- How Much Money Is Needed To Invest In Rental Property?
- Should A Real Estate Investor Get An Agent’s License?
- 5 Big Factors That Affect The Costs Of Renovating Your Home
- SIBOR Hike – What You Can Do With Your Current Loan
- 6 Basic Don’ts Of Real Estate Negotiation Tactics
- Will New Condo Relaunches Trigger The Great Property Sale We Have All Been Waiting For?
- 10 Proximity Amenities That Add Value To Real Estate
- How To Get Personal Loans More Easily With Good Credit
10 Reasons To Love Investing In Rental Properties
Some investors prefer to profit in real estate by flipping cheap buys into high value sells. Some do the same with wholesaling. But the holy grail of real estating is in rental properties.
It’s no coincidence that an overwhelming majority of individual investors make their money from recurring rental income.
It’s the benchmark that investors aspire to reach, with the ultimate goal of having recurring income to retire on. That’s without mentioning the wealth being amassed with home equity via appreciation.
While the flipping of houses is an art in itself, just ask any flipper whether he’d rather make a one of $25,000 profit from flipping or a $1,000 recurring month income, and the answer would be rather clear. The most common reason why a flipper would choose to flip for quick cash is due to cash flow and financing.
Because when the bank calls about that payment you are late on, your options are pretty limited unless you have a lot of extra cash in your accounts.
So if you have the financial muscle, here are more reasons why to go with rental properties and avoid the noise of quick cash flippers are making. Slow and steady win the race… especially in real estate.
1) Financial leverage
What other asset can you purchase with as little as no money down and allow you to slowly pay it off over a period of as long as 30 years?
Even if there are such other assets to invest in, are they as secure as the age-old top-tier asset class such as real estate?
Take into account that appreciation will and rental will be based on 100% of the property value, and it won’t take much more to convince anyone that it’s a great investment.
If we take a $500,000 house appreciating at 5% a year bought with a conservative 20% down payment. You are basically forking out an initial capital of $100,000 that brings in $25,000 equity growth each year. And that’s without taking into account the rental that will cover the mortgage with surplus that goes nicely into your bank account.
2) One-off effort for long term cash inflow
Although you will not exactly be free from managing the rental property after you have acquired it, the effort needed to manage pales in comparison in acquiring it.
A huge part of the job is all in acquisition. And you can always hire a management company to operate it if you want.
A one-off job for years of rental collection is surely an attractive proposition.
3) Success and failure is very much in your hands
Unlike stocks where you trade in the stock exchange, you can have a drastic impact of where your investment goes.
For stocks, once you have purchased the shares, you are pretty much at the mercy of the company’s executives. Their actions and inaction will determine where your investment rises or drops in value.
As a landlord, you have the power and influence in determining the success of your venture.
If something is blatantly obviously wrong, you can solve the issue with a hands-on approach. Something you can never say with equities.
This factor will be very desirable for those of you who are meticulous and control freaks!
4) It’s an evergreen market
There will always be people who needs to rent a place to live. Tenants will never run out.
And as credit tightens to prevent another mortgage catastrophe we saw in 2008, there will only be less buyers and more renters.
5) It is a proven financial strategy
Rental real estate is a vehicle used by millions around the world to achieve financial freedom.
No matter how skeptical a person you are, surely you cannot ignore the fact that countless people, a lot of them average individuals, have gone down this road and emerged victorious in the game of personal finance.
If so many have done it, so can you.
6) Fairly predictable
Even though no one can truly predict the direction a market would move in the long and short term, real estate is as close as you can get when it comes to predictability.
The best part is that when you can predict real estate, you would have ample time to plan and make your moves in the market due to imbalance in demand and supply cycle times. This also give fast movers an advantage over slower reacting investors.
Stocks for example can be fast and furious. And usually, by the time you see a trend emerging, it’s already too late to execute a optimal response.
7) Wide range for varying budgets
There are so many types of real estate available that it would be tough to be unable to find one you can afford as long as you are ready to commit.
- One-bedroom studio apartments
- Multi-family apartments
- Commercial property
Big, small, young, and old. You will never run out of good buys to invest in. And as you build up your cash pile, you will only open more doors to more “sure win” opportunities.
8) Make totally logical decisions
We can all be blinded by emotions when buying a house for ourselves. This can often cause us to overpay for houses that are not worth as much as the price itself.
Since rental properties will be your business vehicle instead for your own stay, you will be more able to make logical and pragmatic financial decisions with a focus on the bottom line.
Who cares if the house has a premium price because of a sea view? Who cares if the recent transaction prices in the neighborhood are high? And who cares if the seller is stubborn as hell?
If the price is not right, you will have no qualms with walking away. This can make a huge difference in how successful your real estate ventures are.
9) Being “in the know” can really pay off big time
Many homeowners, sellers, and buyers are just the average person looking to buy or sell. They don’t have, or do not put any effort into investigative work.
This leaves a huge gap for real estate professionals to exploit.
Knowledge on master plans and zoning codes can give you a deadly edge in making great deals.
In fact, you’d be surprised at how many sellers actually don’t follow the local real estate news. And if they are FSBO, they might even price their homes below what it is really worth in the market.
10) Make money while you sleep
Although the notion of “making money while you sleep” is usually associated with the internet these days, the same can be said of rental real estate.
You don’t need to oversee your tenants to ensure that your properties generate the rental for the day. You will have time to do whatever you want… just like how you foresaw retirement.
Saying that, don’t think that your attention will not be required at all. Every now and then, you will have to attend to issues that tenants have raised. That still sure as hell beats the boring 9-to-5 job.
And as your business grows, you can always outsource to third parties to manage your properties on your behalf. That will be truly be as good as it gets in terms of making money while you sleep.