Investment in Rental PropertyInvestment in rental property is one of the best investments you can make. It is one of the oldest and greatest avenues for building wealth.When I was about 24 years old I was looking for places to begin wealth building. I talked with everyone I knew who was rich and I wasn't afraid to ask complete strangers how they built their wealth. I found that a large majority of them had some real estate. Some had built their entire net worth through investment in rental property. For some reason it didn't click with me right away until one older gentleman put it to me like this... He said "son, if I told you that you could have 10 houses and they won't cost you a dime, how many would you want?", it was right there that the light bulb went off inside my head. I begin to realize the power of using Other People's Money to build MY wealth.
You see, before I had that epiphany I was like many of you. I was saying to myself "renters are horrible to deal with", "renters will call you in the middle of the night with broken toilets and water leaks", "what if the renter trashes the place", etc etc etc. I was afraid and I was letting my fear dictate my life.
Instead put your money in a index fund, CD, money market, mutual fund, or something of the sort. Investment in rental property can be difficult. But owning rental properties can also be rewarding. More rewarding than those other investments I just mentioned and a lot better rate of return. Plus there are tax advantages to real estate such as 1031 tax exchanges If you are mentally tough and willing to go through the challenges then rental property investing is right for you. I'm not trying to scare you or discourage you. I just want to paint a REAL picture and not a false one like so many "experts" out there will do. If you know the challenges, then you can begin to work through them one by one. You just need the right tools and resources, which hopefully we can help you with.
But let's say you only plan on owning a handful of rentals and you have plenty of time you could devote towards them. You need to have a few tools on hand to effectively manage your properties. Rental property management software is one of them. You need to keep good, accurate records of the financials of your properties so you can maximize your rental property tax deductions . This will help come tax time, but it also helps you track the profitability of your properties. You can see how much you are spending in certain areas and how much each property is bringing in as income. Yes, you could keep track of this with pencil and paper, but software will save you tons of time. Quicken Rental Property Manager is a great intro software program that is easy to use and very affordable. Along with software, you will need good real estate contracts. Having proper contracts in place will protect you legally. If you have a bad contract written up that doesn't cover all your bases, you could leave yourself wide open to trouble.
There is a notion going around that buy and hold investing is dead. You hear that especially in regards to the stock market. I do not believe in that whatsoever to be quite frank. If you buy stock in a good business, over time it will make you money. The same logic applies to rental property. Don't believe me- ask anyone who has been investing for over 15 years and they can testify to the point I am making. I'm not saying you can't make money flipping, in fact I believe you can, but I believe in having some long term rentals. Investment in rental property should be looked at as a long term way to pay down assets, get some tax deductions in the process, and hopefully cash flow in the process. At the end you will have a house paid off that someone else (renter) paid for you. That is the power of an investment in rental property! Related ArticlesReturn from Investment in Rental Property to |
