Landlord's Approach to Real Estate Investing

Landlord's Approach to Real Estate Investing

by Denton Ward

Over the last decade, the high home appreciation and low mortgage interest rates have enticed buyers to become real estate speculators (flippers) and not long term real estate investors. Unfortunately for speculators, the real estate market today is not lucrative for making quick profits. While home appreciation has slowed and inventory on the market is rising, real estate investors are looking to a “buy and hold” strategy.
Many real estate buyers are adopting the landlord approach to investing. To buy and hold a property, through spikes and dips of home values, has attracted the attention of new investors and pompous speculators.

The Landlord Approach

Buying and holding investment properties is a long term investment goal. The returns and margins made on long term investments is far more risk adverse than speculation. However, the idea and implementation of making $50,000 to $150,000 in two months time would surely get anybody excited. But, the landlord approach in real estate is like a mutual fund - you don’t worry about the day to day earnings; you look at your earnings after 5 or 10 years. For instance, in today’s real estate market, home prices may be stagnant or even be declining. In time, your investments will likely increase at a steady and formidable rate; possibly doubling or tripling the purchase price of the home vs. the quick profits made by flipping the home.

Another benefit to purchasing a property in 2008 and renting it out is that rents are rising. Because real estate is not appreciating like it had before the 2008 year, people are not as inclined to purchase a property. Home buyers are more likely to rent and wait to ride the wave of decreasing home prices. They are looking for a bargain price of home values, but in the meantime must save money to purchase a property by renting. The supply of rentals is increasing due to the over valuation of homes available to purchase. Renting a home is easier than in the prior decade.

"The best way to become a millionaire is to borrow a million dollars and have your renters pay it off.”

A Success Strategy

Start small. Becoming a landlord is not normally all fun and games. There are situations and problems that arise when dealing with tenants. Therefore, if even one can afford to buy an apartment complex, it is suggested that they start small and purchase a single family home. One must get their feet wet and test the water before jumping in. The analogy extends to real estate investing. New landlords often underestimate the challenges of owning rental property. As an investor, pace yourself with a single family home or duplex. Work your way up to apartment buildings and commercial properties. The single family homes and duplexes will help you create the wealth to invest in larger projects.

Happy investing