It’s undeniable that real estate is the vehicle that has made most wealthy people, well, wealthy. Even if real estate isn’t what got them there, it’s become the investment vehicle of choice for many looking to protect and grow their wealth. In particular, wealth and ongoing cash flow are maximized with long-term buy and hold rental properties.
“I made my first million in real estate, not in movies” – Arnold Schwarzenegger
But let’s be clear – one of the beauties of owning rental properties is that the barrier to entry is quite low, thanks to the fact that it’s easy to leverage (borrow against). For new investors with a stable financials and credit, access to lending isn’t hard to find.
So, why doesn’t everyone do it?
There are several common reasons:
- It Takes Effort to Find Deals
Watch any HGTV based real estate investor show, and there’s never mention to actually finding the properties … but that’s usually the hardest part of all. Ask any seasoned investor – their biggest challenge is always “not enough deals”. It doesn’t matter if they’re buying 2 houses a year and want to grow to 5, or buying 100 houses a year and want to grow to 200, truly good deals are always a challenge to find.
- It’s a Burden to Get Properties Ready
From the initial rehab, to ongoing ‘make-ready’s’ between tenants, working with contractors and getting houses ‘rent ready’ (so you can get paid!) is not for the faint of heart … especially if you don’t have much extra time in your day, or aren’t located geographically near your properties. God forbid you’re trying to do the work yourself … it will almost always take longer than having a professional do it, and let’s not forget about your ‘opportunity cost’ of doing, well, almost anything else!
- Tenants, Toilets, and Termites!
Do you want to get maintenance calls at 3 am? Nobody wants that! Many would-be newbies try to ‘save money’ by managing properties themselves, but a good property manager will be more efficient than you’ll ever be, will ultimately save you money and time, and will usually save you from a ton of drama! Plus, good property managers are often managing hundreds of properties and can develop efficiencies that you simply can’t compete with.
It’s much better to be an investor, not a “landlord”.
- Challenges Lining Up Financing Your Rental Properties
I stated above that access to lending for real estate investors isn’t hard to find … but there are a few challenges. First, not all lenders are created equal. You truly want a lender that ‘gets’ you and cares about what your goals are. The right lender can help with your strategy, and save you a lot of time, money, and grief in the long run. Second, you’ll get access to the best deals if your lender specializes in investments. Your local ‘big bank’ store may tell you they can finance your deals, but you shouldn’t spend a single minute with them … seriously … don’t make us say “told you so” (we won’t go into detail … but just don’t ‘go there’)!
- Hard to Plan Your Attack
When you’re on an island by yourself, it’s hard to know what your options are with rental properties. You hear about the benefits (tax advantages, cash flow, appreciation, etc.), and maybe even know someone that owns rental properties, but resources to help you ‘plan’ your financial future with rental properties are not as readily available as say, your neighborhood insurance agent.
So, what’s a want-to-be rental investor to do?
Enter – Turn-Key Rental Properties.
What is ‘Turn-Key’? There are a few common definitions, but generally, it’s a service to help you wade through all the things above. It’s a way to have someone help you get access to funding, and help you understand some options of buying rental properties that are usually either:
- Completely renovated with tenants and management already in place. (This is a ‘true’ Turn-Key solution.)
- A solution that helps put all the pieces together. For example, they may help you find a house that still needs work, but can provide you with someone to complete the work, help finance it, and a quality property manager to place a tenant and manage it on an ongoing basis.
Most importantly, you need to talk with someone that can help provide you with guidance, and someone that will truly take the time to understand YOUR goals.
Did you know that around 1/3 of all homes in America are rental properties? If you didn’t, I bet that’s a shocking number.
At FlipNerd, we’re real estate investors too. We’ve seen this trend for so long, that we’ve recently started a service for members of FlipNerd.com – to help YOU build a rental portfolio … whether you’re interested in starting with just 1, or looking to buy 10 or more a month. We’ve developed relationships with top property managers in markets across the country – who can help you with your plan of attack.
You can learn more about our service, PassiveRental.com.
To help you better understand how to build wealth with rental properties as passively as possible, please download a copy of our Free Guide below.