and interest rates at all-time lows. In Southern Maryland, rental rates have gone up 20% since 2019. The more expensive the home, the more in demand it is. If a home has three, four, or five bedrooms, the increase could even be over 20%.
To figure out how much your house is renting for, you can use an online comping tool such as the one on Zillow. Add 10% to 15% to that rate to get an accurate number for a rental rate. The bigger the house is, the higher you can go.
Because interest rates are so low, now is also the perfect time to refinance a home. You can get an interest rate that’s 3% or lower. If your current interest rate is higher than that, you should definitely look into how much you could get that cost down by going to a website like Bankrate or Lending Tree. Of course, you should also speak to a loan officer. A lower interest rate means your fixed expenses are lower so you’ll have higher cash flow from your rental property.
How to Decrease Expenses for Your Rental Property
When you own a rental home, there are certain tax advantages. The costs of maintaining the rental property are treated as business expenses. Costs like cleaning, painting, and property management are tax deductible. It’s key to talk to a CPA so you can clearly understand the tax benefits. It’s not something you want to get wrong.
Next, you’ll also have to think about expenses associated with tenants and property management. To keep these costs as low as possible, you want to make sure you know how to effectively screen tenants and manage the property. Many homeowners may choose to go with a property management company like Real Property Management Gold, but it is possible to successfully manage yourself if you have the time to devote to it. Watching our videos is a great way to get property management tips!
Holding a Property Could Make You Even More Money
Remember that while you’re renting out your home, it will continue to appreciate, especially with all the inflation we’re seeing. It’s not the value of houses that are currently going up so much—it’s the flow of money in the economy. Over the last year, the government printed $1 for every $4 in circulation. That’s a 20% increase in the money supply.
Your home is a hard physical asset. It doesn’t go away. When you hold that house, it will almost always go up because of inflation. In a couple of years, the price of your home may go down but over the course of five to ten years, the odds of it going up are in your favor.
Watch Your Rental Income Roll In
In the end, if you follow these tips, you can create hassle-free cash flow for yourself. It’s the best time to act! If you have any questions, talk to Real Property Management Gold.
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