Why You Should Buy a Second Rental Property This Year

If you already own one rental property, it is likely that you already know some of the pros

and cons to running one.

Perhaps a family home was passed down to you to rent and you have the opportunity to buy

another unit to make double the investment.

Or, maybe you own a multi-unit and you seek to make profit off another.

Whichever situation you’re in, if you are already making a profit you can make another

investment to make even larger returns.

Here are a few reasons why you should buy a second rental property this year:

Less People Are Buying Homes

In the wake of the 2008 Subprime Mortgage Crisis, realty grinded to a halt.

Banks slowed their lending processes after mortgage fraud was found on behalf of some of the

largest lenders.

As a result, suburbs were abandoned, unemployment rose dramatically, the rate of foreclosure

skyrocketed, and credit became harder and harder for people to gain or maintain.

Even now, the housing market is only beginning to recover, but some of the long-lasting effects

seem ingrained into the national culture.

In the wake of the crisis, people started to see housing as a poor investment and more people

are now gravitating toward rentals in the city.

The most notable example of this is in the youngest generation up into their thirties.

Millennials—those born between 1981 and 1997—are settling down later and renting for longer

periods of time.

As a result, investing in more rental property has the potential for large growth.

Consider a Multiunit

There are many practical and economic advantages of owning a multifamily complex.

Owning multiple single unit homes can be more difficult to manage, as they are spread out.

When all of the units are under one roof, you will only need one property management company

to handle tenant issues and grounds, instead of individualized needs for individualized homes.

Owning rental property in the form of a multiunit means that even if all of the units are not filled,

you will still make a profit.

This can be more cost-effective in the long run.

Investing in house amenities that provide curb appeal, such as a laundry room or new cabinets,

will make more of an impact than spending as much money on renovations for one property.

Look at Properties in the Same Area

If your first property is in a successful area, it might be a good idea to own another property in the

same part of town.

If you ever played Monopoly, you know that the more property you owned around the board, the better.

Owning more property in one area reduces the competition against other property owners and creates

a higher likelihood that a tenant that is interested in that area will try to rent from you.

By using some of the profit of one property to renovate the other, you now have two properties that

may both have appeal but in different ways—thereby increasing competition among renters.

Optimize Cash Flow

When all expenses are taken out, the cash flow remains.

That is the profit you make off the company.

Take the rent you charge and multiply it by a decade to see the amount you can make.

While this is happening, you are also paying down your mortgage.

As the property appreciates in value every year, you can gather hundreds of thousands of dollars

in equity with a large financial gain.

If you strategize your down-payment and interest rate correctly along with your mortgage, you can

pay down your mortgage faster than you would with one property.

Do remember that you will have to keep up on repairs and interest rate fluctuations.

“Whichever situation you’re in,

if you are already making a

profit you can make another

investment to make even

larger returns.”

Your safest bet in this instance is to buy a property in an area that already has a strong economic foundation.

Have you considered buying rental property?

Share your thoughts and comments with us.