I grew up in a family that owned a few houses. Besides the house we lived in my dad saw owning a few rental properties as good investments. The reality turned out to be a lot more work than I ever expected. I remember spending whole summers and free weekends painting or fixing various issues on the houses.
Fast forward to the 2000’s and I saw others try the same thing. Then many of them moved to simply buying and flipping. Why? Because actually owning homes is expensive and not ‘passive’ at all. It can, as I learned as a kid, become a major investment of your time and energy.
I found this article to be pretty much spot-on to what I saw us go through.
- Managing properties takes a lot of work. Everything from finding tenants, to keeping the buildings maintained (including emergency repairs), to dealing with bad tenants and damage. I learned this in spades. You’re now a home owner for not just your house but ALL the houses. This means each new house adds an entire house’s maintenance to your weekend task list.
- What makes a good house might not make a good rental. You need to be aware of what makes a good rental return (the 1% rule – the monthly rent should be 1% of the purchase price of the home or greater) and whether markets can support that.
- Rental properties in popular vacation spots doesn’t mean you’ll actually want to live there full-time. A lot of people buy a vacation home in a popular vacation spot with the idea of moving there later. But they often forget to ask themselves if that is where they really want to live full time. The Oregon coast is a great example. It’s absolutely gorgeous in the summer but rainy and isolated in the winter. Medical services and social activities are extremely limited.
- Real estate investing can actually distract you from your real financial goals. If your goal is really to retire early or give something to your kids, there might be better ways to get there.
- Real estate investing requires a lot of professional help. You can’t manage all the legal and professional repairs you’ll need to do yourself. You’re going to need to find and pay for good help.