An investment property is something many investors of all ages consider; however, is it right for you? Like any kind of investment, investment property –whether it’s used as a vacation home or as a longer-term rental, has pros and cons as well as risks and rewards. By having a general idea of the pros and cons of owning an investment property, you can make an educated decision about buying one.
Pros of Investment Property
Let’s look at the upside first. For example, if you owned a vacation rental beach house or condo on 30A, when it is not being rented out by tenets, then you, your family, and friends could use it for private vacations. Of course, there are other more substantial benefits such as:
- Investment properties can generate a good deal of added income from renters. They can help you make your monthly mortgage notes and add to your existing income and savings.
- Your rental property is a business and thus expenses related to maintenance and upkeep can be written off on taxes provided you don’t use the property for more than 14 days or 10% of the time you rented as it would then be considered a personal use residence; expenses would then need to be allocated
between personal and rental, and personal use expenses wouldn’t be deductible.
- Depending on what kind of property you invest in, your rental property might be one that you want to retire to one day. Depending on when you invest, you may have a fully paid-for retirement home to look forward t
o as well as the equity from your existing real estate.
- Of course, not everyone wants to live in their home, but property in certain areas (especially 30A) tends to appreciate in value over the years, which means that if and when you sell your investment property, you’ll have amassed a good deal of equity.
Thus, there are many pr
os to investment property that can be well worth it.
Cons of Investment Property
Like anything, as noted, nothing is perfect, which means that while there are many pros to owning an investment property, there are some cons that need to be considered. For example:
- Investment properties usually require more money down and a better credit score than a primary residence.
- Though an investment, your assets aren’t liquid in an investment property and are therefore tied up. It would be difficult to access your equity quickly with an investment property.
- Repairs and maintenance are your responsibility; you’ll likely have the add (tax-deductible) expenses of a property manager, a cleaning company, and a lawn care service.
So, some of the cons relate to tying up your finances and possibly having to spend a little extra on maintenance and such.
The Bottom Line
The bottom line is if you have the resources and the inclination, an investment property can be financially rewarding. What’s more, if it’s a property that you want to use for personal benefits later in life, it’s more than worth it to get an investment property.
Needless to say, before you do invest, you should consult with a realtor who has experiencing buying and selling in the area; you should also consult with people who live in the area you’re thinking of buying in who have experience with rental properties and see what their experiences are. Use this information to make an informed decision about investing in real estate.
Melissa Clements is a realtor with expertise on the 30A real estate market. If you’re thinking of investing in a vacation rental in the 30A area, contact Melissa for guidance and support.