We’ve all seen the VRBO commercials and heard the hype around Airbnb. It doesn’t matter what part of the country you reside, there are endless possibilities for building and owning Income Producing Small House Plans. Whether it’s the secluded lake front view just down the road, the great scenic mountain views an hour away or that magnificent beach location you visit every year, owning your own Income Producing Small Home Plan can be a great investment. Don’t put it off any longer, build one or more of these small home plans on a lot in your desirable location and use it for the occasional weekend getaway, and then rent it out the rest of the time.
Income Producing Small House plans can be a great investment option to consider. Income properties can be rented on a nightly, weekly or monthly basis and here are five benefits to consider with this type of investment.
1. You are in control of the Decisions
When you decide to invest in a small house income property, you become your own boss. You choose what type of house plan to build and invest in, how you will rent it out, how much you will charge and how you will manage and maintain the property.
2. Property Appreciation
One of the most unique things about investing in a small house income property is that you can build it using a small amount of your own money, while borrowing the rest, often four to twenty times more, from a lender. This is called leverage and here is an example of using leverage:
You invest $10,000 of your own money to build a small house and borrow $90,000 from a bank. By combining your money with the bank loaned money, you are now able to build a $100,000 asset.
Let’s assume that each year, for 10 years, your investment property will appreciate by 5%. Here is where the ability to leverage benefits you. The appreciation is on the entire $100,000 asset, not only the $10,000 of your own money.
3. Rental Income Is Real Money
When renting out your small house income property, you will be able to receive rental income. Any money left after paying your expenses will be money in your pocket.
4. Rentals Will Pay Down Your Mortgage for You
The most popular type of loan is a 30-year fixed rate mortgage. It has an interest rate that will remain the same for the entire 30-year term of the loan. In the beginning of the loan, significantly more money is paid to interest than to principal, but by year 15, it is close to a 50/50 split. Therefore, the longer you hold the property, the more of the loan principal your tenants are paying down and the more wealth you are creating for yourself.
Say you have a $90,000 bank loan with a monthly mortgage payment of $500. In year one, approximately $385 of this payment will go towards paying the interest, while $115 will go towards paying down the principal on the loan.
By year 15, approximately $270 of the monthly mortgage payment will go towards interest, while the remaining $230 towards the principal.
Every year that you own this property, you are using the tenant’s money to pay off your debt. By reducing the amount of your loan, you will be building wealth as you will eventually be able to access this money either by refinancing your loan or by selling the property.
5. Numerous Tax Write-Offs
As a rental property owner, you may be eligible for huge tax deductions. You can write-off:
- Interest on your mortgage.
- Interest on credit cards used to make purchases for the property
- Maintenance repairs
- Travel expenses.
- Legal and professional fees.
- Property taxes.
- *Extensive list at Nolo.com
*Speak to an accountant to determine all of your specific tax write-offs.
Below are two Income Producing Small House Plan options to get you started.
Conceptual Plan 1560 is a 594 sq. ft. option that offers a one bedroom, open floor plan option with an outdoor deck great for grilling and relaxing.
Conceptual Plan 1562 is a little larger at 702 sq. ft. of living space and it also features a one bedroom, open floor plan with outdoor deck but, it also has a dual sided fireplace separating the living space and bedroom.