You want to purchase a new home in the Tulsa area. Maybe this would be the first home you ever owned. Or, maybe you own a home now and its value rose quite a bit since you bought it. So, you decided that you want to cash in your equity and buy a new home. Think about this for a moment. Instead of looking at buying a new home for yourself, renting your primary residence and purchasing a rental property may make more sense. How? Let me explain.
Why Purchasing a Rental Property May Make More Sense Than Buying a Primary Residence for Yourself
Make Some Money
Renting a home, condo, or apartment while paying for a mortgage on a rental property may sound counter-intuitive. But think about this. Millions of tourists visit Tulsa every year. Pre-pandemic, as many as nine million flocked to our fair city. But even in 2020, over seven million tourists brought over one billion dollars into our local economy. All those people need a place to stay. Why not provide a rental property for them? The money you receive helps pay down your mortgage each month. Then, you get to save up money for your own home in the meantime.
Allows You to Buy a Second Home
When you buy a primary residence first, you may have trouble saving up enough money to buy a rental property and add to your financial portfolio. However, if you buy a rental property first, your tenants pay your mortgage. That frees up your own active income to either pay off the mortgage on your rental property quickly or save up for a new Tulsa home of your own. Let’s say that you receive twice the mortgage payment regularly each month via Airbnb or Vrbo. After two tax returns, lenders no longer consider this an additional “debt”. In essence, it pretty much cancels itself out. That helps your debt-to-income ratio when you decide to buy your own Tulsa home to live in. If you rent it out monthly to residents, it may take even less than two tax returns.
Creates Passive Income
Finally, a rental property creates passive income. In other words, you receive regular income with minimal effort. Just make sure your cleaning crew is top-notch and you have a good maintenance guy to keep your property in good shape. This increases your income and still allows you to work a full-time job. In turn, your personal wealth grows even faster than it would with just a full-time job and primary residence.
Owning rental property is not for everyone. However, it is something to consider before you purchase your next (or first) Tulsa home. When you are ready to look at a home to buy, contact me.
Lori Cain, REALTOR®, Serving Midtown and the greater Tulsa, OK area. Call 918-852-5036.
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