Investing in the stock market, investing in a friend’s business — there are tons of investment opportunities out there, all of which show potential in growing your financial portfolio. Why should you leverage your self-directed IRA to invest in rental property? Why should you apply for a non-recourse loan to make this happen?
Our non-recourse loan lenders at First Western Federal Savings Bank are here to answer that very question. Find out why property investment is one of the best and most safe financial risks to take, and get started by applying for a non-recourse loan with our lenders today.
A Reliable Demand
As we’ve mentioned in previous blogs, there are more renters nowadays than in the past 50 years. SmartMove reports that “The national homeownership rate has dropped 9% since 2004.” Our non-recourse loan lenders have also talked about how millennials are staying in the rental market longer than previous generations. All of this goes to say that unlike stock markets and business ventures, which can be unpredictable, investing in real estate is much more reliable.
More people can afford to rent properties, but they cannot afford a down payment and monthly mortgage. This trend doesn’t show any signs of changing, especially as interest rates continue to rise. Investing in a rental property is going along with the demands and trends of not only today, but tomorrow.
A Source of Passive Income
By owning a long-term tenant rental or even a vacation rental property, there’s a good chance that you could easily cover your monthly mortgage payment by collecting rent along — if not generating even further income. Rental income can also be taxed differently than income from a traditional source of employment income, which can also work to your advantage.
Once you pay off your non-recourse loan and mortgage, you could see massive gains on your property and rental income. Whereas stock markets fluctuate, a rental property investment is a pretty solid source of revenue.
An Opportunity to Sell
When the time is right, you’ve fulfilled the requirements of your mortgage and/or non-recourse loan, and you’re ready to sell, you will suddenly be able to add an enormous boost to your financial portfolio. Especially if your property has appreciated over time, you’ll be profiting from this investment. This is highly advantageous to planning for retirement, or investing in other avenues as the opportunity presents itself.
A Diverse Investment Portfolio
SmartMove talks about how diversifying your financial portfolio is important for many reasons, one of which is adding a layer of security to your assets. Owning a rental property that’s doing well can protect you from any hits that come from other higher-risk investments. As great as your brother’s new barbershop sounds, it’s an investment that comes with much more risk — Investopedia reports that “The SBA states that only 30% of new businesses fail during the first two years of being open, 50% during the first five years and 66% during the first 10. The SBA goes on to state that only 25% make it to 15 years or more.”
This isn’t to say you should avoid all other investment channels, but it goes to show that there’s truth and benefit to not keeping all your eggs in one financial basket.
An Enjoyable Project
A lot of people love sweat equity. They watch those DIY shows and find YouTube videos that teach about fixing up properties — there is a lot of purpose and joy that can come from landscaping, performing your own renovations, and taking a property on as a project.
To be clear, a non-recourse loan does not cover sweat equity. Your loan can only be used towards purchasing the property. But for some people who own a property for several years, have paid off their loan, and are excited to make some changes, this is a great opportunity to combine your passions with growing your financial portfolio. Not to mention, making some of these changes also helps your property appreciate in value.
Investing in real estate and rental properties are a solid source of passive income that could be the perfect opportunity for you. Ready to take the next step? Visit our non-recourse loan FAQ page or purchasing rental property page to learn how to get started, and apply with our lenders at First Western Federal Savings Bank today.