One of the oldest investment practices in real estate. You buy some property and rent it out to a tenant while the owner, or landlord, maintains the property and pays the mortgage and taxes.
Most of the time it’s good practice and generally the financial goal to charge enough covering these costs, and sometimes more for cash flow. When the mortgage is paid off, the majority of of the rent then becomes profit. If you’re lucky the property can also appreciate in value over the time you’re paying the mortgage leaving you as the landlord with a more valuable asset. The U.S. Census Bureau says that real estate has slowly been increasing in value from 1940 to 2008 when the last financial recession hit. Since 2010 the real estate market continually grows with opportunity for profit and cash flow from houses “with potential” whether to buy flip and sell, or to buy fix and rent.
Having an irresponsible tenant who damages the property or is hard to keep up with, or even worse… no tenant at all can hurt the bank. Scrambling to cover mortgages is never fun but a reality for all landlords and property owners. The biggest differences in an investment property that will be flipped and sold as opposed to a rental property that is held onto is the time, and investment required. The responsibility of being a property owner gets real when the furnace breaks in the middle of the night, the bill for yard work, and hiring a handy-man to take care of normal wear and tear. This of course has a solution as well, but at a cost.. property management. Many property managers can take care of paying bills on time, fixing and upkeep of the property, and addressing any concerns the tenant might have. Welcome to only a slice of the Real Estate Investing world.