Who was it that said “start young, retire young?” Because I want to give him a hug. Right now I own three apartment units and earning a decent amount doing almost nothing.
Buying rental properties is a good investment, especially if you take time to educate yourself about how the market works and the best ways to get bigger returns. Still, most people who want to start buying rental properties or real estate as investments rarely do so. If you don’t take time to educate yourself about investing in rental properties, then you’re missing out on a LOT of opportunity.
My elder brother owns 11 rental properties that bring about $5,000 a month in cash flow after his expenses, including mortgage repayments. The good thing is that I started young and together with my mom, bought my first rental property when I was 21 (believe it or not). What’s best, the longer you own a rental property, the better investment they become. Moreover, when you’re young you have better flexibility in life, lesser commitments, and can handle more risk. If you take too long to start investing, work, family, and life will make it harder to learn about and obtain rental properties.
Obtaining rental properties is easier when you are younger
The majority of banks will require you at least 20 percent down on a property. This is a huge amount of cash for most of us, especially when considering a property maintenance. You have to pay closing cost and have some extra when something goes wrong. It will take at least 30 percent or more of the purchase price in cash to easily purchase a rental property.
When you start young, you have a lesser financial commitment, and thus, more money for these kinds of investment.
It will take time to get a great deal on rental properties that cash flow
While it’s not easy to get rental properties that will generate the returns you want, you can definitely obtain it from trusted providers like McGrath rental property listings. Also, you might notice that some investors get bigger returns than you do, but they have to invest a lot of time and effort learning how their market works, about real estate and the dynamics of rental properties.
The older you get, the less time you’ll have with more family commitments, job issues, and more hobbies you’re involved in. There will be less time to learn about the market and how to make money in this business.
The risks you will encounter with buying rental properties
With every opportunity comes risk. The biggest mistake you can make is buying for appreciation with negative cash flow. The problem with them is most investors underestimate the money they will need to spend on their rental properties. If you have positive cash flow, you won’t need to worry about selling, because your property is putting money in your pocket.
Another issue that many rental property owners forget is maintenance. You have to put aside for maintenance items every month. It could be 10 to 20 percent of monthly rents for maintenance, depending on the condition and age of a property. If you don’t account for maintenance you may not make considerable money on your rentals.
Rental properties are an awesome investment IF you start early on. It’s not a get rich quick scheme and it is hard to do, BUT the sooner you get started, the easier it will get and the better off you’ll be later in life.