It’s undeniable that real estate is the vehicle that has become the investment vehicle of choice for many looking to protect and grow their wealth. In particular, wealth and ongoing cash flow are maximized with long-term buy and hold rental properties.
One of the advantages of owning rental properties is that the barrier to entry is relatively low, thanks to the fact that it’s easy to leverage. For new investors with stable financials and good credit, access to lending isn’t hard to find.
So, why doesn’t everyone do it?
There are several reasons:
It Takes Effort to Find Deals
Watch any HGTV based real estate show, and there’s rarely any mention how to actually find any of the properties, but that’s usually the hardest part. Ask any seasoned investor – their biggest challenge is always “not enough deals”.
It doesn’t matter if they’re buying 2 houses a year and want to grow to 5, or buying 100 houses a year and want to grow to 200, truly good deals are always a challenge to find.
It’s a Burden to Get Properties Ready
From the initial rehab, to ongoing ‘make-ready’ between tenants, working with contractors and getting houses rent ready is not for the faint of heart…especially if you don’t have much extra time in your day, or aren’t located geographically near your properties. Heaven forbid you’re trying to do the work yourself… it will almost always take longer than having a professional do it, and let’s not forget about your ‘opportunity cost’ of doing the work!
Tenants, Toilets, and Termites
Do you want to get maintenance calls at 3am? Nobody wants that! Many would-be newbies try to ‘save money’ by managing properties themselves, but a good property manager will be more efficient than you’ll ever be, ultimately saving you money and time, and will usually save you from a lot of drama! Plus, good property managers are often managing hundreds of properties and can develop efficiencies that you simply can’t compete with.
It’s much better to be an investor, not a “landlord”.
Challenges Lining Up Financing Your Rental Properties
We stated above that access to lending for real estate investors isn’t hard to find… but there are a few challenges. First, not all lenders are created equal. You truly want a lender that ‘gets’ you and cares about what your goals are. The right lender can help with your strategy, and save you a lot of time, money, and grief in the long run. Second, you’ll get access to the best deals if your lender specializes in investments. Your local ‘big bank’ store may tell you they can finance your deals, but you shouldn’t spend a single minute with them… seriously… don’t make me say, “told you so”
Sit with a broker…they work for you, finding you the best deal.
Hard to Plan Your Attack
When you’re on an island by yourself, it’s hard to know what your options are with rental properties. You hear about the benefits (tax advantages, cash flow, appreciation, etc.), and maybe even know someone that owns rental properties, but resources to help you ‘plan’ your financial future with rental properties are not as readily available as say, your neighborhood insurance agent.
So, what’s a want-to-be rental investor to do?
Try and figure things out on their own, or partner with someone like me. Since 2011, I have been invested in various property classes, including single family homes, condominiums, townhomes, duplex, triplex and more recently partnering into larger multifamily properties.
With many of my purchases I partner with investors who may or may not have any understanding of real estate investing. I make it my top priority to first educate them with “real-life” examples, answering all their questions and concerns. I really enjoy teaching investment strategies and sharing my different investments stories.
If you are interested in learning more about my latest project or simply have some questions, please feel free to reach out to me.