What are the benefits of buying investment property in Minnesota?
A Minnesota income property is a property that is purchased with the intent of generating income. Keep in mind that while there are many benefits to investing in income property, but there are also significant risk factors.
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Here are six reasons why buying a Minnesota Investment property can be a lucrative endeavor.
Buying a Minnesota Investment Property
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You control the investment:
When you buy an investment property in Minnesota, you are in control of the investment. You decide on the price you are willing to pay for a property. You decide on how to manage and maintain the property. You decide the lease terms. You decide who to rent to and how much to charge. You decide the exit strategy. With a Minnesota investment property you should know most of your numbers and be able to control the investment, unlike say buying a stock and hoping the company performs.
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Using other peoples money
When you buy a Minnesota investment property, you are able to use someone else’s money to buy the property. This is usually done with a loan from a bank. By leveraging a property you are able to use a smaller amount of your own money, but still get all of the rewards of owning an investment property, which I will discuss in just a minute. If you went to the bank and told them you wanted to borrow $200,000 on invest in the stock market they would probably laugh at you, but banks are competing every day to lend money on property.
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Someone else pays your mortgage
When you buy and own a Minnesota investment property not only do you get to use someone else’s money to buy the property, you also get someone else to pay for it! When you rent out the property, you usually have the numbers worked out to not only cover your expenses, but you can often have extra money coming in. Every year that you own this property, you are using the tenant’s money to pay off your debt. By reducing the amount of your loan, you will be building wealth as you will eventually be able to access this money either by refinancing your loan or by selling the property.
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Passive Income
Assuming that you are investing in an income property to occupy it with tenants, you will be able to receive rental income. When your gross income is greater than your expenses you have money left over and this is your monthly cash flow. Lets use an example. Lets say you bought a rental property and your monthly PITI is $900 and you receive $1300 a month in rent, your potential cash flow is $400 a month. This doesn’t account for vacancies or maintenance, but it just shows that you can borrow money to buy an asset that can provide you with monthly income and also may appreciate. So what is appreciation?
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Potential Appreciation
If you were to look at real estate over history in the US. Real estate tends to have an average annual appreciation of over 5% according to the US census. Of course, as the last housing bubble taught us, there are always ups and downs, but the general trend taken over time is over 5%. Lets say you bought a house for a $100,000 in 2015 with a 20 year fixed rate loan at the end of the 20 years you could have an asset worth over $265,000. These numbers are not guaranteed, but it to show what potential appreciation is possible. Also remember that you borrowed money to buy Minnesota investment property and had someone pay for it for 20 years.
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Tax Benefits
As a Minnesota rental property owner, you are entitled to many tax deductions. You can write-off interest on your mortgage. You can write off your insurance, maintenance repairs, travel expenses, any legal and professional fees, and even your property taxes. On top of all of these deductions, the government also allows you to depreciate the purchase price of your property based on a set depreciation schedule, even if your property is actually appreciating in value.
As you can see there are many benefits to buying a Minnesota investment property. If you are interested in hearing more about investing in a Minnesota Investment property please fill out the form at the side of the page and a Greenlaw Realty agent will contact you.