When you choose to be an entrepreneur, that means you have to stay aware of investment opportunities that are too promising to ignore. Most of the time, likely prospects will turn up in the form of stocks, business deals, and advertising partnerships.
However, some of the best opportunities come in the form of real estate investment properties. If you’re an entrepreneur and you don’t yet own real estate, here’s why you should look into acquiring at least one property.
1. It doesn’t necessarily demand as much work as you might think
Owning investment property can require a substantial amount of work. But it doesn’t have to be all that difficult.
For example, you could hire a property management company to handle all your landlord duties so you don’t have to interact with the tenants at all. Green Residential, Houston’s premiere property management company, performs the following duties for its clients:
- Create a strong lease agreement
- Collect rent and applicable late fees
- Perform all repairs and maintenance
- Maintain good relations with tenants
- Handle tenant issues as they arise
- Field emergency calls
- Advertise/market your vacancies
- Screen tenants with a background and credit check
- Approve or deny applicants according to the law
- Perform showings and walk-throughs at the beginning and end of each tenancy
- Manage the return of security deposits
- Process eviction paperwork according to the law
- And more
The only reason you should perform your own landlord duties is if you are passionate about doing the work. If you enjoy interacting with tenants, tackling those duties makes sense.
But if you’re like many other entrepreneurs, you don’t have the time to be a landlord. When you hire a property management company, you don’t have to play that role in order to create a profitable rental property.
2. The benefits of long-term income are undeniable
Owning property is a long-term endeavor. You may start seeing solid income from day one on your rental, but it won’t represent a profit until the mortgage is paid off. Once that’s happened, though, the profit is sweet.
Provided you find good tenants and maintain the property in good shape, your monthly revenues should ensure a decent amount of stable income for your retirement.
Calculating your financial return can be done in several ways. Bigger Pockets explains how to calculate potential ROI, Cash-on-Cash return (CoC), and the capitalization rate.
According to Bigger Pockets, the 1% rule is the easiest way to evaluate a property’s potential. To meet the 1% rule, your gross monthly rent should be a minimum of 1% of your property’s total purchase price. If you can’t make the monthly rent meet the 1% minimum, the property probably isn’t a good investment.
3. You’ll want to buy more properties – and you’ll need more to turn a real profit
It’s difficult to make a substantive profit with only one property. Once you have a single property, you’re likely to want more. If you follow your intuition and start to invest in additional properties – residential or commercial – you’ll start to see the potential for substantial revenue.
For example, if you can acquire enough properties to generate $100,000 per year in cash flow after expenses, that will be passive, additional income. You’ll still be generating revenues from your other entrepreneurial pursuits, which will make your income potential skyrocket.
4. You’ll always have a place to live if you have to move
Owning a piece of real estate property gives you a place to live if you need to move out of your current living quarters. All you have to do is give your tenants notice to vacate according to their lease; and once they’ve moved out, you can settle in.
If you haven’t paid off the mortgage yet, you might have to change your mortgage from a rental property to a residential property. But that could work in your favor since the rates tend to be lower for residential properties.
5. You can meet and learn from experienced investors
When you’re new to real estate, you’ll benefit greatly from connecting with experienced investors. You can subscribe to popular real estate investing channels on YouTube, but try to make sure you meet with investors in person.
You probably won’t get more than basic advice for free. You can hire an investment coach, however, or take investment courses online to learn more.
Rental property is a smart investment
Although it requires time and patience, owning rental property is usually a wise investment. It’s a good way to generate long-term, passive income that will last through your retirement.
Owning investment property is also a great way to help your kids build wealth when you pass. If you haven’t looked into real estate investing yet, now is as good a time as any.