Today I’m answering your question, “Is buying property to rent out risky?” and the topics I’m going to cover are:
- Rental Property Owners Are Bound by Rules and Laws
- The Number 1 Rule of Buying Investment Property
- Expenses That Rental Property Owners Can Expect
- The Benefits of Buying Investment Properties at Tax Sales
- Acquiring Cheap Real Estate Investment Property
- Profiting From Renting Property Out at Below Market Prices
Want to learn how to purchase bargain real estate? Would you like to buy mortgage-free property for pennies on the dollar? Or earn double-digit interest rates secured by real estate? Then you don’t want to miss this FREE Mini Course.
Rental Property Owners Are Bound by Rules and Laws
Rental property is certainly a little more complex than buying a house and putting a sign on the front lawn then becoming rich. When you’re buying property to rent out, it’s important to know the market and even more important to know about the neighborhood. It also helps to have an understanding of leasing property.
In your county, city, or municipality there will be rules for landlords that must be followed, and they involve more than taking care of clogged toilets and leaky faucets.
I can assure you that the party renting from you will know those rules. Today, we live in a society that knows, and what do they know? They know that too many attorneys graduate law school and are looking for work.
My point is, know the rules, and you will save yourself a lot of money. Understand the law, and understand how to take care of tenants.
The Number 1 Rule of Buying Investment Property
When buying property to rent out, my personal number 1 rule is – know the neighborhood. You can change the property, but you cannot change the neighborhood.
Location is important! Bad neighborhoods create bad rental situations. Don’t kid yourself.
Property management is a challenge which most people discount. They think it’s easy when it’s not, and for the people who do property management, it’s a thankless job.
Expenses That Rental Property Owners Can Expect
Is buying property to rent out risky? The short answer is yes. Rental property is expensive, and it requires down payment money. If you’re planning to use leverage, usually banks lend 75-80% which translates to you needing a 20-25% down payment.
Maintenance on older property can be a nightmare. Sellers claim it’s a low-maintenance property. My advice is to expect maintenance to be high, and if you have to pay retail for maintenance, you more than likely will end up with a negative cash flow if you’re paying an 80% loan.
The good news is, if you can raise rents, and the tenants won’t move. You will have yourself an inflation hedge for the future.
Bottom line, real estate is expensive; financing is expensive, and maintenance is expensive. Management is a cost you must program into your deals.
So what’s the problem? You need money! You either put up a lot of money and lower your debt service and yields with a smaller mortgage, or you accept negative cash flow for the first few years.
There is a solution.
I have a free gift for you, a special mini course that will show you how to profit from investing in bargain real estate. Get your FREE gift today.
The Benefits of Buying Investment Properties at Tax Sales
I’m Ted Thomas, and for 30 years, I’ve been involved with tax defaulted property. I discovered this little-known real estate investment and never looked back. It’s lucrative. Properties are abundant, and I found that if I continuously use a “buy low, sell low” strategy, I could sell quickly and make exceptional returns.
In all 3,000+ counties in the United States, the local county government auctions tax defaulted real estate. These are homes, vacant residential lots, small apartment buildings, and small office buildings.
The starting bids at tax defaulted auctions are as low as the back delinquent taxes, in other words the past due taxes. This means the starting bids could be 10 cents to 20 cents on the dollar.
Just because the auction starts at 10 cents or 20 cents on the dollar doesn’t mean the bidding will stop there. These are public auctions, and the highest bidder wins.
Many of the properties will be sold at the auction for 60%, 70%, or 80% below the tax assessed value.
Another positive of the auction is that the treasurer will extinguish the mortgage or deed of trust loan. The winning bidder will receive a property with no mortgage or trust deed loan encumbrance.
Acquiring Cheap Real Estate Investment Property
Most people don’t know how to make money with tax defaulted real estate.
A Michigan couple purchased a tax-defaulted property for $8,000 and spent an additional $4,000 cleaning the property up. They sold it as an installment contract sale and will receive payments of $48,000 total, $400 a month for 10 years. Rather than sell, they could have rented the property.
Here’s the part my students really like. You don’t have to be a pushy salesperson and use high-pressure closing techniques. Instead, you pick the best deals at the auction for only pennies on the dollar.
You buy low, follow my system and sell low at less than the tax assessed value. That low price will attract property flippers, fixers, and renovators who like to take mediocre properties and make them show like a mansion.
Profiting From Renting Property Out at Below Market Prices
It’s always easy to rent property at lower than market prices, and keep in mind that with tax defaulted properties, you will have no mortgage or deed of trust loan.
This system works for investors who are buying property to rent out because it’s been tested and perfected in the trenches with real properties with big money on the line.
What if I told you this is not easy? There’s no business that’s easy. You must do the work, it’s not magic. The truth is: there’s no easy path to success. I will tell you it will be harder to do on your own.
I always recommend a coach, a guide, or a mentor to accelerate your money-making progress, get you through the learning curve as quickly as possible and on the road to the business of your dreams. So you can get your piece of the massive pie.
We hope you enjoyed Ted’s lesson, “Is Buying Property to Rent Out Risky?”
Buying property to rent out doesn’t have to be risky. You can greatly reduce your risk by increasing your profit margin when you purchase investment real estate.
At a tax defaulted property auction, you can buy mortgage-free real estate for mere cents on the dollar, which leaves you with a large margin. As long as you know how to vet the auction properties, you can generate massive cash flow and create a steady passive income. Ted can show you how.
If you’d like to know more about tax delinquent property investing, Ted Thomas provides full support and complete training with home study courses, Q&A webinars, live tutorials, workshops, web classes, and personal coaching with certified coaches.
Learn how to reap huge rewards from tax lien and tax deed investing! Get started today by taking advantage of Ted’s Free Master Class! Act now, it costs you nothing and will give you a big head start!
Ted Thomas is America’s Leading Authority on Tax Lien Certificates and Tax Deed Auctions, as well as a publisher and author of more than 30 books. His guidebooks on Real Estate have sold in four corners of the world. He has been teaching people just like you for over 30 years how to buy houses in good neighborhoods for pennies on the dollar. He teaches how to create wealth with minimum risk and easy-to-learn methods.