Know that it is possible to live off rent from real estate. This is one of the strategies to achieve financial independence. One of the businesses most coveted by many people is the rental of real estate, whether for housing or commerce. There are many ways to earn income by renting real estate, renting rooms, shops, houses, industrial facilities, land, spaces, farms, etc.
The Different Types of Income
Living on this type of income is an idea that has passed through many heads and some people have already embarked on this adventure. It is a way of being in business. It has been presented as a very profitable way, since in addition to income from rents. The appreciation of properties in recent years (20) has also created significant real estate gains.
Even in times that are not favorable for the owners, the value of their property falls. It continues to present itself as an opportunity for those who reinforce or start this type of activity, due to the fact that real estate opportunities can be found in the market. In case of real estate co-investment this is essential.
A business for anyone
We have to admit that although the idea is not at all original, it is a good idea, as anyone can have this type of income or business.
- It is a safe investment, with the risk in fluctuations in the value of the square meter, for buying and selling, but even so we can say that the risk associated with this asset is small. The property retains its value for many years, and still finds periods of enormous growth, depending on the economic cycles that are going through.
- The dynamics of the business are quite simple, the property is bought, the lease is made and rents are received. There is no production, no customers (only 1 per property, typically), no human resources, no billing fluctuations, no “sales”, etc. The sale is just finding the tenant.
- Even those who have “little” assets can invest in real estate, as it is a source of guarantee for bank loans, enabling them to purchase without their own resources or with a small portion of their own funds.
Reasons to invest money in this investment
Even for those who have considerable sums of money to invest, it can be advantageous to enter the real estate directly for rent, as they allow a constant cash flow and the possibility of valuing the asset that constitutes the investment, never obtained in a term deposit without capitalization of interest.
The accounts for this type of business seem simple, but there are sometimes factors that are not taken into account and that can undermine the profitability of the business, such as taxes, defaults, insurance, condominium fees, sanitation or maintenance and conservation expenses.
An idea that can be used for those who think of living from income from real estate (lease), and for tax reasons is the careful reading of the article reasons to create a company.
Leverage in real estate
The financial leverage is a mechanism that allows to boost business and investments, as already discussed in the article: financial leverage. As the value of real estate is normally high, it is easy to exhaust the financial capacity of each one, so it will not be difficult to perform that access to credit will be increasingly complicated, as it will easily enter a high level of indebtedness and put at risk the ability to make commitments in the event of unforeseen events. Here, personal guarantees take on a central role and this is where you can take advantage of good relations with a financial institution.