How safe is Real Estate for a long term holder?

[Molly K.]

Hi guys,
I am new to this forum and a little new to the industry. My husband and I have been slowly sinking more and more money into rentals over the last 4 yrs. We have been able to purchase a lot with cash, and our most recent purchase has been through a private investor. Overall, we are very cash heavy in real estate with very little mortgages.

It seems a little too easy. Buy a property, minor repairs, rent it and collect an income.

I am aware of nighmare variables that can arise, nothing catastrophic has happened to us yet.

My questions is...out of all our friends, my husband and I are the only ones doing this. We are the only people we know buying and renting. We know only a handful of people in Real Estate at all (agents, contractors, ect).

Do they know something we (I) dont know?

I'm in my early 30's, and my parents generation did very very well. My parents held onto their 1st condo for 35 yrs and just sold it for a $300k profit from initial purchase price. They rented it for 25 yrs and I figure they probably brought in $275k in rental income over the years that they had it. That is about half a million dollars produced from a condo.

Would I be setting myself up for a situation like that buying and holding too?

The people around me are just not interested. They are afraid of the market, or say they could never be a landlord.

Is Real Estate something some people have a knack for (an interest in), while others just dont have that interest? Does the financial committment weed out a lot of people from getting into the business? Or do people get more interested as they get older?

Or does everyone know something I dont know?

My husband lost his job and wants to make rentals and a few flips a year his career. I am tempted to go that route myself. But I am holding back due to my inexperience. I dont know what I dont know. And right now I'm trying to see the downside to this.

Asking a bunch of people who are in real estate might not be where I find a cautionary tale, but I dont know anyone else in real estate!

[Jeff N.]

Molly, I have a similar situation where my close network of friends also want nothing to do with real estate investment for a myriad of reasons. I'm the lone investor in my group charging ahead with buying rentals. I still have a full-time job, but I'm getting extremely close to having the ability to support my family from rental income and other related investments if I lost my job.

I tend not to talk about RE investment with friends not in the business, but recently one of my friends did ask me why I put so much at risk buying rentals. He said it definitely wasn't for him. The funny thing was that this friend recently purchased a new truck for $40K. In 3 years that truck will have a value of about $18K. It's a mindset that some people will never have or get. Maybe they didn't have a mentor at a younger age to teach them cash-flow, or maybe the RE bubble scared them. Who knows, but it all makes sense to me, and over the past 6 years of buying rental property I haven't regretted any of my purchases. My only regret is that I didn't get started at a younger age.

We have not had any catastrophic events happen either, other than one or two bad tenants that have cost us a few thousand in repairs/rent, but these are lessons learned and were completed expected to happen at one point in this business.

Good luck, and I wouldn't let the lack of interest of your friends question your strategy and long term goals. Mitigate your risk by purchasing smartly and incorporating solid layers of protection from catastrophic and liability events and you will be fine.