Landlording & Rental Properties

12 Reasons Why Rental Properties Are the Best Investment

Expertise: Landlording & Rental Properties, Personal Development, Real Estate News & Commentary, Business Management, Flipping Houses, Mortgages & Creative Financing, Real Estate Deal Analysis & Advice, Real Estate Wholesaling, Personal Finance, Real Estate Marketing, AskBP, Real Estate Investing Basics
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It’s no secret that I love rental properties.

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Sure, flipping and wholesaling properties might be fun. Notes and tax liens might have fewer tenants. The stock market might be more popular.

But rental properties are my true business love.

Let me explain why.

1. You can purchase it using leverage.

Rental properties are great because you can borrow the bank’s or someone else’s money to increase the potential return.

This is known as leverage.

In other words, you don’t need to have 100 percent of a property’s purchase price on hand to be able to buy it. Rental properties allow me to buy large properties for far less cash than I might need to purchase stocks or other investments.

2. It allows the ability to hustle for greater returns.

Not only can I leverage my cash, but I can also leverage my time and abilities to make magic happen in this game—something difficult to do with other investments.

In other words, I can hustle.

If I want to do the work needed to rehab a property, I can do that. If I want to leverage my networking skills to raise money, I can do that instead. If I want to leverage my knowledge and time to find better deals that provide an even greater return, I can do that.

Rental property investing gives me the ability to hustle for my future.

Related: 5 Ways Real Estate Wins Big Where Stocks Fall Short

3. You can manage the investment directly.

I’ll fully admit I’m a bit of a control freak, and that drives me toward rental properties in a powerful way. With a rental property, I am directly responsible for the outcome of my investment.

It is up to me to analyze a property before I buy it; it’s up to me to ensure the property is in good condition to rent; it’s up to me to ensure the property is running at peak performance.

I don’t have to depend on some board of directors in New York City for my life’s direction. I can manage my investments directly and personally.

BRRRR-strategy-deal

4. People always need a place to live.

The real estate market will go up and down, but the beauty of rental properties is that demand will never end. People always need a place to live, so unlike the latest tech trend or in your brother's start-up, real estate is an investment that will last.

Furthermore, because increasing student loans are making qualifying for a mortgage more difficult and our culture increasingly values mobility, the demand for rental properties will only grow over time.

5. It’s works for millions of people before me.

Perhaps one of the greatest benefits to rental property investing is the proof of concept handed down by millions of successful investors before us. Since the dawn of human civilization, landlords have built wealth by owning and leasing out residential property.

Today is no different. According to a joint survey produced by BiggerPockets and Memphis Invest in 2012, “one out of eight, or 28.1 million Americans, either consider themselves to be residential real estate investors or own residential investment properties today.”

6. It’s (fairly) stable and predictable.

Yes, events such as the market collapse in 2007 do happen, but rental property owners who were investing for long-term gains did not suffer like those who were trying to be "fancy" (or as my good friend and fellow landlord Jordan says, "punk drunk on greed").

Furthermore, I would argue that the 2007 real estate crash was predictable for those who were paying attention—because one of the defining characteristics of the real estate market is the boom-and-bust cycle that never goes away. Once an investor learns to identify this cycle, the old adage of “buy low, sell high” becomes much easier to achieve.

7. It offers incredible variety.

Rental properties also offer an incredible amount of variety within the asset class.

I can invest in single-family houses, small multifamily properties, large multifamily apartments, office buildings, high end, low end, Section 8, transient, and any of a number of other options. Then, within each of those classes, I can find larger properties; smaller properties; ones that are newer, older, taller, shorter, ugly, beautiful, and so on.

The possibilities are endless.

8. It’s simple and straightforward.

Although I’ll never claim that working with rental properties is easy, I do maintain that investing in rental property is fairly simple and straightforward.

Sure, it involves more than just buying a piece of property and placing renters in it, but the strategies for success are not overly difficult to learn or master. To help, a tremendous amount has been written on the topic by those who have mastered it. Books, podcasts, videos, blogs, forums, networking groups, mentorships, and more can be found to help you learn nearly everything you will ever need to know.

Related: Buy & Hold Real Estate is the Ultimate Investment: Here’s Why

In addition, knowledgeable people are available to help. Several months ago, I ran into a situation I didn’t know how to handle (a smoking tenant accidentally lit part of the outside of her house on fire yet claimed she hadn’t). I reached out to other investors on the BiggerPockets Forums and received some excellent advice on how to proceed—and it didn’t cost me a thing.

 

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9. I can buy below market value.

I was raised by a “garage sale mom” who taught me the value of haggling for the best deal.

As a result, one of my favorite reasons for investing in rental properties is my ability to find properties that I can buy below market value.

In other words, I can shop for a great deal!

Finding properties that are worth $100,000 that I can buy for $80,000 truly excites me and is an integral part of how I’ve been able to build wealth so quickly over the past eight years.

10. Insider trading is legal.

In the Wall Street world, there is a concept known as “insider trading,” which is when an investor makes a profit on a stock because he or she had access to some secret bit of information that helped him or her buy or sell at the right time.

This practice is not just discouraged in the stock market, it is also illegal and can even land you in jail (just ask Martha Stewart).

However, as a rental property investor, I can leverage any secret knowledge I can find to benefit my investments. If I know that a new light rail is moving into a neighborhood, I can jump in and swoop up properties before word gets out.

If I hear that a major industry is leaving an area, I can get out of that area before the market declines. And unlike in the stock market, this is 100 percent legal and encouraged in the rental property realm.

11. There are multiple ways to profit.

One of the greatest benefits of rental property investing, especially compared with other real estate niches and strategies, is the opportunity to capitalize on all four of real estate’s major profit sources:

12. You don’t have to be present to make money.

Finally, I love the idea that I can make money without physically needing to be present. That’s called a “job,” and I want to avoid that.

Understand that real estate is not generally a 100 percent passive activity, but over time, the systems you create can help you outsource most of the landlording process.

The dollars will roll in whether you get out of bed in the morning or not.

“Why I Love Rental Properties” Facebook Live Video

Recently I took to Facebook Live to explain the twelve reasons why I love rental properties that I’ve outlined above. Check out the video below to hear my explanations (and, at the 10:00 minute mark, the cutest little girl on the planet!)

This blog post was inspired by a section from The Book on Rental Property Investing, written by me!

[Editor’s Note: We are republishing this article to help out our newer readers.]

So, why do YOU love rental properties?

Share your reasons in the comments below and let’s make this list longer!

Brandon Turner is an active real estate investor, entrepreneur, writer, and co-host of the BiggerPockets Podcast. He is a nationally recognized leader in the real estate education space and has tau...
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    Jay C. from Seattle, Washington
    Replied over 2 years ago
    The majority of those things can be said for stocks. The ones that dont apply can be substituted for things like liquidity, privacy and others. Yes REI is a great investment but the best? Not likely. It has its place in a portfolio for sure but the real path to wealth is diversification. Spread your investment types across the board as that limits exposure to hardship times.
    Jim Garcia Involved In Real Estate from Castle Rock, CO
    Replied over 2 years ago
    Investment homes are a great way to build equity, retirement income, and protection against major expenses like large medical bills. Great article.
    Account Closed
    Replied over 2 years ago
    Great article, I am new to this site but I am finding it very educational. Thank you Brigid
    Oscar O'Malley
    Replied over 2 years ago
    I really like that you mentioned that the properties are endless when it comes to investing in rental properties. My wife and I have been thinking about purchasing some rental properties, and now I’m even more convinced that it would be a great idea. Thanks for the information–I’ll be sure to share it with her tonight.
    Oscar O'Malley
    Replied over 2 years ago
    I really like that you mentioned that the properties are endless when it comes to investing in rental properties. My wife and I have been thinking about purchasing some rental properties, and now I’m even more convinced that it would be a great idea. Thanks for the information–I’ll be sure to share it with her tonight.
    Joy Butler
    Replied over 2 years ago
    You did a great job of explaining why rental properties could be considered the best investment. And my most favorite part of this article is the 12th reason which is “you don’t have to be present to make money”. That is absolutely correct, you’re earning even though you are in somewhere else doing other things!
    Joshua Benjamins Lender from Virginia Beach, VA
    Replied about 2 years ago
    I truly believe that Rental Properties should be part of a investment portfolio. Again i say ”part” of a investment portfolio! Remember the old wise saying, “Don’t put all your eggs in one basket”. As for the last few years the Real Estate market has been booming again and the buzz is back on the street all about it. So of course people are pushing the idea of Rental properties Rental Properties House flipping house flipping!! Not bad for us who already have been doing all this through the battle of the “Big Short” years because you all are building our equity back up nicely. So where I’m going with this is, don’t get caught up in the craze. Just because you hear of success stories doesn’t mean you will slide right into a deal and start making money. Just because you look at three houses and get frustrated with the search, you buy somthing over valued. Take your time and be patient. Many of us will tell you it took over 6 months to actually find the one deal that made total sense and maxed profits. Rental Properties do come with some headaches, no sugar coating at all. You know what else comes with headaches? Boss’s, supervisors and deadlines. A wiser man once said, “Sell at the wedding, buy at the funeral”. Definitely not discouraging buying real estate right now but you need to search harder and wait longer for the right deals. Happy hunting and welcome to the REI family.
    Artur Flowenol
    Replied over 1 year ago
    Point 2 is my favorite. When I’m trying to decide on where to invest, it usually comes back to investing more in my rentals. I just rehabbed 2 apartment units which will give me a 38% annual return (that includes the rent lost during the remodel) on the money invested, assuming rents stay the same.
    Gary Schwimmer
    Replied over 1 year ago
    Hi, I just joined BiggerPockets to learn the pros and cons of renting property as I recently inherited a senior community condo. the condo is fully paid for only monthly HOA fees. Hopefully I will learn enough to make a good decision whether to sell the condo or rent it. All advice is welcomed.
    Account Closed
    Replied 11 months ago
    Thank you for sharing this information with us, it clear all my queries why should I go for rental properties or not. Aleta helped me to buy the flat on rent. for more details visit them at https://www.aleta.co.in/