Eager to be a Real Estate Investor – but a Word of Caution

You may be feeling the need to jump in and invest due to anxiousness in starting your role as an investor and have that feeling of urgency with the thought in your mind that if I don’t get in now I’m going to lose all the opportunities and all the good deals. While this may be true it is only a valid decision once you have ample experience in the field of such investment otherwise it is speculative move in that I mean you are gambling regardless of what industry you are investing in it: real estate, stock market, currency, Etc.

Many self help development gurus swear by investing in real estate. The literature is abundant of self-made millionaires real estate investor that you get the feeling that an investment in such industry is bulletproof. What could go wrong? After all real estate hedges against devaluing fiat currency such as the US Dollar; the idea of tenants paying a monthly fixed income per months sounds financially enticing and then there’s the appreciation where after holding your real estate invest for an unknown amount of time you make a profit in selling it.

Seldomly  do “get rich” books and gurus guide you to read between the lines in investing in real estate. No one wants to ruin a parade or be the party pooper. However, as much of a guideline it is to be rich should be what be what to avoid and how not to fail. Being told what not to do doesn’t sell as much as providing hope and a can-do guide which I believe is essential.

Here I’m going to focus on one caveat, though there are several worth mentioning but I’ll save those for another post, in real estate investing. The first one is know your Market. And I believe this to be one of the hardest to determine when you’re starting out. Lower-income neighborhoods, for example, look great on paper. The return on investment is anywhere between 20 to 30% and you may ask yourself “how can I go wrong?” With this investment, even if I have to go through an eviction every now and then and rents are lower than in other well off neighborhoods, I’ll still be making nearly 20% on return on investment. However, if you got into real estate investing because you wanted to live a less stressful life or wanted to spend more time with friends and family or go on vacation every know and then while having your real estate income accumulate in your bank account then it may surprise you that you could be placing your self to even further distant than you are already to achieving these objectives. In other words, you’re headed towards another full-time job only this time the job title is: property manager.

Owning rental properties in such neighborhood requires time and a lot of patience. You’ll soon learn that the evictions come a lot more frequently than anticipated. Evictions are a landlord’s kryptonite as far financial stability. They can literally bankrupt you. And then there’s consciousness of having to place families or single parents out with children on the street. Even though they are at fault, It gets to you. In addition, many of the tenants you’ll deal with have some lack of disciplinary framework or are in financial hardship due to drug or alcohol dependency issues. You hope and would be fortunate to get a tenant that is in section 8 where most of their rent is being covered by the government and they are in some form or another in permanent disability. Not that you condone their current state of being only that given their situation, you have a form of symbiosis where you’ll have better financial stability while providing them your services in keeping a clean and safe habitable environment for them to live.

Author: Luis Fernandez

Luis Fernandez is a businessperson in the hotel and software industry. When not glued to a screen, he listens attentively to his 4 years old's imagination.

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