U.S. renters set a new record by paying $535 billion in 2015, Zillow reported. That’s roughly $20 billion more than 2014. This number is staggering. Compare that figure to the U.S. Department of Defense’s entire budget of $575 billion.
Chicago ranked #4 on Zillow’s list of top ten cities with total rent paid at 2015’s year end with $16.5 billion.
Forget Powerball—go buy yourself some rental property. How much of that $16 billion figure would you like to tap into?
Let’s compare the disadvantages of each wealth-building strategy. Buying property requires you to find a desirable property, arrange for financing and find qualified tenants. Buying a Powerball ticket requires you to stand in line. Buying rental property can possibly lead to the inconvenience of repairs, problem tenants, and vacancies. Buying a Powerball ticket can possibly lead to the inconvenience of standing in line. And….and….well….standing in line can be a major pain, especially on a day when your feet hurt.
Seriously, when you look past which strategy appears to be easier to buy into, ask yourself which one is more likely to produce results? Which one gives you a better shot at true financial independence? Realistically?
I write about some of the difficulties of owning property to help others avoid some of my mistakes. And it’s a fun way for me to vent and blow off steam. But, I’m a strong advocate for the advantages of owning rental property. Here’s one thing to keep in mind: owning property does not have to be such a headache. There are so many resources to educate landlords about how to successfully manage properties. While even the most experienced landlord never expects to completely eliminate issues, knowledgeable owners can greatly minimize problems. Smart owners set up processes to deal with unavoidable issues as they arise.
Put it this way, an experienced, motivated and well-read landlord can run their rental business with less aggravation than the average person might face going in to a job each day—with a MUCH greater payoff in the end. Greater risks bring greater returns. Consider that the next time talks of budget cuts at the staff meeting make you wonder if your position is in jeopardy, God forbid. I’ve been there.
Try this exercise when you’re driving to work tomorrow: observe all of the places you pass where someone lives. Think of the houses, apartment buildings, condos, etc. that families or individuals call “home.” Now think about this: someone owns each of those places. And not nearly as many of them are owned by nameless, faceless corporations as you might think. Smaller, independent landlords make up a large percentage of property owners who are benefiting from these billion dollar figures.
“Total home value growth slowed this year, but there was still a significant increase in overall value, and many markets are more valuable than they’ve ever been. At the same time, more renter households and rising rents combined to set new records in rental spending [in 2016]. Americans are spending a lot of money on housing, and that will make affordability an important issue [this] year.” Zillow.com
This CommunityInvestor.com article states, “The $535 billion was divided almost evenly between apartment dwellers and single-family-home tenants.” That means even those single family homes and condos you pass by might not be owner occupied. There could be a landlord somewhere in the background who has created an opportunity to put her kid through college. And that landlord could have been the woman who was standing behind you in line at the grocery store. Truth be told, it could even be the woman who was ringing up your bread and milk. Not only do rental property owners look just like you and me, in many cases they actually ARE you and me.
Successful property owners are everywhere. The problem is that they are often invisible. Well, not really invisible because that would be extra-freaky. What I mean is most people don’t hear about the successes because the much, much smaller proportion of tenant horror stories drown them out. Tenant and repair horror stories are much more interesting to hear and to tell. But those are a small part of a bigger picture.
The same CommunityInvestor.com article also reports that there has been a sharp increase in the number of renters entering the market over the last few years with an addition of 1.5 million new households in 2015 alone. That means that ownership opportunities are only increasing. Is there a better plan for your future than a lottery ticket? Is 2016 your year to make a move?
Future landlords, are you planning to buy your first rental property this year?
Current landlords, are you planning to buy more?
Add your comments to let me know what you’re thinking.
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