No, you’re not reading Consumer Reports or Motor Trend. But believe it or not, your choice of car can have an impact on your level of real estate investment success. This is because your choice of car makes an impression on people, and you always want to make the right impression. And of course, since cars are wasting assets - they very rarely rise in value - the less money you spend on them, the more you’ll have to invest in more practical things - like your next deal.

I was thinking about this recently because my wife and I are buying a car. We’re replacing the old Subaru Outback with… drum-roll, please… another Subaru.

What kind of impression do we want to leave with your tenants and anyone else with whom we have financial dealings? They should think of us as practical. As smart. As careful with a dollar. We want to present these impressions because we are battling a stereotype. That stereotype, of course, is that we are all rich - that we don’t actually have to work that hard - that because we own real estate investments, money comes easily to us. That a few bucks here and there aren’t that important to us. That when we haggle over money, we’re just being jerks.

Making the Right Impression

Don’t let your tenants see it! –>

Even if you are rich and don’t have to work that hard - good for you! - you almost certainly don’t want your contractors and especially your tenants to think so. Again, if they think so, your contractors are much more likely to overcharge you. Your tenants are much more likely to try to make late payments or take advantage of you in other ways. Of course you’re not going to allow this, but why deal with the hassle?

What does that mean to your car-buying decision? Well, first of all, it doesn’t mean you can’t have that Lexus or Porsche. It just means you shouldn’t ever take that car anywhere for business. And it also doesn’t mean you can’t be comfortable. Even my little future Subaru has heated seats, power windows, and so on.

Peoples’ impression of your car will be completely driven by the exterior, and in particular, the brand. That means an old luxury car or sports car will seem “richer” to your business contacts than a new non-luxury model. I would avoid all luxury brands. You especially want to avoid all sports cars. In addition to perpetuating the “rich playboy” stereotype, they just aren’t that practical for landlording.

If you must have a luxury brand, go American, and more than a few years old. An eight-year-old Lincoln or Cadillac will usually be beat up enough to not look overly impressive.

The most practical landlording vehicles are often pickup trucks, vans and SUVs. They never look ostentatious unless they’ve been tricked out with deer antlers and so on (think J.R. on “Dallas). They can carry a lot of stuff. Vehicles with four-wheel-drive can get almost anywhere.

Not only that, but if you really want to spend a lot of money for a comfortable and luxurious ride, a pickup truck can now be as comfortable as any car. But from the outside, it just looks like a pickup truck - not a bling-mobile that will send the wrong message.

So why aren’t I buying a pickup truck? I’d actually love to have one, but the little Subaru will hold everything I need for 99% of my landlording efforts. Of course this includes maintenance projects. It’ll also haul my two kids. If I need to tote a washing machine or something else equally bulky, there’s my wife’s Honda Pilot. However, the Subaru will get much better mileage than any of those other choices. And it sure doesn’t look ostentatious.

A Good Car is a Good Value

I define a good value as everything I need for the lowest possible price. Something that doesn’t suit my needs isn’t a good value - that’s why I won’t buy an old clunker that’ll leave me stranded 30 miles from home at midnight.

Once you’ve determined the best kind of vehicle, the next thing to consider is ownership costs. This is a combination of two factors. The first factor is cost of operation - gas, maintenance, and insurance. The second is depreciation. If you are like most small landlords and use your vehicle for both business and personal purposes, you probably figure your vehicle tax deduction based on mileage. The government includes cost of depreciation in the per-mile deduction - it’s currently 21 cents per mile for depreciation out of a total deduction of 50.5 cents per mile for the first half of 2008, 58.5 cents per mile for the second half. But in reality, cars obviously lose value at different rates. The most luxurious tend to lose value the fastest.

For example, let’s take a look at a couple of flashy rides from high-quality brands. A new BMW 528 will set you back about $55,000, but the five-year-old equivalent will be only about $21,000. A new Lexus LS 460 runs about $88,000. But the five-year-old is only $22,000. The BMW has lost more than half of its value (assuming a 2004 BMW cost less when it was new - it wasn’t that much less). The Lexus has lost almost 3/4 of its value.

By comparison, the Toyota Corolla is one of the most reliable and durable cars you can buy. (I’m not considering one, only because I really want the Subaru’s all-wheel-drive.) A new one will run about $15,000. The 2004 equivalent? About $9,000. That 2004 Toyota Corolla retained most of its resale value over five years and proved itself to be a much better value than most other cars.

Maintenance and insurance will cost a lot more as well.  Just ask anybody who ever bought an old luxury ride.  Replacement parts for a 1999 BMW aren’t any cheaper than for a new one.

Obviously these aren’t the only things you should consider when buying a car. But I find that most landlords don’t think nearly enough about the impression their choices make, and this is one way to do so. And considering the amount of time you spend thinking about your major investment decisions, shouldn’t you devote a little more to this important choice?

Talk to Your Tax Advisor

As you know, the domestic automakers are in serious trouble right now, and I expect the government to create some innovative incentives to try to encourage people to buy cars as part of their ongoing bailout efforts. That means we are likely to see tax changes which will affect your purchasing decisions. I used the Auto and Vehicle tables at Small Business Tax & Management and Edmunds.com for research, but you should ask your tax advisor for advice. Your advisor should be up on the latest changes.

If you're new here, you may want to subscribe to our RSS feed or sign up for our real estate social network. Thanks for visiting!

Tags: attitudes, landlord, money, perception, real estate investing, rich

As a young boy, I was lucky to have some great mentors. My grandmother is one of the best business teachers I’ve ever had and before I get too deep (which I will in future articles) into the financial analysis of real estate investing, mortgage financing, and other “on target” topics, I thought it best to tell you a little about me first. The easiest way to learn all about me (and real estate) is to get to know my Grandma.

So a story is in order…

Grandma told me once as a teenager when I pestering her to spill the beans how she made so much money, “Your grandfather and I never cleared more than $35,000 a year from the restaurant.” I didn’t believe her…and it must have shown on my face because then she said with out hesitation…and I’ll never forget it…almost as a whisper…

“Real Estate”

The words echoed through my head and I just stared at her. She smiled a little crack of a smile…and said it again…”real estate”.

A flood of questions began forming I simply had to get the answers too and over the years, I got them all…and I’m here to share them with you. So stay tuned.

But I am getting ahead of myself…you need a little back-story before we move on…the restaurant!

My grandmother owned a small restaurant in an Ozark Mountain town called Rogers, Arkansas. The town or the restaurant was not very remarkable. The restaurant opened everyday but Sunday at 4:30 am to serve breakfast to the early-rising working folk. The first in the door every morning was Sam Walton.

If you know your Wal-Mart history, the very first “Wal-Mart Discount City” was opened in Rogers, Arkansas in 1962. The corporate headquarters to this day is a few miles away in Bentonville. Back in 1971, when my learning at Grandma’s knee began, this first store was being converted to Sam’s proto-type “Supercenter” store to prove to Wall Street his concept would work in rural areas…and he needed a hearty breakfast to get the day started.

As I said, there was nothing remarkable about this restaurant, except the lady who ran it. It wasn’t only me who thought so. Sam thought the world of Grandma too. And I was soon going to learn why.

As kids, we don’t really know that much about our elders’ adult lives. We are not privy to the “reputation” of our parents and grandparents in the community until we get older…or until we endeavor to find out. I always noticed how patrons at the restaurant always treated my Grandma with so much respect, but I just assumed they were being nice. Down deep I always knew there was more to it and vowed to keep my eyes open for any hints.

My answers would come in a handful of years when our talks about real estate grew more substantial. I knew at the time we lived in one of Grandma’s “rentals”, but I had no idea so did a large chunk of the community.

Come to find out, every waitress that ever worked for my Grandma, rented from her. A lot of the nurses at the hospital also rented from Grandma. Many of whom eventually went on to buy the house from Grandma, often times with her going down to the bank with the tenant and cosigning for the home loan.

I asked her once after notice this predilection to rent predominantly to women, “Why so many women renters Grandma?”

She said, “They never had a chance. I can remember in the 1950’s, when your Grandfather was in the Navy and on that damned sub for years at a time, I had to tote your mom and uncle around to rent places to live. The landlords all looked at me funny…like I had a “scarlet letter” on my dress or something. More than one got a little fresh with me too…if you know what I mean.”

I didn’t. So, I clarified, “You mean they implied a “roll in the hay” would get you the rental?

“Oh, there was no implication…it was plain spoken.”

The only retort I could muster was, “Gross”.

She said, “I promised myself if I ever got to a place where I could help other women or single mom’s who also endure this indignity every day…I would.”

My first lesson was about to arrive…she was carefully crafting her next words…I could tell…

She said, “Rob if you can relieve somebody’s shame…do it. And at all costs, never add to it.”

Then it hit me. Grandma wasn’t in this rental game only for the money. Hell, she may not have been it for the money at all!

She was on a mission. A mission to stop the indignity she once felt as a woman with 2 children who just “looked” like an unwed mother. She could just imagine the actual unwed mothers who fell for the advances, and many did since their shame was real.

Now I also had my explanation for my Grandma’s stand in the community…the reason she was so respected. It was all starting to make sense.

What can you and I learn from this?

As landlords we now have the opportunity to do the same thing…relieve shame. There are a ton of foreclosure victims who are being shut out of the rental market due to their foreclosure. A recent article in the San Diego Union-Tribune quotes industry insider stating:

Ron Bowdoin, who oversees 2,500 rental units for the SARES-REGIS Group in Los Angeles and the Inland Empire, said foreclosure victims often fail to meet his company’s credit standards.

“As they reach the brink of foreclosure, their credit reports have suffered tremendously,” he said. “We have to do a co-signer or large deposits to get them into apartments.”

They feel awful and get treated by the big rental agencies and apartment complexes like day old fish. A foreclosure on your credit is today’s “scarlet letter”.

As private rental property owners, we decide who to rent to…and I am now imploring you to take a look at the foreclosure victim as the best renter you can find today. As a matter of fact, my original title for this article was, “Foreclosure Victims Make The Best Renters”.

I believe and my Grandma proved relieving somebody’s shame makes you the winner. Helping today’s foreclosure victim puts you on the same path as my Grandma.

Believe me when I say…and I’ll demonstrate this with future articles here on Bigger Pockets…it’s a spiritually and financial fulfilling path.

Good Luck!

Tags: foreclosure, income, income property, money, real estate, real estate investing, rental, rich

With an economic crisis getting worse and worse, a housing bubble, doom and gloom everywhere, foreclosures, and subprime blowups, find out how you can take advantage and become rich with real estate.

economic, housing bubble, doom, foreclosures, subprime, real estate

Tags: biggerpockets, comedy, foreclosure, home, Housing, housing, money, mortgage, real estate, realestate, rich, subprime, video