Millionaire Gives Tips on Entering Rental Real Estate
Marcia Castro Socas has been a landlord for years.
She says the landlord-tenant relationship is an often-overlooked part of owning rental real estate.
She says buying the cheapest place isn't always best, and the news shouldn't dictate your plans.
One of my biggest financial goals is to invest in real estate. I've always wanted to own a handful of properties, all around the country, that I rent out to tenants as a way of making passive income. While I'm years away from being in the position to buy my first investment home, I'm doing what I can to understand how the whole process works.
In addition to finding out how much cash I'll need for a down payment, renovations, insurance, taxes, and to cover fees before a tenant moves in, I'm also eager to find out what else I should know before I enter the real estate investing space.
To help figure that out, I spoke with Marcia Castro Socas, a real estate investor, home renovator, and real estate broker who has generated millions from her investment properties over the years, about what she'd tell any new investor. Here's what she had to say.
1. Paying a lower price isn't always the best deal
In my free time, I like to look at properties for sale to see which ones I'd be interested in buying if I had the cash to do so today. I also search for the lowest-priced properties, since I assume my budget won't be big for my first investment home.
Castro Socas says that searching for the lowest-priced home isn't always the right move.
When she purchased her first investment property, it was a fixer-upper that required remodeling. She knew it would take some time and she'd need to pay the mortgage while the home was being fixed up. But what she didn't think about was all the actual cash she'd need to spend on the repairs, which added up to more than she expected.
"Sometimes it's better to get a property that doesn't need quite so much work, even if you have to pay a bit more for it," says Castro Socas. "The lesson I learned here was to assess honestly how much cash I have available for a project and how much work I can afford to take on comfortably."
2. Don't let outside news change your real estate plan
As someone eager to get into real estate investing, I'm always wondering if there's a right time to buy and nervous that I might enter the housing market during a recession, which could make it harder to rent out the property.
Castro Socas recommends not letting outside news change your long-term plan. That's what she did in 2008 when the real estate market collapsed.
She owned many rental properties that lost a significant amount of value, and while other real estate investors rushed to short sell their properties to get out of debt, she held onto hers.
"Rather than listen to that news, I saw that each property, except for one, was making rental income over the mortgage amount," says Castro Socas. "So, even though the sales market had plummeted, this didn't matter to me since I wasn't in the market to sell. I was happy to hold and keep renting the properties and pay down that mortgage every month."
Even years later, Castro Socas still owns several of those properties and their values have risen to a new record high.
"Keeping a cool head and looking at the actual facts rather than reacting to panic in the market proved to be much wiser in the long term," says Castro Socas.
3. Being a landlord isn't just about money
One of the biggest reasons I want to get into real estate is that I'm hoping to make passive income and grow my overall financial portfolio.
But Casto Socas says that owning properties isn't just about making money. She says while it might be easy to just focus on income amounts and return on investments, being a landlord is also about the landlord-tenant relationship.
"Tenants who have a personal connection with you take care of the home better, stay longer, and are more likely to take care of minor repairs on their own," says Castro Socas.
In return, Castro Socas makes sure she maintains that good relationship by taking care of issues quickly and treating tenants well. Plus, she says this mindset has led to an increase to her income over the years.
"With several tenants that have lived in rentals for over eight years, my income has been higher since we don't have any vacancies on these properties," says Castro Socas.
businessinsider.com
Christopher Pataki
Realtor, RE/MAX Associates - Hockessin
Phone: 302-562-0628
Office: 302-234-3800
License: RS-0019092, Delaware
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