For those of you that own income property, those are the fortunate people amongst you who have decided to set aside a portion of their consumptive capacity and instead invest in an income producing property. Let’s talk about the benefits of this investment.
Bob Nelson, Eugene real estate investment broker
Bob Nelson: While there’s a mortgage on it, it may not produce much cash flow for you, but each passing year your equity grows. The value of the property goes up and the amount that’s owed on the mortgage goes down. Both of those things cause an increase in your equity position.
The beauty of the process… Now for those of that are young you’re going to think this is heresy, but at some point wouldn’t it be nice to have the various properties that you own free and clear of debt, and all of the cash flow that would have gone to the mortgage is now going to you personally. That’s the part of passive investment income that is so fantastic. You are no longer dependent on going to work and getting paid on an hourly basis. Instead your property’s working for you 24 hours a day.
Now, the urgency that faces us at this particular point is we’re on the verge of seeing rent control imposed on a statewide level. The Oregon State Legislature is considering a bill, if you wanted to look it up it’s Senate Bill 608. SB608. At that particular point, if that is imposed it will put a limit on the amount of rent that can be charged, increased each year on an annual basis.
I’m not too concerned with the fact… what’s the amount, can we live with it, is the fact that the government now starts to dictate to the landlord who’s taken all the risk in owning the property and managing it and so forth, taking on a large mortgage, it starts to restrict you as to what you can do. If it came time to reroof the property and it comes out of pocket, guess what? It may be a situation where you really can’t afford to do the repairs to your property.
That’s typically what happens. Other areas that have had rent control, it stagnates. They can’t afford to maintain their properties because the amount of income is restricted, but the expenses continue to climb. Be aware of this, be very attentive and it’s important to you. Contact your legislator if you’re concerned.
Join Eugene, Oregon, real estate experts: Bob Nelson, Real Estate Investment Broker with Pacwest Real Estate Investments, and Marcia Edwards, Residential Real Estate Broker with Windermere Real Estate, daily at 5:30 on KPNW for the “Real Estate Today” radio show.