Real estate is an excellent vehicle for building wealth. When you own rental real estate, you have the potential to earn some pretty impressive returns over the long term, and this can help you plan for retirement, save for your child’s college tuition, or build generational wealth for your entire family.
Four major factors contribute to the wealth-building capabilities of real estate investments:
- Real estate appreciates quickly. For residential properties, values tend to double every 10 years.
- Rental prices also appreciate quickly. You can expect your rental value to double every 20 years.
- Tenants are paying down your mortgage when they send in their rent every month.
- Tax advantages unique to rental properties include deductions for depreciation, maintenance, and professional services.
Choosing the Right Tampa Investment Property
To be successful as a real estate investor, you need to understand two important things. First, it’s going to take time to earn some real money. Second, you can only succeed when you buy the right property.
Some rental properties will cash flow right away, but for most, it will take some time. That’s okay. If you’ve invested in a good property, you started earning money as soon as you closed the deal.
The best investment properties for wealth-building, we believe, are single-family homes. The Tampa market has a lot of opportunity for investors looking at single-family homes. In our 35+ years of experience, we’ve found that multi-family rentals, while they have their own unique advantages, often result in more work and lower returns over time.
With single-family homes, you’ll attract stable tenants and higher rents. You’ll also see your property value increase consistently in the short and long term.
Real Estate Investing is Time Consuming
We’re always amused when real estate investors describe the “passive income” they earn on their properties. There’s nothing passive about owning, leasing, managing, and maintaining a rental home.
If you’re managing on your own, you’re going to need a lot of time to devote to your properties and your tenants. You’re also going to need resources like a good lease agreement, highly qualified maintenance vendors who are licensed and insured, legal experts if you have lease violations or an eviction, and an understanding of the local rental market and how it impacts rental value, marketing, tenant retention, and lease renewals. You’ll need to understand security deposit laws and the difference between a pet and a service animal.
Most investors earn more money and waste less time when they hire a professional Tampa property management company. Property managers have consistent systems in place and years of expertise.
Measure Your Tolerance for Risk
As with any investment that provides good returns, there are risks when you invest in Tampa real estate. Traditionally, people have believed the higher the risk, the higher the return. But this isn’t always true. If your goal is to build long-term wealth, we recommend a low-risk strategy that reflects an understanding of the market.
Wesley Chapel, for example, is a Tampa rental market that commands high rents, attracts great tenants who want good schools for their kids, and is unlikely to begin deteriorating in the next 20 to 30 years. Property values are increasing steadily, and an investor can expect to make eight to 12 percent on the cash invested over the period of their investment. The wealth is growing, even at a lower risk level.
Risk is always mitigated with a good property manager.
If you’d like to talk about your own unique investment goals and how a strategy of buying smart rental properties in Tampa might help you build wealth, we’d love to meet you. Contact us at Hoffman Realty.