Whether you are a seasoned investor or are just starting out, there are several benefits that come with buying real estate not for ownstay.
As with any form of investment, being a landlord will not always be smooth-sailing and risk-free. You might have to occasionally deal with bad tenants, and grapple with laws that are not practical when it comes to recovering losses or damages.
Yet, the pros are well worth the cons. Here are four reasons you should look into owning rental properties.
1. Passive income
One of the biggest benefits is that rental properties provide recurring income that requires relatively little work to maintain.
Still, investors must be diligent in doing the necessary research beforehand to identify properties that can yield positive cash flow.
If a whole unit does not offer the desired returns, try renting out by the room or per bed. This generally requires more tenant management but makes up for it with higher returns.
The extra income from a rental property can add to your savings or serve as additional financial security for retirement. And even if the rental income does not exceed your mortgage repayments, you at least benefit from tenants helping to pay down your loans.
This rental income can be taken into account by banks when evaluating loan eligibility for future properties.
2. Hedge against inflation
As land is a relatively limited commodity, real-estate values tend to appreciate in the long term given the right circumstances. As such, a property could be sold down the road for a hefty profit.
While the average inflation rate in Malaysia has been around 3% annually, house prices rose by as much as 96.1% (52.4% inflation-adjusted) from 2005 to 2015.
And while the growth of house prices was muted at 3.3% – after inflation adjustment – from 2016 to 2018, property ownership has proven to be an effective hedge against inflation over the long term.
Owning multiple rental properties also allow investors to diversify their investments, minimising the risk of losses and maximising opportunities for capital appreciation.
3. Flexibility
If market conditions are poor when you are ready to sell, renting out your property instead will offer you better holding power through tough times, giving you the flexibility to time your sale until market conditions improve and you’re able to make a profit.
Owning a rental property also means you could choose to move back in if circumstances require, leaving you with a safety net.
4. Upkeep and security
Some owners prefer to flip investment properties and avoid the hassle of dealing with tenants in the interim. Others may inherit a property but choose not to rent it out for sentimental reasons.
However, leaving a residence vacant could incur costly repairs over time, especially in the case of landed property. Left neglected, minor leaks or insect infestations may occur.
From a security standpoint, vacant properties are also more prone to break-ins and unwanted squatters – be it people or animals.
As such, continuous upkeep and maintenance, either by the tenant or landlord, are easier on the wallet in the long run.
This article was written by Vigneswar Rajasurian of PropertyAdvisor.my, Malaysia’s most comprehensive source of property data, property analytics and insights.