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Rental Investments Should Not Be Considered Your Car Payment.

I have explained to many potential rental investors many times that real estate is a long term investment.  If you plan and set your goals right – you will be pleased with the results.  But if you approach buying and renting homes as a means of extra income to make your car payment – you will end up frustrated.  

For many, they just cannot see past what is in front of them - and that tends to not make a good investor.  Here are some basic thoughts about owning a rental home: 

If you are lucky enough to have extra income each month after expenses, it’s a good idea to keep those funds in a reserve account for potential issues that might arise, i.e., repairs, vacancy, etc.

It is not a good idea to budget extra rental income as a means to make your car payment, or other payments.  The reason I put this out there is because rental income is not always guaranteed, or not come at all.

If your plan includes annual rent increases – or you want to raise it because your expenses are going up - reexamine the results. Quick calculation:  raising rent by $25 will bring you $300 more annual – raising it by $50 brings $600.  Your rent is between $800 and $1000 a month – if a tenant moves out – a vacancy will cost you that every month until you re-rent it.  So what is the benefit? 

Finally, owning a rental home is going to cost you money.  You will not always break even, nor will you have extra at the end of every month.  It is important to keep it in perspective and look at profit from the long term.  Example: an owner recently sold a rental home owned for 20 years – never raised the rents and made 6 mortgage payments that cost him $4800.  Tenants made the other 234 payments or $187,200.  The home sold for $255,000. Even if his expenses were $20,000 over the years – I say, he did well.

Don’t be short sighted with investing in real estate – it is a long term investment that you will benefit from if you plan it right and are patient.

Buying or selling Tucson real estate, Mt Lemmon, Tucson bank-owned homes, Tucson rental homes, or Tucson lease option homes? Visit www.KGCPropertiesLLC.com .

                                                 

 

This blog is written with my opinions and my opinions are  presented with accuracy but not guarantees. Please talk to a professional before making any real estate, financial or agency decisions.    Gabrielle Kamahele Rhind - 2014. If you want to reprint parts of this - just email me for my permission: KGCProperties@gmail.com .

 

Comment balloon 4 commentsGabrielle Kamahele Rhind • August 12 2014 06:22AM

Comments

Good morning, Gab..... and that's exactly why investment property is NOT for everyone....some are out of control is they see a cash flow from it....hope all is well with you....

Posted by Barbara Todaro, "Franklin MA Homes" (RE/MAX Executive Realty ) over 3 years ago

Gabrielle Kamahele Rhind very well said - there is a big difference between the two!

Posted by Praful Thakkar, Andover, MA: Andover Luxury Homes For Sale (LAER Realty Partners) over 3 years ago

I just picked up another rental and walked through it with my property manager. I always go go conservative on rent to begin with. I have never lost money on investment property and I follow many of your examples!

Posted by Paul S. Henderson, REALTOR®,CRS,, Tacoma Washington Agent/Broker & Market Authority! (RE/MAX Professionals.) over 3 years ago

Great advice and yes you need to be able to plan a few expenses if you plan to be a landlord. 

Posted by Florida Tolbert Team Keller Williams Advantage, Million $ Guild Member Cert Luxury Home Mkting Spc (Keller Williams Advantage III Realty in Lake Nona) over 3 years ago

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