Take Advantage of the Housing Market to Become a Landlord
One way to build wealth is to become a landlord. As you gain rental properties, you will have more and more passive income at your disposal, which can help supplement your day job income and increase your cash flow.
Take, for instance, Matt and Jessica who bought a home 10 years ago and have been aggressively paying down their mortgage. Now, they only owe $50,000. Despite the market, their home has retained its value, and they have $155,000 in equity in the home.
Since they bought the home 10 years ago, they have also saved aggressively by working side jobs in addition to their day jobs—Matt is a D.J. and Jessica is a photographer. They have banked all of their side job money and now have quite a large amount. They have decided to take advantage of the historically low interest rates to buy a bigger home. However, they won’t be selling their current home; they will instead rent it out and become landlords.
If you are in the market for a new, larger home, there are a variety of home loans available to you, so when preparing to buy a bigger home, you need to determine what mortgage is the best fit for you personally. Should you take out a 5 year adjustable rate mortgage (ARM) and take the chance that mortgage rates will be lower than they currently are, or should you take out a fixed rate mortgage with the assumption that today’s rates are quite good and locking in those rates would be wise. Using mortgage calculators as well as talking to a mortgage broker or loan officer can help you choose the mortgage that is right for you.
With careful planning and the right mortgage, you can find yourself in the enviable position where your tenants pay for your own mortgage payment through their rent payment. Then, you can continue to grow your own wealth and, if you are interested, buy additional properties.
While being a landlord is sometimes difficult, such as when you have tenants who cannot or will not pay or when your property needs to have expensive repairs, it also has many financial perks. You can grow your wealth and develop a passive income stream that can give you a good return on your money for years to come.
People enter the rental market through a variety of means. If you are thinking about becoming a landlord, consider waiting until you plan to move to a larger property. Then, you can use your former home as your first rental property. You will know exactly how the property has been taken care of and what condition it is in, so you will not have any surprises as you might if you were buying a new property.
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