Consider The Benefits Of A Quality Rental Property
By Paul Esajian on January 19, 2015
There are many ways to be a successful investor. Between assigning contracts as a wholesaler and flipping properties, there is a niche for anyone with a strong work ethic. More often than not, the types of deals you pursue depends on when you want to see a return on your money. Flipping properties and focusing on rehab deals is a great way to generate cash quickly, but buy and hold rental properties can provide the best of both worlds. The immediate returns will not be as great as when you flip, but you can still generate cash flow while having the security of a long term asset. Before you quickly dismiss rental properties as an option, you should consider all of the benefits.
There are plenty of horror stories associated with rental properties. Dealing with bad tenants and getting phone calls at all hours of the night is just a part of the business. For all of the headaches you have to deal with, there is plenty of reward generated from a quality rental property. Instead of looking at the negatives and thinking about the downside, you should focus on the benefits.
1. Cash flow
A property’s cash flow is what is left after you exclude all the expenses it takes to run it. This is extra money that you can do whatever you want with. Most investors will opt to add this to their rental reserve fund, but you can use this money in multiple ways to grow your business. As long as you take care of your property and find good tenants, this cash flow will continue for the foreseeable future. There could be changes to annual taxes or unforeseen expenses at any time, but if you have a rental that is in demand, you will recoup these costs in no time. The idea of someone paying down your mortgage for you is a very appealing one. If you can find an investment vehicle that provides you with long term equity and short term cash flow, you would be foolish not to at least consider it.
2. Long Term Equity
If you take a look at where property values were over the years, you will see that real estate has always been the best long-term investment. Of course there have been dips in the market, but if you are willing to ride it out you will usually see a strong gain. Owning rental properties is no different. You may be able to make a good chunk of money flipping a property today, but that number could be doubled or tripled if you are willing to wait. The best part is that someone else is paying down your mortgage for you. Time goes by pretty quickly. Some of the richest people in the world have accumulated their wealth in buying and holding real estate. It takes discipline and patience to be willing to wait the market out, but if you do, there is a pot of gold at the end of the rainbow.
3. Trust In Your Team
Owning rental property can be a grind if you try to do everything yourself. Regardless if you are not the handy type or great with numbers, you can still surround yourself with a team that can take care of many of these tasks for you. If you enlist the services of a property manager, you can let them take care of all the things you don’t have the time or desire to handle yourself. This will come at a reduction in your monthly cash flow, but if your property can run on autopilot it will be worth the expense. All you have to do is find a good property manager and focus on good tenants.
4. Keep Your Options Open
As an investor, you want as many different options as possible. After a few years of owning a rental property and paying down the mortgage you will have those options. At this point, you will have some equity in the property. If you see that the market has appreciated, you can opt to take a profit in selling and move on. You can also do nothing and continue to rent for as long as there is strong rental demand. All of these options are favorable.
Owning a good rental property takes due diligence and the ability to know all of the expenses going in. This lack of knowledge, in regards to the expenses, is the biggest reason that some investors have soured on rentals. Not every property you buy will be the best rental property option. Some properties are better for flips, but in the right market, renting makes the most sense for the long-term assets. Regardless of what you may have heard or read from fellow investors, you should do your own homework on rental properties. Before you blindly dismiss a rental, you should at least consider if it may be right for you.