Like most people, I think flipping houses would be a fun way to make a living, but unfortunately, it doesn’t work in every location. The stock market is a very popular way to make money, but you have no control over it. That’s why owning rental property is my favorite way to invest, it has so many advantages. I currently own four rental properties, and I’m always looking for the next one. Here’s what I like about it.
1. Purchase with other people’s money
I usually need 10 or 20% of the property’s purchase price to buy it; the rest comes from the bank or a private lender. Sometimes I can use equity from a previous purchase to decrease my down payment even more. The tenants pay down the remainder of the loan with the rent that I collect.
This use of leverage allows me to purchase a large asset for less cash than I might need to buy stock or a similar investment because I don’t have to have 100% of the acquisition price.
2. Control over Returns
If I want to increase the returns on the rentals properties I have the option of using cash or sweat equity to improve the returns. Upgrading kitchens and bathrooms, new flooring, paint, and new light fixtures make the biggest difference.
Searching for good deals on a property or better interest rates with the bank is another way to increase returns. Screening tenants to avoid huge bills from property damage also makes a difference.
In other words, if I’m willing to put in time and effort I can influence my future. I don’t have to rely on someone on Wall Street to make the right decision to protect my investment.
3. People Need a Place to Live
There will always be a demand for rental property. Not everyone can afford to buy a house and some people like the freedom that comes from renting versus buying. According to a report from Trulia, the share of U.S. households that rent increased from 36.1 percent in 2006 to 41.1 percent in 2014. Student loan debt, rising health care costs, short-term employment and stricter mortgage qualifications have all contributed to the increased demand for rental property.
4. Proven Strategy for Building Wealth
According to Forbes.com, 22 people became billionaires in 2016 thanks to their real estate holdings. The total on the list is now 184. There is information and proven investment strategies available to follow; I don’t have to figure it out on my own.
5. Different Choices
Properties are available in every price range and every condition. I can buy a turnkey property or a fixer-upper, a house or an apartment building. There are beautiful neighborhoods and up and coming ones. Commercial buildings are also available.
It is good to have variety, so I can find just the right fit for the situation I’m in at the moment.
6. Easy Access to Information
There is so much information available today to teach you about real estate. I read books, listened to podcasts and asked questions in forums before I made my first purchase. Everything I needed to learn was available online for free.
7. Bargains are Available
There are ways to find properties that sell for less than they’re worth. Once in a while a foreclosure becomes available that isn’t in bad shape, or you meet someone that needs to sell their house quickly and is willing to offer a discount. Finding a bargain is always exciting.
8. Provides Ways to Help Others
When I was searching for a place to rent I couldn’t find anyplace that allowed pets, finally a friend allowed me to move into an apartment that they owned and let me bring my dog. I was grateful for being able to keep my dog. Now I welcome people with pets in my rental properties, no one should have to give up a member of their family.
9. Several Ways to Profit
The best-known form of income from a rental is cash flow, the amount left over each month after expenses. Appreciation of the property is another way to profit. The tenants paying down the loan, and the tax benefits also add to your income.
10. Passive Income
Although there is some work involved in owning rental property, you are still earning money even when you sleep. If you don’t want to do any work and still make money, there’s the option of hiring a property manager to do the job for you.
The flexibility is there to be as involved in the business as you want to be.
Overall there’s a lot to love about real estate. What are your thoughts? Do you think real estate is a good investment?