The REAL price and value of owning a rental!

A lot of people in 2005, 2006, 2007 bought rentals and thought it was the way to get rich fast. Realtors were fast talkers, everyone thought it was easy money. Now people are struggling to pay their first mortgage, and their second, their rental mortgage and second home, ouch! The reality is it takes many years to really accumulate money and wealth from rentals. It is a balancing act most people don’t understand.
First the high cost of the loan, depreciation, taxes, interest, insurance, utilities and then the dreaded turnover. If you don’t accumulate reserves early you will never be able to balance the cash in and out.
Rentals are meant for people that understand how money really works. It costs money to make money, or it takes careful budgeting and allowances to manage the property. It takes a specific type of personality to collect the rents each month, call tenants, check the property, understand needed and timely repairs. Besides the Arizona Landlord laws, a lot of legal issues can occur with a poorly managed rental.
For an average $200,000 property you need to understand what CASH FLOW really is…After paying the mortgage, insurance, taxes, and maybe utilities you better have money left over. Money in case the tenant splits and leaves the house a mess: $130.00 cleaning, couple new blinds, a little paint here and there,new refrigerator, landscaping, maybe carpet, seasonal maintenance, water and utilities. Wow, you could be out $3000.00 and now your paying the mortgage until ( say a month and a half) a new tenant comes along you trust! Out $4200.00.
-repairs and two payments. Fortunately, rents are stable and have gone up , but so has utilities, taxes, insurance. That may mean no extra money in your pocket. Don’t ever buy a property without cash flow, check all the continued costs, don’t assume the previous rents are now current rents. Make calls yourself, call
talk to a real estate accountant, understand the real costs. After owning a rental 10 years and stocks ten years you are more likely to have made MORE money in a stock fund than owning a piece of property- dollar for dollar rentals eat money. Make a big down payment, (or pay cash), make the tenants pay all costs, water, gas, electric, get a big security deposit (one and a half rents as allowed). Write a careful lease that requires some small repairs be done by the tenants. Screen your tenants carefully.
There are good reasons to own property- It’s a negative bond- pay down your mortgage- you earn money, it gives you leverage, it could be back up emergency funds(if you have equity),it makes inflation your friend, you profit from falling interest rates, it can build wealth, building equity builds financial security.
Building equity in property takes buying the property at the right time! Timing IS everything in this market!