Question

Discuss whether rental properties are a good investment. Talk about how much control the government should have over rental properties. Discuss some of the pros and cons of the controls the State has exercised over the last few months in the United States.   

If you own or plan to own a rental property, describe your reaction to these controls. Is it too much control? Or maybe not enough? Have these controls made you think twice about rental properties? Have they become a bad investment?

Answer 1

Proof That Rental Properties Are a Better Investment Than Anything Else

1. You can purchase rentals using leverage.

Rental properties are great because you can borrow the bank’s or someone else’s money to increase the potential return. This is known as leverage.

In other words, you don’t need to have 100 percent of a property’s purchase price on hand to be able to buy it. Rental properties allow me to buy large properties for far less cash than I might need to purchase stocks or other investments.

2. Rentals allow you to hustle for greater returns.

Not only can I leverage my cash, but I can also leverage my time and abilities to make magic happen in this game—something difficult to do with other investments. In other words, I can hustle.

If I want to do the work needed to rehab a property, I can do that. If I want to leverage my networking skills to raise money, I can do that instead. If I want to leverage my knowledge and time to find better deals that provide an even greater return, I can do that.

Rental property investing gives me the ability to hustle for my future.

Related: 5 Ways Real Estate Wins Big Where Stocks Fall Short

3. You can manage the investment directly.

I’ll fully admit I’m a bit of a control freak, and that drives me toward rental properties in a powerful way. With a rental property, I am directly responsible for the outcome of my investment.

It is up to me to analyze a property before I buy it. It’s up to me to ensure the property is in good condition to rent; it’s up to me to ensure the property is running at peak performance.

I don’t have to depend on some board of directors in New York City for my life’s direction. I can manage my investments directly and personally.

4. People always need a place to live.

The real estate market will go up and down, but the beauty of rental properties is that demand will never end. People always need a place to live, so unlike the latest tech trend or your brother's startup, real estate is an investment that will last.

Furthermore, because increasing student loans are making qualifying for a mortgage more difficult and our culture increasingly values mobility, the demand for rental properties will only grow over time.

5. Rentals have worked for millions of people before me.

Perhaps one of the greatest benefits to rental property investing is the proof of concept handed down by millions of successful investors before us. Since the dawn of human civilization, landlords have built wealth by owning and leasing out residential property.

Today is no different. According to IRS Statistics of Income data, about 10.6 million taxpayers declared rental income in 2015 for 17.7 million properties.

6. Rentals are (fairly) stable and predictable.

Yes, events such as the market collapse in 2007 and COVID do happen, but rental property owners who were investing for long-term gains did not suffer like those who were trying to be "fancy" (or as my good friend and fellow landlord Jordan says, "punk drunk on greed").

Furthermore, I would argue that the 2007 real estate crash was predictable for those who were paying attention—because one of the defining characteristics of the real estate market is the boom-and-bust cycle that never goes away. Once an investor learns to identify this cycle, the old adage of “buy low, sell high” becomes much easier to achieve.

7. Rentals offer incredible variety.

Rental properties also offer an incredible amount of variety within the asset class.

I can invest in single-family houses, small multifamily properties, large multifamily apartments, office buildings, high end, low end, Section 8, transient, and any of a number of other options. Then, within each of those classes, I can find larger properties; smaller properties; ones that are newer, older, taller, shorter, ugly, beautiful, and so on.

The possibilities are endless.

8. Rentals are simple and straightforward.

Although I’ll never claim that working with rental properties is easy, I do maintain that investing in rental property is fairly simple and straightforward.

Sure, it involves more than just buying a piece of property and placing renters in it, but the strategies for success are not overly difficult to learn or master. To help, a tremendous amount has been written on the topic by those who have mastered it. Books, podcasts, videos, blogs, forums, networking groups, mentorships, and more can be found to help you learn nearly everything yo Byu will ever need to know.

There are four big reasons for this: it likely won't generate the income you expect, it's hard to generate a compelling return, a lack of diversification is likely to hurt you in the long run and real estate is illiquid, so you can't necessarily sell it when you want.