The effectiveness of rental real estate as a strategy for getting out of the rat race is dependant on one factor – cash flow. If we can buy-up houses and apartments whereby the rents coming-in are greater than the sum of all of the expenses, then the only two questions are how many of them do we need to reach our financial goals, and how quickly can we buy them.
In my opinion, we are currently in the best economic environment in which to conduct the business of residential rental real estate. The biggest cost impacting our ever-important cash flow is debt service – the mortgage, and it is determined by three factors: starting balance, interest rate, and amortization. Well, the values are tanking, you don’t need me to tell you this, and while the interest rates are silly low. With these two realities in place such as they are, a beginner entrepreneur has as good of a chance as ever to buy one, two, three, four, or more properties at a price and interest rate that would allow for prodigious cash flow.
As if that’s not enough, the amount landlords can charge for rent is going up. People either cannot qualify for a loan, do not have the down payment, or are plain scared to buy, so they rent (http://www.cnbc.com/id/45887201). The forever old standard of supply and demand at play here: the more people want what we have, the more we can charge. Furthermore, vacancy rates are as low as they have been in years.
If you were ever going to become a real estate entrepreneur, now is as good of a time as any!
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