A recent article in Entrepreneur magazine reported that there are over 10 million small and medium sized landlords in the United States. That number continues to grow as more and more public sector retirees search for ways to supplement whittled-down employer pension plans and protect themselves from economic downturns. As Jason Hartman recommends, investing in rental income property is also an investment in yourself, as you become not only a landlord, but also an entrepreneur – an independent business owner.
What are the characteristics of a successful entrepreneur? In general, good entrepreneurs are like first responders — self-motivated individuals who aren’t satisfied with the status quo. They want to be in control of their destinies and not at the mercy of others. They’re willing to try new strategies with the potential for better outcomes. And for retirees or those about to retire, becoming a real estate entrepreneur offers a way to take control of your financial future.
As Jason Hartman recommends, buying rental income real estate is the soundest possible investment. It’s an asset that will appreciate over time, with the potential for a stable and significant return over the lifetime of your ownership. Not only that, owning rental real estate puts you in charge, with no superiors to tell you how to manage your investment.
Within the limits of the Fair Housing Act and the local business and housing codes, you can decide how the property should look, who can live there, and how much rent to charge. You’ll be able to buy and sell properties as you choose, and establish your own schedule for maintenance and repair. You can decide what income level you want – and plan accordingly.
When you’re getting ready to launch a real estate investing business, think of yourself as an entrepreneur from the beginning, and take steps to establish the business aspects of managing your investment. Some areas to consider include:
Consider investing in multiple properties in different areas. With good credit and the likelihood of consistent rental income to even out your debt-to-income ratio, you can most likely buy three or four rental properties of various kinds, optimally in different markets. This is a strategy Jason Hartman advocates, since it spreads the risk over a number of properties in case you run into problems in one area.
Establish a home office or space dedicated to your business. Although many entrepreneurs are reluctant to claim home office tax deductions for fear of triggering an audit, rental property ownership and management is a legitimate business with entirely appropriate exemptions for space, travel and other expenditures related to conducting the business of managing your property.
Maintain detailed records of all expenditures and related paperwork. As we’ve noted in previous posts on this topic, owning and managing rental property entitles you to a number of tax deductions related to repair, maintenance, travel, and hiring any contractors, managers, or other assistants you need. Documenting all these things and filing all receipts establishes you as a professional running a business.
Employer-provided pension plans, even in the public sector, are becoming increasingly vulnerable. But choosing real estate entrepreneurship puts you back in control of your financial future for a comfortable and stable income in retirement. (Top image: Flickr | MacEntee)
The Heroic Investing Team