Please take what I’m suggesting as a suggestion for those landlords who are looking for a long term investment not for those landlords whose income is based solely on their income property.
I am always learning. I enjoy learning. I always say, “if you are the smartest person in the room, you are in the wrong room”
This lesson was taught to me when I was introduced into the world of real estate investing. I figured out a way to pick good tenant and keep them. Longevity it key! I check references for all tenants, and then discount the rent. For example, on a single family home that would normally rent for $1,400, the rent may be dropped by $100.
If I drop that rent to $1,300, for tenants it’s huge savings. For me, it’s not a huge loss.
The benefit is twofold. First, tenants don’t turn over very often. Second, the tenants rarely bother me with complaints.
By keeping the rents low, it also minimizes the maintenance factor with tenants.
I have tenants who truly believe that they are flying below the radar, and they do not want to call me when the something goes wrong. They just go out and fix it. They want to talk to me as little as possible because they know that they’re getting a great deal.
This may not be for everyone but it may make economical sense for the investor who is looking for a long term rate of return and not relying on their investment as a pay cheque. I, myself, am NOT looking to make money on my rental properties each month. You might ask yourself, “What is this guy talking about?” It didn’t make sense to me when I first heard it as well.
Remember I do not rely on my income from my investment properties to live. As long as my properties pay for themselves and I do not have to inject money into them, I’m very happy! They are self sufficient and they are paying for themselves.
If I start to make money, I shortens the amortization on the mortgage and reinvest the money into the property. That way, I keep my mortgage payments high, pay off my mortgage faster, and I deduct the mortgage interest and other expenses.
In the meantime, the tenants are paying down my mortgage. By the time my wife and I retire, the mortgage will be paid off.
I equate this to winning the lottery. It’s as if somebody else will have bought the house and gave it to us as a present. I fully expect the income from our rental properties to account for a significant portion of our retirement income.
Again, please remember this is a suggestion for those who are looking for a long term investment. This is not suggested for those looking for instant gratification.