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This is a question I get asked all the time: Should you invest in rental properties? Most of the follow up questions I hear are something like “what about when the tenant trashes the house?” and a lot of other fears. Most of which are not really that scary. To drive this point home, I spoke with Ryan, a buy and hold investor in the Indianapolis area, on his experience with “buy and hold” investing.
Why Should You Choose This Strategy of Real Estate?
Having already over 30-plus buy and hold properties, Ryan is skilled at this investment strategy. “The problem with wholesaling is it’s kind of a job,” he tells me before explaining more. “You sell one property, and then you’re right back into finding your next deal. And the whole reason I got into rental properties was the cash flow.”
By doing buy and hold deals, Ryan’s ability to collect $200, $300 a month from properties that would have otherwise been sold wholesale at $5,000. “The money just starts stacking up.”
But That Doesn’t Mean You Won’t Run Into Problems
Recently, Ryan had to forcibly evict a tenant due to lack of payment, leaving Ryan to turn off the utilities for the property. But after the tenant left, he took his washer and dryer unit with him, so, when the utilities were turned on, those open water lines literally flooded the entire house. That, and it didn’t help that Ryan was out of town when it happened.
“Yea, this place has been drying for four days now,” he tells me. So, the elephant in the room now is does his insurance pick up the bill. Thankfully, they did. In fact, it might actually help increase the property’s value. “Honestly, when things like this happen and no one’s hurt, it’s actually a good thing,” Ryan says, making note the fact that they get the chance to totally redo the entire property, courtesy of their insurance claim. “This gives us the chance to completely remodel this unit from the ground up and offer something high-quality and, basically, new.”
Any Tips on Insurance for Buy and Hold Investors?
Right off the bat, Ryan told me that he and his partners always do “replacement value” policies, as opposed to “actual cash value.” Also having things like lost rent coverage and being honest with your insurance company from to get-go will help ensure smooth sailing in hard times.
As for any other tips, Ryan’s is pretty blunt: “Make sure your water lines are closed before they turn on the water.” That’s wisdom, in my opinion. Watch the video below for more insights from Ryan and don’t forget to visit our website to start your 14-day free trial, afterwards.