3 Myths about Owning Rental Properties

There's multiple ways you can invest in real estate, but if you want to build long term cash flow, owning rental properties can accomplish that. Worried about your long term cash flow and how you'll survive when it's time to stop working? I highly encourage you to look into rental properties as a solution. Here's 3 myths that discourage people from investing in long term rental properties.

First, they think they have to be a landlord. Nope, you can hire a property management company to do this for you. Many companies allow you to select which services you want them to handle for you. Perhaps you want to select the tenant and get them placed, but then turn everything else over to the property management company. You can do that. Don't want to be involved in any of it? That's an option as well. Hiring a property managment company can be a great option to keep your rental cash flow truly passive income.

Second, I often hear the objection that all tenants tear up your house and stop paying rent. While, this can happen it’s pretty much preventable with good tenant screening processes. It’s NOT enough to meet someone and approve them because they seemed nice or responsible. Oftentimes, past behavior is a predictor of future behavior, so running a background check is imperative. I personally use a system that checks credit, evicition history, and criminal history. That, along with employment and income verification along with current or previous landlord checks will help ensure that you place a responsible tenant that will take care of your property and pay rent on time.

Third, they don’t know where they’ll come up with the money to buy the rentals. There are options for this speedbump as well. First, speak with a mortgage broker to find out your options. Many traditional brokers will lend on rental properties just as they do your primary residence. Usually, an investment type loan requires 20% down, but some will do it for 15%. If your lifestyle allows, look into househacking. In other words, buy a duplex, live in one side and rent the other side out. You can use an FHA type loan for this with as little as 3.5% down. In this case, your tenant’s rent is paying the mortgage and you’re essentially living for free. (Genius strategy that I recommend to all young buyers or anyone who’s lifestyle allows living in a duplex.

Continuing on with solutions to #3 above, a common investment strategy is called the BRRRR strategy and it allows you to scale your portfolio. BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. You’re basically buying a property that needs some fixing up and once you rehab it and secure a tenant, you do a cash out refinance. Take that cash and use it as the downpayment on the next property. You can repeat the process. There’s a great book by David Greene if you’re interested in this strategy that goes into all the details you need to know.

Bottom line, investing in rental properties can be very lucrative for a long term investment strategy with easy cash flow. I encourage you to reach out if you’d like to discuss more.

Contact Danielle

The St. Joseph Real Estate Group

3723 Beck Rd., St. Joseph, MO 64506

Cell (913) 707-1705

Broker Office (816) 396-6076

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