I believe that most people will succeed in investing in real estate if they are able to do their homework, which includes choosing top real estate professionals. In the following sections, I would like to ask a range of important questions to help you determine whether you have what it takes to succeed and to be satisfied with real estate investments that include property management. Income-producing real estate is not passive investment.
Will You Have Enough Time for That?
Purchasing and buying investment property and becoming a landlord are time consuming. The same way that a poorly informed owner could sell his property for less than it is worth, if you neglect to do your research before purchasing the property, you may end up overpaying or buying the property with a lot of problems. It takes time to find knowledgeable and responsible real estate practitioners.
As far as property management is concerned, you can employ a property manager to interview tenants, collect rents and fix issues such as leaky hawks and broken appliances, but doing so costs money and also takes some of your time. Of course, if you employ a professional and knowledgeable property manager, you will be compensated with less time for supervision.
Will You Deal With the Issues?
Challenges and difficulties will eventually arise when you attempt to buy a home. Purchase discussions can be both stressful and frustrating. You can also rely on some of the issues that happen when you own and manage investment property. Many renters don’t care for property the way homeowners do.
If any little issue especially those that you think might have been caused by your tenants—think “bed bugs”) causes you anxiety, at a minimum, you can only own the rental property with the help of the property manager. You should also doubt whether you’re ever going to be happy with the ownership of investment property. Financial benefits go long down the road, but you’re living the everyday headaches of ownership (including the possibility of litigation) right away.
Are You Involved in Real Estate?
In my experience, some of the best investors in real estate are curious and interested in real estate. If you don’t already have it, some kind of interest and curiosity can be cultivated—and this book can do a trick.
On the other hand some people are just not comfortable investing in rental properties. For example, if you’ve had experience and success investing in the stock market, you may find it uncomfortable to venture into real estate investment. Some people I know are on a quest to start their own company, and they might choose to channel time and money into that outlet.
Will You Deal With Market Downturns?
Investing in real estate isn’t for the faint of heart. Buying and keeping real estate is a lot of fun as prices and rents are rising. Yet market downturns are happening, and you are being checked both emotionally and financially.
Consider the drop in real estate values that occurred in most communities and forms of property in the 2008 financial crisis. In several parts of the world, the effect was still a fact a few years later. Such drops can present attractive buying opportunities for those with courage, a good credit score, and cash for down payment.
None of us, however, has a crystal ball, so don’t hope to be able to purchase at the exact bottom of rates and sell at the exact height of your local market. Even if you make a smart purchase now you will eventually end up owning some of your investment property on a difficult market (recessions where you have difficulty attracting and keeping high-quality tenants, where rents and property prices can fall rather than rise).