(img: kyle ruth)
It’s never a good time to buy rental property.
Not a day goes by without something proclaiming this to us.
Prices are too high.
Demand from tenants is too low.
The market is saturated.
In 2008 the world was coming to an end.
In 2013 the bubble is too big.
There’s too much hassle, there’s this, there’s that and the other …. LOL.
What most don’t realize is that we’ve been in this game a very long time.
We remember the euphoria of the late 1980’s.
And the crash of the early 1990’s.
How property prices stayed flat for almost a decade after that.
How everyone ran into tech stocks.
And then real estate came into vogue again around 2003/04.
Then the U.S. monster crash of 2007.
Nothing in this business is new but after watching all of this stuff for over twenty five years now we can tell you that rental property is very likely the best part time business anyone can get themselves into.
Just look at all the Pros:
1. You don’t have to stock or manage inventory – your property is your inventory and it just sits there.
2. You don’t have to find new customers every single darn day – your customer lives in your property.
3. You don’t have to sell more to your customer – they buy from you every single day by living in your property.
4. You don’t have to deal with full-time employees – most of who you need are contractors handling their own payroll taxes and stuff.
5. You earn a little bit of money every single day.
6. You gain a tiny little bit of equity every single day.
7. On some days you gain a little more if the property decides to appreciate.
8. Even if your inventory (your property) goes down in value the price your tenant pays stays the same – how cool is that?
9. You can fix your overhead (your costs – mortgage, taxes, insurance) for a full year at a time – and even longer.
10. Your property will likely provide hundreds of thousands of dollars in value to you 15 and 20 years from now – a regular business has a lease that expires and you don’t got much of diddly squat.
11. You earn recurring income – the best time of income there is.
12. There are tax deductions galore.
13. We haven’t even mentioned that you are using leverage thanks to the generosity of the banks to control a lot of property (inventory) with only a wee little bit of money.
14. When purchased properly your business has more revenue each month than expenses – brilliant concept.
And the best part…
One single rental property has the ability to alter your retirement more than almost anything other business – ever.
Don’t believe us?
Go to Yahoo! Finance and look at the roller coaster ride the S&P 500 has been over the last two decades.
Look at the stats on how many small businesses start and then fail every single year.
Your probability of long-term success (key: long-term) with a simple little rental property greatly outweighs the vast majority of your other options.
But yes, there are negatives:
1. You must deal with customers (your tenants) – welcome to the real world.
2. Sometimes your customers don’t pay you – you’ll have to shuffle over to the Tenant Board and follow the procedures clearly outlined for this, step-by-step.
Aside: In the construction business our father didn’t get paid for countless jobs … worth hundreds of thousands of dollars … yet a landlord cries in his/her milk when they lose a couple months of rent to an unscrupulous tenant … it’s almost embarrassing.
3. Sometimes your property value goes down – affirmative.
4. Sometimes your inventory (the property) needs repair – affirmative.
5. Sometimes you have tenants that are crazy people – affirmative, but when you treat people with respect you’d be surprised at how great they treat you back.
Neither of us will ever forget the day an older gentleman pulled up in front of our first offices in a rusted out Ford minivan.
His jeans were crumpled and his baseball hat was worn.
He stopped by to “learn” what we were up to with our investing.
He then went on to explain that he purchased 15 single family home rental properties beginning in the 1980’s.
In the 1990’s everyone told him to sell, he didn’t.
During the tech boom everyone told him to sell ’em, he didn’t.
During the housing boom in the 2000’s everyone told him to sell, he didn’t.
He said it was too much work, he just kept renting them.
Today he explained that he controls approximately $5 Million in free and clear property – that’s $5 Million in equity.
And his monthly cash flow on rents is approximately $21,000 …. A MONTH.
He explained that each time he had a vacancy he painted the walls – with his wife, by themselves – and sometimes he had to replace a furnace or a roof.
But that he didn’t really do much else.
Sometimes people make the process of making money much more difficult than it is.
Timing the market.
Find the perfect “trend” to ride.
Good ‘ole rental property, when you boil it all down, may simply be the best part-time business anyone can ever have.
Are we biased – 100%
Until next time … Your Life! Your Terms!