All County PPM provides property management in Orlando, Central Florida, South Florida, and North Florida in Jacksonville. Over the years, my team and I have managed 2,400 homes for investors who have one or more rental properties. The question I’m asked most by investors looking to enter this space is: why invest in residential rental properties? I have three good reasons to share with you, but I’ll give you a bit of background on why I decided to invest in residential real estate.
Investing in Property: My Why
While attending the University of Central Florida, I read a book by Robert Kiyosaki called Rich Dad Poor Dad. A lot of investors probably read this book as well, and it had an impact on me. I learned a lot, and within a year of reading it, I purchased my first investment property. The three reasons for investing are the same today as they were back when I read the book.
Equity is the difference between the value of a property and what you owe on that property if you have a loan. Your home equity will increase as your tenants help you pay down the loan, and also with appreciation that you receive from making normal repairs, paying attention to maintenance, and implementing smart upgrades.
Robert Kiyosaki also wrote a book called The Cash Flow Quadrant. It talks about cash flow, or passive income, and the opportunities that rest there. This is the difference between your rental income and your expenses. If you earn more than you spend, you’re net positive, and you’re earning a positive cash flow on your rental properties.
Lots of investors look for opportunities to leverage the bank’s money when they don’t have enough cash to purchase a property outright. So, leveraging is important. You must understand the loan to value ratio, or the LTV. Most banks loan 80 percent, so you’ll need to have 20 percent. When you have a few properties, you can leverage those to buy more.
These are three simple reasons for investing in residential real estate and rental properties. If you have any questions about how to get into real estate or investing in real estate, please contact us at All County PPM.