Is Owning A Rental Property Worth It?

One of the best decisions I ever made was to invest in a rental property.

When I started out, I bought a property that was nothing to write home about and I ended up sleeping on the floor. I worked very hard to make the house look presentable enough for tenants to want to move in.

A lot of people will make you question the wisdom of property investment. There are times when might question it yourself in the early years.

I learned an important lesson from that first rental property. Everything comes down to cash flow.

All the wealth you get from owning property comes from cash flow.  Without cash flow, property is an asset that doesn’t pay you back anything until you sell it.

So owning a good rental property is worth it if you want to put some real cash back in your pocket.

The return you get from property investment comes from the rent your tenants pay you every month, less the amount it costs to run the property.

So if a property has a rental return of 5% you need to figure out how much of that you get to keep for yourself for the investment to be worth it. 

Sometimes that 5% may not all the profit you make from the property – unless it is calculated as a net return.  

The net rental return is what you get when all the things like management charges and taxes are taken out. You will need as much of that monthly return as you can keep hold of to make your investment worthwhile.

The gain you get from appreciation comes much later. This is why property investment should be a long term strategy. Historically property prices have always gone up.

So property is worth the effort if your plan includes getting a good monthly rental return.

The real magic begins when you invest in more than one property:

Let’s say John invests in a 5 unit apartment complex.

The apartments cost £125,000 per unit and he gets a conservative 3% appreciation growth per year for 5 years. 

This gives him a return of £79,000 on paper.

Rent those same 5 apartments out and the rental income is £125,000 over 5 years.

If John stopped at just one property he would miss out on all this extra income.

Real estate investing can be a headache if you don’t plan long term and you can’t find someone who is willing to help do at least some of work for you.

It is not only about investment, you will need to spend some time taking care of the investment property.

You can hire people to do the work for you, but like any investment, the more people you hire the less money you will make.

So always allow for your expenses. It will have an impact on the amount of money you can make as a property investor and save you some headaches in the future.

Is owning a rental property worth it for you?

Kind Regards

Brett Tudor
Property Expert

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