How Is Buying A Rental Property Different From Buying Your Own Home?
When buying a property, you’ve probably asked yourself if you're going to buy your own house or a rental property. Real estate investors would likely say that buying a rental property is the best option. It can generate more revenue quickly than owning a house.
It's true, and there's no doubt about that. However, being a landlord associates many responsibilities. And that means having a wide range of skills is a requirement. You can't just rent out your property if you are not well-versed in managing rent operations.
So, how can you choose between buying your own house and buying a rental property? First, you need to know your objective. Are you buying a property to earn a profit, or are you only after the house itself? It's necessary to understand the nature of both types of property investments before making a final decision. In this way, you can determine which strategy fits you right, especially in the financial aspect.
Here, I listed the difference between buying a rental property and buying your own home:
Buying Own Home
You are purchasing your own home because it suits your needs and wants.
Everyone needs shelter. If your aim is to have a place where you can live, buying a property is the best option. And if you have more funds to acquire a property, you can also buy another one in a different place. Owning more than one real property is a good investment as well. Since the value of the real estate appreciates over time, the market value of your assets will also increase.
You aim to pay it off.
Since it is just your own place, you can't generate revenue from it. So basically, you will pull out money from your own pocket to pay off your mortgage. Your property may appreciate its value over time, but of course, it is not liquid. That means you can't sell your property and gain income right away. And while the selling is on the process, you still need to pay the mortgage.
The loan is paying off the principal and interest costs.
This is one of the benefits of having a fixed-rate mortgage. You don't have to worry about payments because the loan covers all the cost and interest. And since it has stable monthly payments, you can easily monitor your cash outflow.
You can live to the best you want.
Of course, you own the house so you can do whatever you want to do. You can renovate and design it based on your liking. You will also get the privacy you want. No restrictions. No interventions. Your rules follow. How nice would that be?
You can have quality and often expensive upgrades.
I bet you also have a dream house that you want to build in reality. When you acquire your own place, you surely want to have only the best quality of things in your home. You will probably spend more when it comes to upgrades. Designing your own house may be expensive, but the satisfaction it will bring is priceless.
Buying a Rental Property
You are purchasing a rental property because it's the best for other people and you want passive income.
Passive income is the recurring income that needs moderately little effort to manage. If you're a real estate investor who wants to earn revenue quickly, buying a rental property is what you need. Aside from the returns that you can gain from rental income, you can also help people find shelter.
You can have tax benefits when incurring expenses in your property.
Renting out your property offers many financial rewards on your end. Since it is a registered business, the expenses you incurred for the rent operations will deduct your tax due. And this includes the ordinary and necessary expenses, improvements, and depreciation.
You can provide upgrades but not so expensive.
You'll be having tenants. That means other people will live in your property. In the rental property business, you don't have to spend too much on upgrades. You can purchase essential things with good quality, without hurting your own pocket.
You need to fund the cost of upkeep.
Having a rental property requires sufficient attention from the landlord. When it comes to repairs and maintenance, you need to have funds for the cost of upkeep. Unless you have various skills in managing and handling maintenance, you can save yourself from those expenses.
Whether you buy a rental property or own a house, it's still better to study how real property investment works. Finding out their benefits and drawbacks will help you differentiate which suits you financially and personally. And whichever you choose, real estate will give diversification in your investment portfolio.