It’s easy to think about your recurring rental income as the money-making part of your Long Beach real estate investment. That rent goes towards your mortgage payment, your insurance, taxes, HOA fees, and any other expenses that come with owning a rental home. You’re aware that your tenant is contributing to the costs associated with any investment.
But it’s not only rent that helps you earn money.
Real estate investments are wise for a number of reasons, and your earnings cannot be measured simply by your rent deposits.
Long Beach Asset Appreciation
As an investor, you’d love it if every property you purchased began to earn you positive cash flow in the first month. If the amount of rent you collect far exceeds the amount you need to spend on that property, you’re going to earn a lot just on rental income.
But, that rarely happens, even with rental prices climbing steadily.
Asset appreciation is the increase of a home’s market value compared to its purchase price or acquisition cost. Factoring your appreciation into the equation of what you’re earning and how your return on investment (ROI) looks is an important part of understanding how much money you’re really making.
When you factor appreciation into your investment strategy, you’ll see that it will help you earn the income you’re hoping for as the property increases in value. Long Beach real estate values are going up, and they will likely continue to increase. The market has had some ups and downs over the last few years, and as things begin to settle a bit, there’s a lot of room for appreciation.
Increasing the Value of Your Long Beach Property
Another way to earn money on your real estate investments is by making them more valuable on the rental market. A well-maintained, modern, and attractive home will not be vacant for long, and you’ll have no problem attracting and retaining high quality tenants. You’ll also be able to increase what you ask for in rent.
Invest in cost-effective upgrades. You don’t need to completely renovate the place to increase what you earn, but you can make some simple improvements. Hard surface floors instead of carpet, for example, or stainless appliances can raise your rental value. Better landscaping, fresh paint, and even new fixtures on your sinks, cabinets, and drawers can make a difference. Improve your lighting and your window treatments. These things matter.
Long Beach Rental Property Depreciation
Depreciation is the loss in value to a property. This occurs naturally over time thanks to the property’s age as well as normal wear and tear and deterioration. When you claim your rental property depreciation on your taxes, you can write off the structure of the property and the improvements you’ve needed to make over a period of time.
The IRS looks at this as a business expense that can be written off at tax time.
Be mindful of what you can and cannot include: you can only depreciate the improvements to the property itself and not the land it sits on.
Basically, the IRS allows owners to take a tax deduction based on the perceived decrease in the value of the property over a period of 27.5 years. Depreciation deductions are spread out over the “useful life” of a property, which the IRS has decided is a 27.5 year period.
Depreciation helps you make more money because it reduces reportable net income and leaves you with fewer taxes to pay.
If you’d like to discuss the money you’re really making on your Long Beach real estate investment, contact us at HCM Property Management. We’ll be happy to help!