Category: Finance, Real Estate.
I bought my first apartment 10 years ago, on my 20th birthday.
But when I finally entered college at 19 on a full academic scholarship, I decided that instead of spending my accumulated savings, I would try my hand at investment. I had spent the previous 5 years working and saving for college. Here I am 10 years later. But it is a story of effective" forced savings" that has provided me significant insight into financial planning, and balancing the, real estate investing books. This is not a story of extreme or fast wealth building. While it hasn t always been a barrel of laughs, overall, I m reasonably satisfied with the outcome so far.
Let s start at the end, where I am today: I currently own 7 condo apartments in my general geographic area. I thought I would share some real world real estate investment thought. All of these condos are revenue neutral or revenue positive. My approach is best described as" slow and steady" ; my outlook is 20- 25 years. I don t have significant savings to fall back on, and I am just now in the process of" cashing in" , by selling my first apartment. Here the top points I like to share about investing in real estate: 1) Path to( instant) riches.
My bank statement demonstrates that. I will never argue that real estate investing is an instant, or even particularly easy, path to significant wealth. I am willing to grant that many people are able to turn real estate in wealth quickly. Instead, I ve taken the long view, with the hope that my real estate portfolio will provide a steady cash flow in 10- 15 years time. I m afraid that hasn t my approach. For me, slow and steady really does win the race. For example, my two oldest properties now generate$ 3500 in revenue each month, with monthly expenses of just$ 140Imagine what that will look like once I ve paid off all the mortages! 2) For a cautious investor, take the long view.
Just think about it: if you can manage to buy and hold 5 properties, within 15 years all five will turn in heavy revenue and heavy profit. This a vast generalization, but I hold to it pretty firmly: if your outlook is long enough, you will not lose money. That s not to say that you ll never lose money. At the worst, investing in real estate is a forced savings. Circumstances such emergency repairs, or rapidly inflating, a destructive tenant interest rates certainly increase the risk. And, while property values might dip for periods, keep in mind that over 5 years it s virtually impossible that your overall property won t appreciate. But, if you can hold on through any such upheavals, you ll find that within two or three years things will settle and you ll start to benefit from increased appreciate in property value, or both, increased rental income.
At the very worst, you ll have paid down some of your mortgage. There s a lot to be said about that kind of peace of mind. 3) Operating costs- if they balance, you re in the good! Plus, you have a tangible, physical asset. You re probably not going to earn back your down payment quickly- that s ok! It just happens to now be in your property. Keep in mind that the portion of your down payment that goes toward principle( ie: the part not eaten up by lawyer and realtor fees) is still in your hands.
You will see this money again when you sell. Ideally, that means that your rents will cover mortgages, taxes and maintenance, strata fees. So, the real goal is to be at least neutral on an operating basis. This might not be possible for the first year or three, but even if you re paying out a few dollars each month, you are still gaining more than if you were not investing. 4) Tenants- do your research, I learned this lesson the hard way, when I had a tenant cause about$ 5000 in damage to one of my apartments. If they are unwilling to share, or if you don t receive sufficient references to make you comfortable, it s probably better to just wait. What I learned is that tenants have histories. Personally, I now ask for 3 references, and I require proof that the people I m talking to are actually who they say they are( requiring a work phone number, for example) .
Real estate investing is a business. It might seem extreme, but this type of due diligence at the beginning increase comfort throughout a tenancy and reduce the chances of serious damage. 5) Tenants, Part Two- Late rent is forgivable- Once and don t be afraid of the eviction notice. And, like many small businesses, it is sometimes operated on small margins. I know that nothing works perfectly, so I will always forgive the first missed rent if there is a reasonable explanation. That means, if a tenant doesn t pay their rent, it comes out of my pocket. However, a second missed rent, and I will immediately begin eviction proceedings.
There must be good and reasonable cause. The laws of our state are very strict when it comes to evictions. Here, missed rent is, at least just cause for eviction. I always keep an open mind. Don t misunderstand. But many individuals will take advantage of a situation if they believe there is no consequence. Do your research, because real estate, though investing has highs and lows, just like any other type of investment vehicle.
All in all, I d say real estate investing has been a very positive experience and I would recommend it to anyone who has patience and fortitude.
