5 Reasons to Consider Buying Rental Property

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Even if you are gainfully employed with a regular nine-to-five job, you may still want to earn more by purchasing rental property. Hear us out.

According to one source, around four in 10 US adults—36%—have a side hustle. While that’s down slightly from 39% last year, many American adults are side-hustling.

One way to earn more income is to buy investment property. Going this route might be cost-prohibitive since buying rental property can cost six figures. But the return on investment, even with the risks, beats that of many other investment opportunities.

Here are five reasons to consider buying a rental property if you’re up for a side hustle opportunity.

1. Having Rental Property Will Diversify Your Portfolio

A smart investment strategy includes diversification rather than putting all your eggs into one basket. So, pursuing a plan that includes investing in a family home, high-interest savings accounts, mutual funds, stocks, index funds, bonds, and even cryptocurrency can help you build an investment strategy that can weather any proverbial storm.

You can add investment properties to that list. The rental market remains strong. People need to live somewhere, after all. So, if you offer suitable rental units at fair prices, your investment property should perform well regardless of the economic climate.

2. Rental Property Grows in Value

Another reason to invest in a rental property is the potential for the property to increase in value.

The US House Price Index shows that the year-over-year increase in residence values averaged 4.63% from 1992 to 2024. During that period, the all-time high was 19.10% in July 2021, while the all-time low was -10.50% in November 2008. While any investment carries an element of risk, investing in real estate has been as reliable an investment as any over the decades.

3. It Provides Passive Income

Yet another reason people buy investment properties is the passive income opportunities. If you buy a home with five rooms and rent them out for $500 per month, that’s a total of $2,500. You can use that to pay the mortgage, save, or invest in other things. As long as you have tenants who pay on time every month, the flow of passive income will come in month after month.

But how do you ensure tenants will be dependable and take care of your rental property? On the one hand, there’s no guarantee that tenants won’t morph into terrors. On the other hand, a property manager can screen applicants and stock the odds in your favor.

A property manager will conduct background checks, credit score checks, proof of income checks, and even request that applicants submit reference letters from previous landlords. You’re more likely to get good tenants if you hire a property manager to screen applicants.

Another reason to work with a third party rather than do it independently is that a property manager knows how to screen applicants without breaking laws that could lead to lawsuits.

4. You Gain Tax Benefits

Yet another reason to invest in a rental property is that doing so affords tax benefits. You can deduct insurance, maintenance and repairs, property taxes, and any reasonable costs you incur to earn rental income. It’s a good idea to consult with a professional accountant in your area to maximize any tax breaks you’re entitled to. You’ll see there are many tax benefits available.

5. You Can Monetize Your Investment

You can keep your rental property for the short term or for a long-term period; it’s entirely up to you. But the longer you retain it, the more likely you’ll get a profitable ROI. It’s one of the reasons why buying rental properties makes so much sense.

Conclusion

While there are many options if you want a side hustle sooner rather than later, buying a rental property is one offering high ROI potential. One of the best investments you can make, should you go this route, is to hire a property manager to help you. It will boost your odds of success.