Without a doubt, there are pros and cons to owning multiple properties. This is not about owning stocks and bonds that you have a financial advisor managing. In most cases, you need to self manage the properties that you own. Or you can hire a property management company to do it. But ultimately, you are the owner and responsible for everything.
For that reason, I prefer controlling properties without owning them so that I can minimize my financial exposure. That’s why I specifically prefer the lease option or the sandwich lease option that I frequently write about. However, let’s take a closer look at the pros and cons of owning multiple properties.
The Pro Side of the Pros and Cons of Owning Multiple Properties
If you’re investing for the long term, the biggest benefit of owning properties is the direct cash flow that you receive each month. Before investing, it’s vital that you perform your due diligence to be sure that the cash flow will be positive. When it comes to the pros and cons of owning multiple properties, one of the major pros is that you can keep your day job while adding to your income with the positive income from rental properties.
If you have a three bedroom home that rents for $1,000 per month, you’ll bring in $12,000 per year in income. However, you are going to have expenses. You might have a $700 mortgage that only leaves you with $300 per month in positive income. On top of the mortgage, you’re going to have property taxes and insurance that cuts into the positive cash flow. Still, as the economy grows, rents will continue to increase but your mortgage should be the same. Even if it’s a close financial call right now, it will likely improve as time moves forward.
When it comes to the pros and cons of owning multiple properties, the other pro that you want to keep your eye on is appreciation. Even if you’re only earning a few hundred extra a month on multiple properties, the value of each property should be going up several thousand dollars each year. The accumulative increase will make you wealthy by the time you decide to retire and sell off. If you want to increase the value of investment properties, you can also go after sweat equity by painting the house, improving landscaping, remodeling, or making other improvements.
The Con Side of the Pros and Cons of Owning Multiple Properties
For many people, the biggest con side of the pros and cons of owning multiple properties is placing the vast amount of your assets in one, two, three, or even more properties that you are responsible for as an individual. No matter if you make money, lose money, or come into a liability, it’s your name that is on the title. If you don’t have your business properly structured as a LLC or corporation, one single mistake can cost you all of your investments and possibly your personal wealth.
For that reason and others, I’m a firm believer in lease options. Lease options and sandwich lease options enable you to control and profit from more properties but invest less of your own money, while also limiting your liability. When it comes to the pros and cons of owning multiple properties, it seems intuitive to me that controlling multiple properties with lease options is the better answer. Properly structured, the lease agreements will bring in the same positive cash flow until the buyer delivers a decent profit from the sale in a year or so.
By Wendy Patton
For more than 30 years, I’ve used the Sandwich Lease Option System to earn myself and my students millions of dollars. From my experience, I know there is plenty of room and opportunity in the real estate investment market for everyone wanting to participate to find profitable deals. It’s because of that fact and my personal success that I share the Sandwich Lease Option System with others.
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