I love investing in rental properties. It’s not without trials, but the good certainly outweighs the bad.
Once a year, every spring, I like to reflect on the previous year and consider my successes and failures. It’s my proverbial “spring cleaning”.
I specifically like to meditate on what worked and what did not work in the previous year regarding real estate. The time I have to dedicate to real estate investing continues to shrink as my family is growing and I have other responsibilities at my church and full-time job. With all of this said, I think it’s a good time of year to determine your “why.”
One of my favorite speeches is given by Simon Sinek, at a regional TED talk. He tries to answer the question “why?”. Specially, “why do you do certain things?”
Listed below are several reasons I am a landlord – more specifically, why I love being a landlord. Hopefully, this will help you define your “why” in this business.
1. Long-Term Wealth
Sometimes the best investments are the simplest. With real estate, I can buy a house and a bank will lend me the majority of the money that I need. A renter will pay my mortgage and I can use the profit to pay-off the mortgage early – likely in 10 years.
If there was ever a viable short-term path to long-term wealth I believe real estate is the way. I didn’t just figure this out in a spreadsheet one-day – I have seen it time and time again with friends and family members.
2. Retirement Income
This is a big one. I don’t believe many people can retire simply by relying on social security and 401k income. I definitely can’t retire early solely relying on social security and 401k income! Sadly, most people have not calculated their retirement income and what it will take to get there.
This is one of the biggest reasons that keeps me holding on to real estate and buying more properties.
Not only does the bank lend the majority of the money needed to buy property, but the tenant also pays that mortgage. As an added bonus, I make a profit every month after the bills are paid. This of-course assumes I bought the property at a reasonable price and I have secured reasonable financing.
The cash-flow that I gain every month gives me a solid foundation to support my family and grow my portfolio.
4. Family Time
Yes, I do have to work on my rental property on the weekends and at nights sometimes. However, I try to include my kids whenever possible.
Sometimes they help me with minor fixes (my 4-year-old son loves to rip-off wallpaper and my 7-year-old daughter likes to mow) and other times, they just play in the yard. Regardless, I like to believe this is educating them while at the same-time instilling a hard-work ethic.
5. Family Vacations
My wife and I love to vacation! However, there has been several times in our 14 years of marriage this has not been possible due to cash-flow and liquidity constraints.
Ultimately, I want to keep taking longer vacations (up to 3 months at a time) and rely on my rental income to pay for these vacations.
6. Experiential Learning
As a landlord you are a business owner. I’ve been to business school and love reading books and blogs. However, there is no better education than getting into the action yourself.
I have a friend who has read ten times the number of real estate books as I have. Realistically though, I know more than him because I started buying properties and managing them instead of just reading about it.
No one ever made any money by only talking about investing in real estate.
7. Growth as a Leader
To be completely candid, this is the most challenging reason and the one I like the best. When you are a landlord you have to manage situations and people who are, shall we say, “not optimal” at best.
Unfortunate situations like:
- Tenants not paying
- Subcontractors not showing-up
- Business partners not carrying their weight
- Lenders that are not acting in a timely manner
It’s funny because people who are not landlords have an easy answer for everything. Whenever, someone hears about me working at one of my properties over the weekend, someone inevitably makes a comment:
- You should hire a property manager
- Your time is worth more than that
- You shouldn’t do those types of tasks
It’s easy to give advice when you aren’t the one that has to make the loan payments!
For me, leadership is about leading from the front – and of course I could hire everything out. However, when things don’t go as planned I’m not going to make excuses, I’m going to make an action – by planning and then executing on it.
Leadership is getting people to do things that they don’t want to do.
– Harry S. Truman
8. Income Diversification
I have been laid-off more times than I can count (or remember). Life happens, jobs come and go. Sure, a tenant can stop paying rent and you will have to evict them. It’s bound to happen eventually.
However, you will get another tenant and life will go on. The bottom-line is life happens and diversifying your income sources is always a wise decision.
They say you are the average of the five people you hang-out with. Some people even go so far as to say that your income will be the average the incomes of the five people you hang-out with most.
For whatever reason the vast majority of my friends are all real estate investors. We are all encouraging and use each other’s resources to help each other grow.
At least once a week I get a call or a text, that says something like: “Hey Jimmy, do you know a good roof guy.”
Of-course I do!
10. Resume Builder
John C. Maxwell said: “your network is your net worth.”
As a landlord you will meet all kinds of people:
- Real Estate Agents
- Title Agents
- Real Estate Attorney’s
- Tenants with all kinds of jobs
Everyone has a story and I enjoy hearing about what people do for a living. I have helped tenants get married, graduate from college, buy their first house, stabilize their family life, et cetera.
Owning real estate isn’t just an opportunity to make money it’s an opportunity to help people.
Hopefully this article has encouraged you to define your “why” and take your real estate business more seriously. I love being a landlord, and I hope you can too.
I’d love to hear more about your motivation to invest in real estate in the comments below!