Is Buying A Rental Property Your Ticket To Financial Freedom?

Is Buying A Rental Property Your Ticket To Financial Freedom?

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When you invest in rental property, you may be able to increase your earning potential and generate positive cash flow for yourself.

Buying a rental property can be a great investment at any age. In doing so, you can receive regular payments that act as an additional form of income on top of your day job. In fact, you can also do short-term rentals or partial rentals out of your primary residence.

As a rental property owner, you have various rental options that allow you to earn money to use toward your mortgage payments (and more). Here’s what you should know about owning and renting out a rental property.

How On-Demand Hospitality Platforms Are Changing The Landscape Of Traditional Property Investing

While traditional renting typically entails finding a tenant to rent your property for longer, more-permanent stays (such as yearly leases), on-demand hospitality platforms allow people the flexibility to rent their properties at their own leisure. For instance, many rental owners will offer one-night or weekly bookings, or even monthly stays.

Benefits Of Owning A Rental Property

There are many benefits of owning a rental property as an investment, according to SF Gate. Here are three major pros to consider:

  1. Tax Benefits
    Owning a rental property provides great tax benefits depending on your state. For instance, property investors pay little to no taxes on their rental property income, as only the portion of your rental income that exceeds the mortgage and property tax payments is taxed. They also tend to get deductions, such as mortgage interest and insurance, when filing for taxes.
  2. Positive Cash Flow
    Renting out your property will ensure a positive and consistent cash flow each month — without you even having to go to work. This is a great source of income you can rely on regularly, which can contribute to your financial security or simply allow you extra cash in the bank. Keep in mind, the more tenants you have, the higher the cash flow — so if purchasing an entire apartment building is in the cards for you, it will be better for your finances.
  3. Value Appreciation
    Over time, your property’s value appreciates, meaning you will earn more to put toward your mortgage. Additionally, you’ll be able to sell your property at a higher price than when you purchased it, especially since property values have been increasing as of late. Best of all, if your property’s value increases significantly, you may be able to refinance your mortgage to a higher amount to match the property value and withdraw the difference between your current mortgage amount and new (known as a cash-out refinance).

Cons Of Owning A Rental Property

While there are many attractive benefits of owning a rental property, there are also some important cons to keep in mind:

  1. Difficult Tenants

Dealing with difficult tenants can be a real headache for property owners. But if you take the time to conduct thorough background checks, check references and meet with the renter in person before having them sign a lease, you shouldn’t run into too many problems.

  1. Challenges Of Being A Landlord

Being a landlord can often feel like being a boss. There’s stress and responsibility that falls onto your shoulders. Additionally, when quick repairs are needed or other issues arise with your property, it’s your job to hire a professional and cover the expenses.

  1. Potential For Neighborhood Depreciation Or Unfavorable Tax Changes

Just as property value can appreciate over time, it can also depreciate due to neighborhood changes. Additionally, property taxes and insurance premiums can spike.

Features Of A Great Rental Property

Looking to purchase and rent out a property? Here are some key features of a profitable investment property to consider:

  • Average rents — When deciding on the right rent to charge for your property, you’ll want to conduct some research on the average rent in the area. Charging too much will deter potential renters, while charging too little can leave you with barely enough money to cover your mortgage and other payments. Additionally, you’ll want to account for potential changes such as tax increases or spikes in insurance premiums.
  • Number of listings — Depending on the number of listings in your area, you will either need to raise or lower your rent to accommodate it. For instance, if there are many vacancies in the neighborhood, you’ll have to decrease your rent to stay competitive; while if there are few to no vacancies, you might get away with increasing your rent and earning more than anticipated.
  • Future development — Check with your local municipal department so you can anticipate new development plans. This will help you determine whether you’ll be up against new properties or additional housing.
  • Natural disasters — If you’re renting a property in an area that experiences frequent natural disasters such as earthquakes, flooding or even tornadoes, be sure to account for insurance, which you’ll need to subtract from your returns.
  • Property taxes — It’s important to know how high your property taxes will be, as they vary widely. You can check your municipality’s assessment office for tax information or simply talk to other homeowners in your neighborhood. High property taxes might mean you’ll have to charge an unrealistic amount in rent, so be sure the town in which you’re looking to purchase a rental property is not in financial distress.
  • Schools — Depending on the size of the property you’re looking to rent, you’ll want to consider the quality of local schools, particularly if you own a family-size home. If you purchase a home in an area without good schools, your investment won’t be nearly as valuable.
  • Neighborhood — The neighborhood in which you buy your rental property will greatly impact the renters you attract. For example, if you’re renting a home in a college town, odds are your tenants will be students; but if you’re renting out a nice condo in a small community, you might find tenants who are looking to settle down.
  • Amenities — Local amenities such as parks, restaurants, public transportation, downtowns and more can increase the value of your home. This will attract more renters to your property, thus allowing you to increase your rent.

Austin New Home Sales Are ‘Normalizing’ As We Near 2021 End

Austin New Home Sales Market Report.

By: Meagan Falcon, Patch Staff

The Texas new homes market, particularly in Austin, appears to be “normalizing,” according to a December report from​.

AUSTIN, TX — The Texas new homes market, particularly in Austin, appears to be “normalizing,” as new home prices remain near record highs and Days on Market hover near record lows, according to a December report from

The Dallas-based company, which analyzes new home sales and days on market reports monthly, said overall sales data stabilized statewide last month. The 3-month moving averages of statewide new home listings and pending sales also were higher in November.

Across the Lone Star State, new home listings increased from 14,260 in October to 14,599 last month. Pending sales increased from 4,151 in October to 4,692 in November.

The average Days on Market for a new home in Texas was 54 days – up one day in November from the record low the company reported in October, the report states.

While new home prices were slightly higher statewide in November as the 3-month moving average of new home sale prices hit $422,199 versus $419,341 in October, it was one of the smallest month-over-month price increases since June.

In November, median sales price rose 29.7 percent to $470,000 — a record for the month of November in the Austin Metro, according to a Dec. 16 report by the Austin Board of Realtors.

Officials said the sales dollar volume rose 20.5 percent to $1,882,296,166. New listings in Austin increased 6.7 percent to 2,950 as active listings ticked down 2.2 percent to 2,768.

“Texas’ new homes market is normalizing,” said Ben Caballero, CEO of and world record holder for most home sales. “The good news for buyers is we see more new homes coming onto the market. The good news for Texas builders is that both total sales and sales activity remains incredibly robust,” Caballero explained.

Caballero notes that statewide, based on November’s 3-month moving average of MLS data, Texas new homes sales were 3,113 versus 3,061 in October.

In three of the state’s four largest new home markets – Houston, Dallas-Ft. Worth and Austin – total sales were up last month.

In November, 53 percent of the 3,215 closed listings in the Austin Metro —1,694 homes —sold between $250,000 and $500,000, today’s typical price range for first-time and first-time move-up homebuyers, the ABoR report said.

Across the Austin-Round Rock MSA, closed listings dipped 4.9 percent to 3,215 across the area. This occurred even as the housing market remains on track for a record-breaking year, with closed listings outpacing 2020 by 3.1 percent last month.

This data indicates that despite a fast-paced market and record-low inventory, opportunity still exists to find the right home, the ABoR said.

“We have all seen the headlines about our housing market and the Austin Board of Realtors knows that it is competitive, however, when you dig a little deeper, you can see that there is plenty of opportunity and our market is still readily accessible for homebuyers across all price levels,” Susan Horton, 2021 ABoR president, said. “This doesn’t mean there isn’t work to be done to ensure everyone has equal opportunity to find a home here, but it does demonstrate that by working with a licensed realtor, homebuyers and renters can find something that works for their budget and housing needs.”

Only San Antonio showed lower new home sales. Still, Caballero cautioned that new homes are selling so fast that many are not being entered into the MLS (Multiple Listing Service), which remains the most reliable and timely source of sales activity.

“Builders have more buyers than they have homes, and when you have a waiting list of transaction-ready buyers, builders don’t have a reason to enter them into the MLS,” he added, “and that the MLS data indicates the market is becoming more balanced.”