So, Chris. What are the commitments a real estate investor has to make to be successful?
That's a great question I received not too very long ago. And it's a complex answer. But I'm going to try to boil it down to a 4 topic blog post. Obviously, you'll need more counseling with your chosen real estate professional.
Time
Almost all of the Buy & Hold real estate investors that I know have other professions. The investors that own 1-3 rental properties tend to help find them, manage them and are involved in the day to day operations.
But that's tough to do when you get to 5+ income properties. Your "day job" is generally pretty involved to generate an income that allows you to own income property. And dealing with 5-10 tenants on an ongoing basis can begin to consume all of your spare time.
So then it's time to bring in a good property manager. But you'll still need a little time to work with him/her.
Money
I've seen the infomercials and heard most of the "gurus". However, you are still going to need to make a financial commitment if you are going to own rental property. What happens if the tenant doesn't pay for a month? Or it's vacant? Or the roof needs replacing?
And don't forget to keep a minimum of 3 months mortgage payments per property in reserve. The day will come when you will be glad you did.
Patience
Patience? Yes, patience. Patience to find the right property. Patience to find the right money. Patience to find the right property manager. Patience to find the right tenant. Hot heads don't do well with Buy & Hold real estate investing.
Though you might try out for A&E's latest series of frauds, er, flip shows.
Time
Chris, you already mentioned time. I know. I know. But I'm now talking about time to let your investment grow and mature. The sweet spot here in Kansas City for investment properties is right about 5-8 years. After 5-8 years The 4 Benefits have peaked and will now start a slow slide down on returns.
Don't try to shortcut the 5-8 years. In most cases it's the time you'll need to maximize your investments so that you can then turn them and start over again.
Dianne - good to hear from you again. The reason I recommend 3 is the feeling of security it gives you. Say renter doesn't pay. You are usually already 20 days in before you finally face that fact. Then to get them out will take about 30 days in some areas, but I figure two weeks because I will buy them out. Then you need a couple weeks to get it back in order and ready to rent. Then on the market time, etc.
So you see, three months can come and go pretty quickly.
Put a smile on your face and make your situation better! (And as you can read I'm not a sunshine and blue skies person.)
Hi Chris, Why are talking about my tie? I don't say anything about yours, or should I?
It appears from your remarks that your income property is SFRs and if that is so 3 months reserves is probably not enough in my market where evictions can take several months and the property will be beat to hell when you get it back.
But 3 is better than 2.
Too many "investors" never consider "what if,,,," and expect everything to be perfect.
Bill Roberts
Our judges here aren't quite a liberal. Don't pay...go away. But even with a quick eviction you still will need all three months for refurbish and rent time.
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