Part Three
The Advantages of Being a Landlord
It’s a Hands-on Investment
If you send your money off to invest in the stock market or bonds in one form or another, directly buying stocks or through mutual funds, that money is out of your control. Companies can and do make stupid decisions that trash their stocks and run them into bankruptcy. Do that and too bad for the investors. As we have seen in the last few years, the entire market has nose-dived, leaving all kinds of investors wondering where their money went.
Because it is a hands-on investment, with rental property, we can largely avoid the downs through buying smart and ensuring that our rents keep up with the market.
Buying Smart
Along with hands-on investment goes the idea of keeping up with the real estate market. That means we pay attention to the rents and do regular rent surveys. But in addition, we also pay attention to where the good real estate investment deals are.
By doing the math, we can spot properties that will make us money from day one. The rents will cover our buying costs and operating expenses and leave some left over for our profits.
But we have to think about it. We have to take real interest in the real estate in our communities so we can spot an terrific investment immediately and be ready to act to snatch it up before another cagey landlord does.
The Tax Advantages Are Great
Since rental property ownership is a business, we get to deduct all kinds of things we don’t get to for our own homes. We get to depreciate the improvements. We get to deduct everything we spend on the property as expenses, taxes, insurance, repairs, mileage, management fees, and just about anything else you can think of.
When I first invested in rental property some 30 years ago, I went from having to borrow money to pay my income taxes to getting a refund.
You Get to Choose Your Customers
If you owned a retail store, you are mostly stuck with whomever walks through the door. With rental property, you can slam the door in the face of bad customers by using careful screening techniques. Bad tenants leave a trail that is relatively easy to follow.
As I pointed out in a previous tip, some 95 percent of tenants are good. They pay the rent on time, are good neighbors, take care of their homes and are generally nice people. We can encourage those tenants and discourage the bad ones with simple advertising techniques that explain that we carefully screen applicants.
By using wording such as “In order to keep our properties great places to live, we carefully screen our applicants,” we send a message to bad tenants that they need not apply and to good tenants that their homes will be pleasant places to live, assuming they rent from us.
You Can Think Like a Professional
Thinking like a professional real estate investor is the important first step in being successful in this business. Professional real estate investors have a set priority in the way they think.
First, they honor their investments. They worked hard to obtain them and they treat them with honor. That means they care about them, they never neglect them, and they pay meticulous attention to how those investments are doing. They don’t just hope that everything will be all right; they make sure it will be. They leave nothing to chance. They can tell how their properties are doing anytime someone asks.
Second, they value their good customers. Those are the good tenants they selected to live in their properties.
Third, they look for ways to make their investments even more profitable. That means looking to make sure the neighborhoods where they own real estate don’t become drug and crime centers. They work with local government and neighborhood associations to ensure their neighborhoods remain great places to live.
They pay attention. They expect to be successful. They play the real estate investing game to win, not just to survive.
That’s how you must think if you are going to be a real estate investing success.