An investment property is an excellent way to increase income and expand your financial portfolio. But is it right for you? To answer that question, you’ll need to consider a few things.
Current Market Conditions
When there’s a slowdown in the housing market or a decline in prices, smart investors often purchase investment properties. Options are greater when sales are sluggish, and buying a property at a lower price generally means higher profits.
If you’re considering an investment property in the Dallas-Fort Worth area, now is a good time to buy; DFW home prices have seen a historic decline. A recent S&P CoreLogic Case-Shiller home price index reported a first-in-a-decade annual decline. Prices for DFW homes dropped 2.9% from April 2022 to April 2023.
Current Interest Rates
The right financing can make or break an investment property. So does that mean you should wait until interest rates drop to the historic lows we had a few years ago? You might be waiting a while, which translates to time without an income stream from an investment property. Instead, financial experts advise considering today’s rates the new normal and moving forward with your purchasing plan. If rates fall in the future, you can always refinance.
Consider the Tax Benefits
Here’s where you really need to do your homework, and you would be wise to consult a tax expert. In Texas, one can lower the taxable income from rental property with a depreciation deduction. Owners of rental properties can also lower their tax bills with deductions for mortgage interest payments. Losses on investment properties can offset other taxable income. Just to name a few tax benefits you should know about.
Know the Rental Market
You should have in-depth knowledge of what is renting and for how much in the area you’re considering. So a market rental analysis is advisable.
If you’re thinking of investing in the Dallas-Fort Worth area, you’re in luck; DFW ranks first in the U.S. for real estate investments. A survey conducted by the real estate company CBRE Group considered the ten largest metropolitan areas in America. It found that the DFW area outperformed these other metros in commercial property sales three years in a row. Apartments and industrial buildings make up the bulk of these sales.