I know right now it seems most people are having a difficult time buying a house to live in. Why on earth would anyone think about buying a rental house right now?
Fabio Campanella writing for Financial Post writes “So what’s the point? Are rental properties a good investment and is this the right or wrong time to make a move? The answer is yes but only if you’re in it for the long-haul and only if your current financial position allows you to do so. Novice investors tend to follow market momentum and stretch themselves thin. They see prices increasing year over year then go out and take massive amounts of leverage to get in on the action “before it’s too late.”
What often happens is they buy more than they can handle, they don’t do proper due diligence on their tenants, and they get caught with a dud investment that they can’t support with their personal cash flow. This frequently leads to panic selling in order to raise funds to pay off large amounts of debt consequently resulting in losses.
Smart investors take their time. They seek out properties in desirable neighbourhoods, scrutinize their tenant’s ability to make rent payments before they take them on, manage the property with a keen eye, but most importantly they do not over-extend their leverage. Smart investors realize that there may be times that tenants can’t make rent or that markets may temporarily turn south.
Even if the original intention for a real estate investment is a short term flip, the smart investor will not purchase a property they aren’t able to hold over a long period of time should price momentum not go their way in the short run.
Direct investment in real estate is not like buying a passive investment such as a mutual fund. It requires a time commitment, experience, and patience but the long-term results can be superb when done properly.”
It’s not a get-rich-quick plan, but slow does the trick. If you are thinking this may be a good time to increase your portfolio, let’s talk!
Just make your comments here, or you can reach the Dean of Graduated Realtors at http://www.FSBO-GUY.com or “like” him at http://www.facebook.com/MartinProps and even “follow” him at www.twitter.com/MartinProps
Martin Properties (Flat Fee MLS to Full or Graduated Services in Nashville, TN)