Main lesson of the book: A comprehensive look at rental property management.
The Book on Rental property is what you could call a guidebook on what to do and what not to do when it comes to investing in real estate. The book focuses on the entire concept of investing in real estate from the mindset to the problems you might face. One of the key elements he points out is that by owning rental property you can start building your path to financial freedom. There are no shortcuts, and Brandon Turner made sure to make this clear by stating that investing 20.000 dollars to only get 200 dollars a month back is a good investment. This sounds extremely counter intuitive for most but its essential to building wealth. Because the goal is financial freedom and that comes from consistent effort and building enough assets that will give a solid cashflow.
The Book on Rental Property states there are 4 generators of wealth. Appreciation is the first step of gaining wealth through rental properties. Appreciation can happen naturally through economic growth and time or it can be forced by cleaning up the place. The second generator is Cash Flow. And cash flow is the money you receive after all expenses have been paid. The goal is to create cash flow from the very beginning after you purchase the property. The definition of good or excellent cashflow depends on your own perception but as long as its positive, it is a valid investment. Tax Savings are the next generator because if you don’t manage and understand taxes they can easily destroy any hope you might have of ever becoming financially independent. The more books I read, the more I come to understand that taxes are a true destroyer or usurper of wealth. The last wealth generator is Loan Paydown. One of the best ways to buy a property is by using leverage. Leverage means that you will buy a property with a loan from a bank or other institution. This loan will need to be paid off and interest will also need to be paid. But the beauty of this is that every time you make a payment, the interest will slowly decrease. In the beginning, the amount you pay will mostly be the interest, but in time you will start paying the actual amount you borrowed. And that is a great way to build wealth. Leverage is a key element in increasing your wealth and allowing you to purchase more properties than your actual pocket would allow. If you have 20.000 but the property you want to buy costs 100.000 then you would need to borrow 80.000 to buy it. And that 80.000 is leverage and it allows you to buy the property even though you don’t have all the money.
The Book on Rental Property made sure to list all the benefits and cons of investing in real estate. The key point being that this is just like any other form of investing and it carries with it certain risks. You can lose your entire investment, either by being unlucky or managing your property as if it was a toy instead of a business. Managing your properties should always be seen as a business. And because it is a business it should be seen and handles as such. Which means that there should be protocols and business systems in place that will allow the business to run smooth and reduce the amount of stress it can inflict on the owner. Owning rental properties means that you are dealing with people. And people will always have a story to tell you on why they can or can’t do certain things. These stories are usually always made to play on your emotions and get you to either “do them a favor” or forgive them for their mistakes. But by doing so, you are no longer running your rental properties as a business but are running them as a hobby. Don’t make this mistake. You are not in the business of being a friend, you are in the business of providing a service and maintaining a property. Of course you could also outsource the entire process to a property management company, but that will take a bite out of your cashflow. Plus a property management company will never “love” your property as much as you would. Because for them the property is just another building they have to manage and thus they will be somewhat lackluster in the execution of their responsibilities. And not as motivated as you, to make sure you get the best deals, the best people to fix problems and the best possible solutions to unique problems that might arise. So the question is, if you want the headache of dealing with people and all their stories, or if you want lower your cashflow and have someone else do it. Keep in mind though, that even if you hire a property management company, it does NOT mean that you are relinquished from all responsibility, because you will have to check up on the company to make sure they are doing their job.
Brandon Turner gave a lot of possible strategies in this book that will help the reader understand how to analyze a property. Or how you can go about starting your landlord journey. And with a huge selection of properties available and a wide range of analysis methods present, the smart thing to do would be to create a quick method to see if a property is worth your time and effort. The quick analyses tool I personally will use is the 2% rule. The 2% rule states that a property is a good investment if the monthly income is equal to or higher than 2% of what you will pay for the property. For example, if a property is worth 100.000 than the monthly rent should be 2.000 to pass the rule. Some would lower this percentage to lower or higher, but for me 2% seems like a valid rule of thumb to follow as I will quickly analyze properties.
And the main method I will use for my own investment method is the BRRRR Strategy. The BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. It’s a simple but very effective strategy. And just to clarify what refinance means: Getting a new mortgage to replace the original. This book goes into extreme depth about several more points that goes beyond the scope of what I wish to include in this chapter. But if you are interested in starting a career in real estate, this is without a doubt a book worth reading. The only problem I had with this book is the constant reminder to go to BiggerPockets.com every other page. At times it felt as if the book was nothing more than a marketing tool for the website.
This book like many of the other books I have read is focusing on middle class America with a lot of extra income. It tends to exclude those who don’t fit into that category pretty severely. I would love to read a book that teaches those below middle class on how they can start gaining wealth in this world.