Do you have any plans to move to California? Over the years, rental properties in California have remained a top investment despite interest rates steadily soaring high. However, despite good results, the only big problem when investing in rental properties is that people are still not accustomed to soaring interest rates.
The question remains, why do rental properties remain a good investment even if interest rates are high? This could be a common question you would ask to professionals with real estate license in California. Sometimes, interest rates can present specific opportunities for investors to generate a steady income stream, build equity, and the potential to achieve long-term gains in the process.
In this article, we will learn why some people still find investing in rental properties a good thing. If you have no additional questions, let’s learn the reasons below.
4 Reasons Why Rental Properties Remain a Good Investment Despite High-Interest Rates
Despite high-interest rates, rental properties remain lucrative investments for certain individuals. With the help of professionals with real estate license in California, here are some of the reasons you might not know of.
Rental Properties are Long-Term Investments
One of the biggest reasons rental properties are still great investments despite soaring interest rates is that they are considered long-term investments. Why? While some people get instant money from dealing with their properties, and some might land deals with significant cash flow from the start.
Generally, whether you earn right away or in minimal increments, remember that rental properties are long-term investments. Most of the time, people are looking for the cash flow; they don’t see that cash flow is only projected today and not for the future.
Cash flow doesn’t account for rent increases, appreciation, demand, and inflation over time. All of those considerations will be worthwhile if they are going to change for the better.
Rent Increase
As we’ve already stated, the cash flow is only projected based on what it is today, which means rent is only calculated based on its rate today. Over time, residential areas are delighted with new business establishments and tourist attractions depending on the property’s location.
As a result, it has the potential to increase in value while also giving you the leverage of using this newfound piece as one of the reasons you need to increase your rent. But, of course, when rent goes high, it only means you will get back a little more than it should.
This means your cash flow will continue to grow or increase as long as you have the property. While property taxes and mortgage payment increases over time, it doesn’t increase the way rents do. Over time, you will see that rents get increasingly high as time goes by, which will eventually offset the high-interest rate you dealt with when you purchased the property.
Improving the Property
When you improve the property as a whole, you not only add value to it, but you can also do a lot of things with it. One of the more obvious ones is increasing rent, as we mentioned a while ago. In addition, the more desirable the property looks, the more it will generate income for you, as it will most likely gather interest within your area.
While improving the property can take up most of your money, it will still generate cash in the long run. Remember our first reason rental properties are great investments despite high-interest rates? It’s because they are considered long-term investments!
In addition, improving your property doesn’t mean a total makeover. You can most likely repair damages, improve lighting, upgrade the kitchen, or reinvent the bathroom. These are what we call minor upgrades but with amazing kickbacks. As we’ve mentioned, aside from increasing the rent, you can add value to your rental property if you plan to sell it one day.
Refinancing Your Mortgage
Remember, your mortgage is subject to inflation and deflation, which means you might not have to deal with soaring interest rates long-term. Therefore, if interest rates in your property drop by a considerable margin, it would be better to refinance your property at a much lower rate.
The only problem is we can’t guarantee that interest rates will fluctuate over time. However, if there comes a time that it will do, consider this option if you want to maximize your cash flow.
Conclusion
Owning a rental property is still one of the better investments you can make if you want a steady cash flow. Most investors are always keen on investing in this industry because it doesn’t depreciate, and its value increases over time.
In this article, you should clearly understand why rental properties remain a good investment despite extremely high-interest rates. Statistics and numbers aren’t the whole story. If you are already a veteran in this industry, you would know why keeping your rental properties in the long haul remains a top priority for steady cash flow.
