- The global market for rental real estate is growing, with record-low interest rates and rising rental prices.
- Expanding your properties as a landlord offers diversification, increased rental income, access to financing, capital appreciation, and tax benefits.
- Purchase a new property, research financing options, choose the right property management partner, and develop your brand.
- Refinancing is a great option to access the equity in an existing property and use it for purchasing additional ones.
- Quality services and tenant relationships are critical for successful expansions that generate steady cash flow.
Investing in real estate can be a profitable venture if approached properly. As a landlord, your goal should be to increase your rental income, and one way to achieve that is by expanding your property portfolio. Real estate can provide steady cash flow, long-term appreciation, and tax benefits. Here’s what you need to know about the rental market today, why you should expand your properties, and how to start your expansions.
The Rental Market in 2023
The global market for rental real estate has reached more than $2 trillion this year and is expected to continue growing steadily over the next decade. With record-low interest rates, rising rental prices, and increasing demand for housing, now is a great time to expand your properties as a landlord.
Why Expand Your Property Portfolio?
Expanding your properties as a landlord can give you many advantages. Here are some of them:
Diversification
Investing in different properties diversifies your portfolio. Owning properties in various locations reduces the risk of vacancy or low rental prices, affecting all your properties simultaneously. Diversifying your portfolio also mitigates the risk of damage resulting from civil unrest, natural disasters, or local economic decline.
Increased Rental Income
Owning multiple properties can increase your rental income, enabling you to generate a steady flow of revenue. For example, owning five properties that generate $1,000 in monthly rent equates to $60,000 annually in rental income. Having multiple properties also gives you an edge during rent negotiations with tenants. The average rent for two-bedroom apartments has now reached $1,300, so by expanding your properties, you can get a lot more than that average.
Greater Access to Financing
Banks and other lenders are more likely to offer financing to landlords with a track record of success. You can increase your borrowing power by showing that you have successfully managed multiple properties. Access to financing means you can purchase additional properties and grow your portfolio further.
Capital Appreciation
As the population continues to grow, the demand for housing increases. This translates to a higher demand for rentals, which can cause property values to appreciate. Owning multiple properties means you can benefit from the rising property values to create equity. Also, having several properties means more opportunities to profit from a property flip or a long-term hold.
Tax Benefits
Owning multiple properties provides various tax benefits. Tax laws allow you to deduct mortgage interest, repair expenses, property taxes, and insurance premiums from your rental income. Depreciation also reduces your taxable income. Owning multiple properties provides additional opportunities to write off expenses, minimizing your tax liability.
How to Get Started With Your Expansion
Now you know the benefits of expanding your properties, here are five steps you can take to get started:
Purchase a New Property
One of the best ways to expand your properties is by purchasing a new one. Look for an area with a lot of potential, such as areas undergoing gentrification or with high rental demand. Consider the size and condition of the property when making your purchase decision.
Research Financing Options
When you’re ready to purchase a property, research the financing options available. One of the best options you have is refinancing. Mortgage refinancing is replacing an existing loan with a new one. It can help you access the equity in your current property and use it to purchase additional properties.
Choose the Right Property Management Partner
Partnering with a reliable, experienced property management company is essential for successful expansions. A good property manager will handle all the day-to-day operations, such as tenant screening, rent collection, maintenance, and repairs. They will also provide valuable insights on where to invest next and offer advice on maximizing rental income from your properties.
Develop Your Brand
As you expand your portfolio of properties, creating brand recognition is important. Offer quality services and build relationships with tenants by creating an online presence or attending local events. A strong brand presence will help attract more tenants and increase rental income.
Identify Tax Benefits
Finally, take advantage of the tax benefits available to landlords with multiple properties. Consult a tax professional for advice on maximizing your deductions and minimizing your taxable income.
Expanding your properties as a landlord can be highly rewarding if done correctly. With careful planning and proper management, you can use real estate investments to generate steady cash flow, long-term appreciation, and tax benefits. Keep these tips in mind and start expanding your property portfolio today!
