The Power of Owning Just ONE Rental Property (2024)

Hello and welcome to another episode of Passive Real Estate Investing. I’m your host, Marco Santarelli. Well, I wanted to take a little bit of time this Saturday afternoon to record a relatively quick episode on the power of owning just one rental property. You see, a lot of investors discount the impact that having or owning one single rental property has on their life and their future, especially their financial future. They just simply discount it and either don’t do anything or they don’t get started, or they just don’t look into it any further. I believe that everyone should own at least one rental property. Owning real estate simply means that you have an income generating asset that will continue to generate income virtually forever. Unless you destroy the property, burn it down, or sell it, you’ll always have this income producing asset that will work for you as long as you maintain it.

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It will constantly generate income and generate wealth for you and your family and your generations for many, many years to come virtually forever. So of course, you know you’ll have turnovers, which means you’ll have some downtime from time to time, but that’s normal with income producing real estate, any kinda real estate. When you have a tenant and a lease, you will have vacancies and you will have downtime. But don’t focus on that. That’s a minor fact and course of business in owning income, producing real estate. But think about this, if you purchase the property and you use leverage, which is what 99% of real estate investors do, and you leverage your investment capital and you have a mortgage, let’s just say you don’t pay the mortgage off for 30 years, at some point you’ll pay it off. Some people pay it off early as as little as seven years.

But regardless of when you pay it off, once you pay off that mortgage, your rental income becomes pure profit, of course less the expenses on the property. You have some maintenance and you have property taxes. And, and if you don’t self-manage, you’ll have property management, but you will have some expenses. But once you pay off that mortgage, that rental income coming in is practically pure profit. It’s just income for you. So the fact is, is that your first property can lead to significant cash flow and appreciation and tax savings, but that is not really what sets you free. All that is powerful and wonderful. But the truth is, is that most people who want to invest in real estate, they never get started. They educate themselves, they learn about it, they want it, but they just don’t get started. They either lose interest when a great deal’s presented to them, or it isn’t handed to them immediately, or they get stuck in this analysis paralysis, which is something that I suffered from long ago.

They start looking at different deals they’re unable to analyze, they’re unable to pull the trigger when the, the deal makes sense and everything checks out. But they, for whatever reason think that oh, they’re, they must be missing something because everything looks good, everything is right, the all the check boxes are checked, but they’re just not a hundred percent sure. And I don’t think anybody ever will be 100% sure about any investment. But once they find a good deal, they just don’t pull the trigger. And that’s just analysis paralysis. So they either don’t get started, they lose interest, or they get stuck in this analysis paralysis mode. But this is why I feel that the most important thing to do is to find a good deal or a decent deal and just move forward with it. Just buy it, invest in it, cut your teeth on the education, learn everything you can through the process, because believe me, it gets easier with each and every deal and then it becomes second nature.

But let me make something clear. Your first investment property does not need to be a home run. It just doesn’t. So if that first investment property is earning you a hundred dollars a month or $200 a month, or maybe $400 a month per door in cashflow, it really doesn’t matter. It’s good, it’s important, it’s significant and becomes more significant as time goes on. But we’re talking about your first investment property. The first one where you’re gonna gain the most amount of experience in the shortest amount of time. The one you’re gonna cut your teeth on, the one you’re gonna gain experience on, the one that you can call your first investment property, the one that’s gonna set the stage and create that first step to the next step, which is your second property, and then ultimately your third and then your fourth. But once you have that first rental property under your belt and you’ve gained some of the required knowledge and the required confidence that you have, that confidence will just come naturally.

You know, I say it’s required, but you’re gonna gain it one way or another. At that point, you’re gonna be well on your way to becoming financially free. So the power of owning one rental property, just one rental property is significant. Don’t underestimate it, don’t brush it under the rug. Just move forward. And your goal should be to get just one good investment property under your belt. So here are a few points just to highlight the power of owning a single rental property. One property, it could be a single family home, which is the most common, but it’s fine if it’s a duplex, a triplex, or a fourplex. These are all what are considered residential properties, residential income properties. So the first thing I wanna highlight is the steady income stream. You know, renting out a property generates typically consistent income. That’s an income stream, and it provides you the owner with regular rental payments.

And this can contribute to your financial stability over time. But it certainly helps cover the property related expenses. So this is why I always say pick a property that makes sense. The day you buy it, it’s, it makes financial sense. So you have some positive cash flow. I mean, the worst case scenario is you have negative cash flow, some, not a lot or break even, but that’s often temporary if you buy right, it’ll be very short term. It’ll only be the first year or two. But that cashflow is important ’cause it’s what I call the glue that holds your deal together while your equity builds, while you take advantage of the tax benefits while the income grows over the years because of rent increases in the area that you invest in. But it does provide a steady stream of revenue and ideally, hopefully, but ultimately that revenue is an income stream for you.

The second thing you gotta consider with, you know, getting that first rental property is long-term, you will have appreciation. You see, real estate has the potential for tremendous long-term appreciation, meaning that the value of the property can and will over time increase. And this can result in capital gains that trickle down to your personal balance sheet in the form of your net worth. The equity you have on your balance sheet, your personal balance sheet, is simply your net worth. So keep that in mind. This is one of the most powerful things about real estate in general, but income producing real estate more specifically is the long-term appreciation. Then there are the tax benefits. Property owners usually and almost always are eligible for various tax deductions. And of those include the mortgage interest, the property taxes, certain expenses related to the property management. You know, these deductions help reduce the overall tax liability.

But of course, there’s always the depreciation, which is a powerful and almost magical form of tax benefit because you don’t have to do anything to receive it. You don’t have to spend a single penny to depreciate your property over 27 and a half years with residential property, which means that you now have a deduction against passive income, any passive income, not just from the property itself to lower or eliminate the income tax impact you have from the income on that property or from other investments and assets that you have that generate passive income. And as a side note, if you’re a professional real estate investor, if you qualify for that designation, then you can apply that depreciation not only against your passive income, but your active income as well, which is incredibly powerful because now you’re lowering your tax impact on all sources of income, not just passive income.

Also, investing in real estate and getting that first rental property provides asset diversification because real estate can be a very, very valuable addition to any investment portfolio. So if you’re already investing in stocks, bonds, and whatever else, owning real estate provides diversification beyond the traditional, what I call traditional financial assets like those stocks and bonds. So in a sense, it can serve as a hedge against market volatility in these other asset classes. But in reality, income producing real estate not only provides that asset diversification, but it, it is a true, true natural hedge against inflation. Plus, you have equity buildup. You know, as you pay down the mortgage over time, the property builds equity and you know, you gain more equity in this asset, that equity can be leveraged, you can be tapped into, you can pull that equity out, it becomes spendable cash or investable cash.

You can use it towards future investments. It can be collateral for other financial needs. It is part of your net worth. So the beautiful thing about real estate is that equity buildup is a source of equity and net worth towards yourself. Of course, there’s control, you know, control over your investment. You know, some investments and many asset classes don’t allow you to have any direct control. In many cases, not even indirect control, but owning rental property gives you a level of control over the asset. Now granted, in most cases, you’ll have a property management company managing the asset for you. So even though you’re still in control of the asset, the day-to-day operations, the day-to-day management is outsourced and handed over to a professional property manager, which takes that off your shoulders. You don’t need to think about it or have the, the stress or anxiety of managing the property, although that’s not necessarily stressful or something that creates anxiety, but it allows you to put people in place to help manage your assets.

And you never lose control. You’re always in control. So your manager, or whoever it may be, you know, they can make decisions for you on a day-to-day basis. But overall, you’ll always maintain control, but you could outsource the management improvements and even the rental terms. Real estate can provide stability and consistency, especially single family homes, which I love. But single family properties are often considered far more stable than other types of real estate investments. You know, the demand for rental homes, especially today with the imbalance between supply and demand across the country, and very specifically in some markets, provides, you know, this consistent demand which leads to increased values and increased rental demand. In other words, the demand for rental homes today remains consistent, and it always seems to be that way during economic downturns. We always need a place to live. We need housing, and there’s a shortage of it.

So that simply means that you’re in the right place at the right time. We’ve got headwinds that are in our favor as real estate investors. It’s pretty easy to invest in residential real estate, especially single family homes. Investing in single family properties is typically more accessible for individual investors than many other choices or options, especially compared to larger commercial properties. You see, it requires less capital to invest in a single family property, and that makes it an attractive option, especially if you’re just getting started in real estate. It’s relatively easy to manage. Manage. We all understand what a home is, what a house is, what a rental property is. We all grew up in some sort of property, whether it was a rental or whether your parents owned it, but we tend to understand real estate. So managing a single family property can be less complex than dealing with, you know, large multi-family properties, and especially commercial properties.

This makes it very feasible for an individual investor who may not have the resources for extensive property management. And again, I encourage most people to outsource that. And then of course, there’s residential demand. You know, the demand, as I mentioned before, for residential properties, has been very, very steady year after year and even decade after decade, people always need a place to live. And that contributes to the more reliable income streams that come from good or well located residential income property. And then last but not least, there is the appreciation potential. You know, single family homes have the potential for very, very good, attractive, long-term appreciation rates, especially if they’re located in areas where there are growing economics. There’s strong jobs and job growth. It’s in a desirable area, it has desirable amenities, it have a stable economy. Ideally, there’s population growth, which certainly drives the real estate market, drives prices up, drives rents up.

If you have all those things in play, you have very strong appreciation potential, especially long term. So this is why I want you to seriously consider the power of owning just one rental property. But don’t stop there. Get that first one under your belt. Maybe you’re listening to this and you already have one or two under your belt, and my message to you would be continue, don’t stop. Don’t slow down. Keep accumulating your investible capital. Create those chunks of cash so you can deploy it into income producing assets like income producing real estate, and keep growing your portfolio beyond that one. But if you never do anything more than own one rental property in a good location that’s professionally managed and you maintain that property, you’re gonna look back 10, 20 years from now and be very happy about your decision. And also maybe regrettably, you’ll be kicking yourself saying, well, why didn’t I get two or three or maybe four or five?

So again, don’t discount all that. I think it’s very important for you to get started and keep going when it comes to investing in real estate.

So if you haven’t already done so, remember to subscribe to the show. It takes you three seconds to click that button or that link to subscribe to the show. That way you don’t miss an episode every single week. Maybe there’s two. Visit us on iTunes, leave us a rating and review. Greatly appreciated, or wherever you’re watching this or listening to me, always appreciate the ratings and reviews. If you have a question about real estate investing, you could do one or two things. Contact my team of investment counselors. We’re here to help you. There’s no cost or obligation. We’re here to help you build your real estate portfolio, help you get started and answer questions if you’re not sure about something. Of course, you could also send those to [emailprotected]. Get your free strategy session with my team. Again, no cost, no obligation.

That is it for today. Thank you for listening. We will see you all on our next episode.

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