Can I become rich by being a Landlord?
A lot of individuals enter into the landlord business to get rich in a few years. It is absolutely true that wealth can be created by pursuing a rental business. It can be the best financial decision you can take in your lifetime. Like any other business, the landlord business also demands the right management. Failing at which can even make you lose all your money.
You can not only become rich but can create enormous wealth by being a landlord. There is nothing more rewarding than buying cash flowing rental properties. You need to master a secret art in order to become rich by being a landlord. A huge fortune can become yours if you can put your continuous efforts and dedicate time to your rental business. A landlord business favors you in million ways to earn a fortune. And you never know if you too end up becoming a millionaire landlord one day.
How can you become rich by being a landlord?
Pursuing a rental business comes with its own challenges and rewards. A successful landlord exactly knows what a rental business demands. And, how can he turn his rental business into a money-making machine? There are many advantages to running a rental business. But among those advantages are some rarely known strings attached that can make you rich with your landlord business.
1. Passive Income
Being a landlord, you can become rich by taking the compounding benefits on your passive income. In a rental estate business, you generate passive income every month without actively participating in your business.
The money you have invested in your rental business will earn money for you. Your money is working for you 24/7. This invested money has the power to work for you for unlimited hours. The more time it works, the more it will make you richer.
The wealthy person knows the advantage of having passive income from the assets they own. It is this secret which makes them even richer and they keep on generating money. Imagine yourself doing a conventional 9-5 job. Can you work for more than 70 hours in a week?
If yes, how much more money can you make by doing that? The rich works for passive income, they spend their time creating assets that can generate passive income for them. Once they have assets that generate enough passive income, they can get financially retired.
2. Cash Flow
The cash flow is a great tool attached to the rental properties. You can become rich with rental properties and can fund a wealthy lifestyle by acquiring positive cash flowing properties. It doesn`t matter how much money do you have or how small money you are making with one of your rental properties today.
You will be going to end up being a millionaire if you utilized the power of cash flow in the right direction. You can build your portfolio of positive cash flowing rental properties by putting very little money. And with some knowledge and experience, you can even employ zero money down acquisition strategy to build your portfolio.
It may be possible that you don`t have a lot of money today. But by becoming a landlord you can become rich and can acquire various cash-flowing properties under your hand in a few years. The initiation can be small, say you only make $300 cash flow monthly. But the $300 you make monthly makes $3600 annually.
And if you keep going like this for a few years, you will able to buy more such cash flowing properties. Finally, a day will come when you have lots of cash flowing properties in your hand. That day, you will be making good money and may end up becoming a millionaire.
3. Property Value Appreciation
The Landlords can become rich by taking advantage of value appreciation on their property. You own a physical rental real estate and that real estate has equity in it. Your value of property tends to increase due to inflation in prices, change in market trends, and population growth.
On average, a landlord sees a 3% appreciation in the property value considering the highs and lows of the market. If you can invest at the right time and at the right place in the rental business, you can become rich in a few years.
Suppose you own a property in a low-income area that is worth only $100,000 today. Think of it after 10 years down the line with just 3% appreciation. You will gain $30,000 on this property. And what if, you start acquiring one property every year? How much gain you can make with multiple properties?
You start with one property of $100,000 and acquire 10 properties in 10 years. Now, what is the effect of appreciation after these 10 years on your wealth? You will not be having only $10,00,000 in equity but will have $300,000 more additionally due to appreciation in the value of your property.
4. Building Equity
The silver lining of a rental business is that you can build your equity with other people`s money. It can be no better than someone building wealth for you. You can practically build a lot of equity in several years by investing a little money in this business.
There are various types of financing available for rental business owners today. You can start your landlord business by investing a little amount and the remaining amount can be financed easily. Now, you have a rental business in which you have invested very little money. The rest you have borrowed and is using other people`s money.
You will pay the borrowed money gradually in several years. Also, you will not be paying this money by yourself. You have tenants on your property that will be paying off this borrowed money for you in the form of rent. Suppose 30 years ago, you have bought a property worth $500,000 by putting $100,000 in down payment. The rest $400,000 is financed from a bank for the term of 30 years.
For these 30 years, you rent your property and generate a good cash flow every month. You paid off the loan in 30 years. Now, you have left with a lot of equity in your hand. You started with only $100,000 and in the span of 30 years; you have multiplied your equity by 5 times. And if you consider appreciation in the picture, you can imagine how much equity you will make.
5. Snow Ball Effect
The rental real estate can have a snowball effect on your wealth. This effect can make you a rich landlord in several years provided you implement it in time. You need to first understand it carefully to use it for growing your wealth. Just like the snowball starts with a small chunk of ice. And with momentum, it starts to build upon itself becoming bigger and bigger in size.
The wealth creation in rental business builds the same way. You start with one rental property. And, when your business starts to build momentum; you also start multiplying your revenues catering an exponential growth. Your portfolio starts building up and you keep acquiring more and more properties in your hand.
Suppose you purchase positive cash flowing rental property worth $300,000. You rent it for $2800 per month and your expenses come at $1800 per month. Now you have $1000 worth of profits every month and $12000 annually. You keep on operating your business in this way and manage to set aside $60,000 in 5 years.
Now you got enough cash to put in the down payment of the second property. So you purchase another rental property with the same specifications as the previous one. This means you will now have $2000 profits every month or $24,000 every year.
Think about how much more time you need to finance your third property. Not more than 3 years right? And now think about the fourth property. You can have it in 2 years and this effect will keep on going and you can potentially become a millionaire in say 10 to 15 years.
Rachel Becomes Rich by being a Landlord
Rachel owns a rental property worth $300,000 for which she put 20% of her money in down payment. Her rental property yields a $2000 cash flow every month and $24,000 annually. She has to pay a monthly mortgage of $500 and $6000 annually on the 80% amount she has borrowed. The other expense that occurs annually includes $2000 in repairs, $2500 in landlord insurance, and $1500 in taxes. Adjusting everything, she has an NOI of $12000 yearly.
She manages to save about $50,000 in 5 years. For which she reinvested this amount on a property worth $250,000. She now gets a cash flow of $3500 every month from the two properties she owns. The loan is paid off in 30 years. After 30 years, she has a passive income flow of $4000 every month.
Her loan is paid off; the rental income has been increased due to inflation. And, the value of her properties has appreciated and now it worth $952,000 after 30 years with a 3% rate of appreciation every year. Rachel has started with $60,000 thirty years back and now her assets worth $952,000 and she has a passive income of $3500 every month.