You saved a lot of money and are thinking about making a pretty sizeable investment. After looking around online, you’ve decided that a real estate investment is the smartest choice. Properties typically appreciate, so it makes a lot of sense to get on the property ladder when you can.
On that note, you’re thrust into the world of property investments and their many types. One side of the equation holds a “traditional” investment – this is a house you’ll use as your primary residence or try to flip for profit. The other side plays host to buy-to-let investments. These properties are not for you to live in; you purchase them and rent them out to other people or companies.
While many people opt for the traditional investment route, here are three reasons a buy-to-let investment makes far more sense and can help you make more money:
Easier to Find Financing
Rental properties are easier to finance, thanks to Debt Service Coverage Ration (DSCR) loans. Anyone can obtain a DSCR loan, and they’re explicitly for rental properties. This is because you become eligible depending on the rental income generated by the property. Your personal income doesn’t get taken into the equation, which is often what stops you from getting a traditional mortgage for a more standard real estate investment.
Of course, you still can get a buy-to-let mortgage, but the presence of alternative loans widens your options and gives you more ways to finance this investment.
Generates Monthly Revenue
Traditional real estate investments depend on market forces and time to make money. You need to wait for the right time to sell the property to earn a profit. Contrastingly, buy-to-let investments generate revenue every month. Your tenants pay rent, and it comes in consistently, allowing you to maintain a steady cash flow from this investment.
You’re effectively earning back the money you pay on your loan through rental income, which is far better than having a property and paying the mortgage for decades.
Offers the Best of Both Worlds
Of all the reasons to consider rental investments over traditional ones, this is the most obvious. You get the best of both worlds from a buy-to-let investment: earn rental income every month and then sell the property when the market dictates it.
You can hold onto your investment for decades and continuously make money through rent. Then, when the time is right, you can sell it to someone else for a profit on what you originally paid. Overall, this generates a far greater return on investment when you account for the rental income PLUS the sales profit.
As the evidence shows, rental properties are superior to traditional ones. They give you more options, open a regular revenue stream, and are difficult to get wrong. If you’re interested in this investment, make sure you purchase the right type of property. You can’t buy a standard house and rent it out – you need to buy a property that’s either designated as a buy-to-let or purchased using a buy-to-let loan.
