OWN TO RENT
Conventional wisdom says that renting is
more expensive than owning (or "renting to
own") in the long run. Conventional wisdom
also says that it doesn't make sense to
own outright something that you're going
to need only once or for only a little while.
Who wants to store a bulldozer after
the landscaping is finished? Most people
probably don't, and that's why they rent.
But what if....
....you could buy what you wanted to rent
inexpensively enough that you could resell
it for around what you paid for it? What if
there was a chance you could MAKE money on
the deal? It's certainly possible that you
could get paid to rent equipment!
Granted, this probably isn't a new thought.
Many people do this with their houses and
cars. They "own" their house (or the rights
to use it), live in it for a while, and
resell it. Or, they buy a car, drive it for
a while, and sell it when they want or need
a different one. If the car cost $20,000
initially, and was resold five years later
for $5,000. the owner "rented" it for $3,000
a year, plus maintenance.
Here's the trick
If you want to own to rent as cheaply as
possible, buy used and buy quality. In this
way, the original owners paid the depreciation
up to that point (the loss of value suffered by
goods after they are bought and used), and you
get stuff that works well at a lower price.
New car owners get hit with depreciation pretty
hard. A new car loses thousands of dollars the
moment it's driven off the lot. This drop in
value, and its potential resale value, is what
I mean by "paying the depreciation." Most common,
non-collectible items depreciate, though
sometimes not to the extent that cars do.
If you buy used, the item will still depreciate,
though not as quickly as a new item would. A
chain saw bought at an auction for $65 might bring
$40 at a garage sale two years later if I maintain
it properly. This is a far cry from the $300
the chain saw cost new.
In the above example, I essentially "rented" the
chain saw for two years for $25, whereas if I
went to a rental store I might get a chainsaw for
a week for that price.
Some success stories
My friend Charlie seems to end up using his
electronics for free. Cordless phones, PDAs,
computers, you name it -- he always seems to
get it at a good enough price and sell it at
nearly the same price after he's used it for
a while. This is very hard to do with electronics
(how quickly does a computer become obsolete?)
but he manages to do it!
One of my uncles bought a used bulldozer for
a landscaping project. He used the bulldozer
and dug up a profit when he resold it!
When chainsaws turn ugly, though...
There are some potential problems with this
strategy that you should be aware of, though.
If you buy something used at an auction, a
garage sale, from an online auction site, or
from a private party, you're usually buying
as-is unless you pay extra for a warranty.
This means that if it breaks, you're the
proud owner of a broken piece of equipment as
opposed to a merely-inconvenienced renter that
can exchange the non-working equipment for a
working version. This could make the
own-to-rent strategy very expensive. Also,
you're paying all of the maintenance costs
for the item rather than the rental company.
Basically, if you buy used and know the
potential hidden costs of owning the used
equipment, you can own to rent for a song.
© 2004-2006 MightyBargainHunter.com. All rights reserved.
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