PCG – August 2019

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Should you worry about Market decline when you own rentals?

  All markets cycle, there are highs and lows.  Real property is hard to sell quickly and often can't be sold at market value in under 90 days.  So what do you do when you expect a slow or down market and you own real property, specifically rentals?  The answer is easy, nothing.  If you bought your properties right, manage them well and are brave enough to wait out the cycle you will be fine.  Since 2006 there has been less than $60 change in the average rent paid in Cleveland.  That means through the housing market crash and the next 10 years the average rental property had a gross income variance of less than $720 annually.  In most cases the year to year change was $15-$20/month.  Typical returns for rentals that were purchased right and managed well is between $200-$350 per month per door.  So even a $60/month variance shouldn't cause your rental to lose their profitability.  You also get the added bonus of equity build each time you pay the mortgage.  It is always good to be cautious and manage risk based on your comfort level, but boom or bust real estate rentals can be a good investment.

Want to see more about historical rents in Cleveland?  Check out the numbers below:

Dept of Numbers - Cleveland Historical Rents

Take care,

       Lincoln
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