If you’ve ever daydreamed of becoming a landlord, now is the time to wake up and take action! With new tenants entering the rental market and old tenants sticking around for longer than any previous generation, today’s rental market is booming. Sure being a landlord comes with some extra expenses and responsibilities, but for most landlords, capitalizing on today’s market boom leads to a brighter financial future. Here are 7 ways that you can build your wealth when you purchase a Tennessee rental property:
Generating positive cash flow
Positive cash flow is generated when rental income exceeds the expenses you pay as a landlord. When your Tennessee rental property is generating positive cash flow, you get to pocket the excess month after month, thereby building your wealth.
Paying off your mortgage
The savviest way you can use positive cash flow is to pay off the mortgage on your Tennessee rental property. Monthly mortgage payments take a bite out of your rental income. The sooner you can ditch your mortgage, the better! Profit from your Tennessee rental property will skyrocket, as you get to keep the lion share of rent from your tenants.
In addition to putting cash in your pocket each month, the value of your Tennessee rental property adds to your net worth. If you increase the value of your property, your net worth increases too. Probably the most proactive way to increase your property’s value is to undertake cost-effective home improvement projects. These can increase the value of your property regardless of market fluctuations.
Even if you make little change to a property from the time you purchase it, the property’s equity value is likely to increase over time due to market inflation and supply-and-demand economics. This is especially true if you purchase property in a hot location with lots of development.
As your property’s value increases through improvements you make and market inflation, you will be able to up the rent you charge each month. It means more cash in your pocket!
An experienced accountant can give you a detailed analysis of the tax benefits that come with your property, but the gist is this: owning Tennessee rental property entitles you to tax deductions for depreciation, rental expenses, and mortgage interest.
Real estate tycoons, the people who make a fortune as landlords, do not own just one Tennessee rental property. Instead, they re-invest the profit and knowledge they gained from their first rental property into more and more properties. Their cash flow and net worth snowball.
When you decide to purchase a Tennessee rental property, you are setting a cycle of profit into motion. Increasing rental rate means you are able to pay off your mortgage sooner and, if you choose to do so, continue to improve the property. Your property’s value will then increase, and you may consider increasing rent again. Eventually, you might even sock away enough cash to invest in a second money-making machine. It’s a happy financial cycle for you as the owner of rental property, and the sooner you get started, the brighter your future shines.