Investing In Rental Homes? What Matters and What Does Not
As a real estate investment guide, I get a lot of questions about the dos and don'ts of investing. People ask me questions on our quarterly expos as well as on social media – and you can subscribe to my YouTube channel and follow me on Instagram, by the way. One of the questions I get asked is, whether investors should buy subsequent homes in the same location as their first property purchase. Should they buy their second and third homes and so on in the same area? And my answer to them is, it doesn’t matter!
Why it doesn’t matter.
Now if you buy one home and then you buy another in the same location – the same city, say, it can be convenient. You already are in touch with the brokers, you already work with the property management people, and you're already familiar with the mortgage company that did your paperwork. So you know the ropes and you're familiar with the people. Getting a second and third loan may well be easier when the lender has already advanced one loan. This is convenient and the familiarity is comforting for you as an investor.
So, I'm not saying there are no advantages at all. There are advantages but they are not significant in terms of any financial advantage they will bring you. Where you buy your second, third and fourth homes – this is not going to make much of a difference to your retirement riches in the end. There are other far more significant factors that will make much more of a difference to your financial outcomes in the longer term.
What really matters.
Number one is the 30-year fixed-rate loan. Yes I know I've said it before, but I’ll say it again – it is a gift and one that you cannot afford not to take. This is the loan that you pay off over 30 years at a fixed rate of interest. So if you're repaying X amount today, you're still only paying that X amount ten, twenty years later. By then, inflation is going to make that amount seem puny in comparison to what it seems today. Meanwhile, the rental income will help pay off the loan.
Number two is the sort of investment you make. Quality single family homes in good areas have the best chance of getting top dollar rent. So that is what you're going to want to look at when you invest in real estate. If more than one of your investments is in the same geographical area, well and good. If not, that is no problem either! So long as you have the important aspects sorted, this doesn’t really matter.
To know more, watch this video or listen to this podcast.
