Real estate investments rarely create immediate wealth. If you’re hoping to make money from your real estate investments in Philadelphia or the surrounding areas, you’ll need a solid strategy and a bit of patience. Sometimes, new investors will expect to make a lot of money right out of the gate. That’s unlikely. Whether you’re buying your first investment property or growing an already established portfolio, you have to remember that real estate investing makes money over the long term.
Another good thing to remember is that there’s more than one way to make money on your real estate investments. Rental income is typically what we look at when we think of income, but there are several ways to make money from your investment.
Your Investment Property Increases in Value
Everyone wants their rental homes to cash flow the first month that they’re occupied, but this is unlikely, even in the best possible rental market. For a while, the rent you earn will contribute to the costs of owning property, but it’s not going to leave you with thousands of extra dollars to spend each month.
Capital appreciation is the increase of a home’s market value compared to its purchase price or acquisition cost. When you factor appreciation into your investment strategy, you’ll see that you are earning money as soon as you buy your property. Real estate values are going up, and they will likely continue to increase. The Philadelphia rental market has a lot of room for appreciation.
Earn Income with Tax Benefits, Especially Deprecation
Income is often only considered when you think about what you’re bringing in on your investment property. But, you also have to think about the money you’re holding onto. This is especially important when you consider your taxes.
You’ll need to declare all the income you earn off your rental property, but you can offset that income with any expenses related to your rental home. These may include:
- Maintenance costs
- Legal and accounting fees
- Property management fees
- Any travel expenses related to visits you made to your property
Talk to your CPA to make sure you’re taking advantage of every possible deduction so you can earn more money with your investments and limit your tax liability.
Depreciation allows you to deduct the investment and purchase costs of your rental property. Even better, you get to take this depreciation over the life of the investment instead of just in the year you purchase it. Currently the IRS has an average lifespan of 27.5 years on record for a home, so that’s the number you’ll use in your tax planning.
Another important thing to remember is that you’re increasing what you earn while your tenants are paying down your mortgage. The longer you hold onto your property, the better return you’re going to have.
Upgrades and Updates Increase your Rental Income
You can earn more on your investment property when it’s well-maintained, modern, and attractive to high quality tenants. If your kitchen has old appliances that are quickly deteriorating, you’re likely losing good tenants and you’ll have trouble increasing rent.
If your home is new and already in great condition, don’t spend a lot on upgrades now. To really maximize your investment, you’ll want to wait until you need to begin replacing things such as floors, appliances, and fixtures. It’s best to take care of these things during turnover periods.
We can tell you more about how to ensure you’re maximizing what you earn on your real estate investments. Contact us at TCS Management.
TCS Management is a full service property management company headquartered in Philadelphia, Pennsylvania, also serving Cherry Hill, NJ, Wilmington, Delaware and the surrounding areas. We focus on single-family and multifamily residential property management of homes, condos, townhomes, and apartment buildings.