Investing in Grand Rapids real estate is an excellent way to earn rental income in the short term and long term appreciation. Many investors have found success building wealth from real estate. But, it’s not as easy as buying a property and waiting for the money to roll in. The most successful investors understand that the best investing strategies cover years and even decades – not months. It’s hardly a get-rich-quick opportunity.
Don’t rely only on rental income. While your cash flow is one important way to make money with real estate, there are other ways to increase the value of your portfolio and the stability of your wealth.
Capital Appreciation and Increasing Value
It would be outstanding if every property you purchased began to earn you money in the first month that you rent it out. Maybe you’ll earn more rent than you expected and you’ll see positive cash flow right out of the gate.
This is certainly possible, but it’s highly unlikely.
Capital appreciation is the increase of a home’s market value compared to its purchase price or acquisition cost. When you factor appreciation into your investment strategy, you’ll see that it will help you earn the income you’re hoping for as the property increases in value. Grand Rapids real estate values are going up, and they will likely continue to increase. It’s a great market with a lot of room for appreciation.
Access Deprecation and Tax Benefits
Making money isn’t only about the cash that’s flowing in. You also have to consider what you’re earning by taking advantage of tax breaks. This is especially true when you consider depreciation.
You’ll need to declare all the income you earn off your rental property, but you can offset that income with any expenses related to your rental home. These deductible expenses are likely to include:
- Maintenance costs
- Legal and accounting fees
- Property management fees
- Mortgage interest
- Any travel expenses related to visits you made to your property
There are several others, and we encourage you to speak with your CPA or tax accountant to get an idea of what you should be deducting to limit your tax liability.
Depreciation is a major tax benefit. It allows you to deduct the investment and purchase costs of your rental property. Even better, you get to take this depreciation over the life of the investment instead of just in the year you purchase it. Currently the IRS has an average lifespan of 27.5 years on record for a home, so that’s the number you’ll use in your tax planning.
These things will help you earn money on your Grand Rapids investment property, and it’s easy to forget these benefits when you’re measuring your rental income against your expenses every month.
Remember also that you’re earning this income while your tenants are paying down your mortgage. The longer you hold onto your property, the better return you’re going to have.
Increase Rental Income with Upgrades and Updates
You can earn more on your investment property when it’s well-maintained, modern, and attractive to high quality tenants. Consider making some cost-effective improvements and upgrades to make it more attractive to potential renters. You’ll find yourself with a higher rental value, better tenant retention, and fewer maintenance and repair costs. All of those things earn you money.
If your home is new and already in great condition, don’t spend a lot on upgrades now. To really maximize your investment, you’ll want to wait until you need to begin replacing things such as floors, appliances, and fixtures.
Contact us at Short South Management and Development if you’d like to talk more about how to make money investing in Grand Rapids real estate.