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Posted about 7 years ago

So, why real estate investment .. my take

If you've read the previous entries on this blog you'll see that I didn't expect to be a landlord, I expected to help folks buy/sell real estate to make extra money for my family.

Let me explain why my primary focus is now buy/hold real estate investment.  Similar lists have been put together by thousands of other investors

  • Tenants pay your mortgage
    Simply put, the most beautiful thing about buy/hold property investment is the fact that your tenants pay your mortgage down and create equity for you.  This is long term income for you, without you having to do much!  Recently, I got to see first hand what it looked like to have 5 rent checks deposited in my checking account for the first time.  Holy cow!  
  • Appreciation
    Appreciation on property you own isn't something that you can bank on.  We all felt the last housing crisis.  However, if you pick your properties right, there is no reason that you can't weather almost any correction in the housing market.  You may not make month over month profit (bec rents have decreased) but your mortgage will keep getting paid down and you'll be adding to your equity stake with each passing month
  • Labor Intensive - Not so much
    As I have stated already, buy/hold is something that gives you long term income.  When you hit critical mass, it can also give you monthly income (more on that later).  The wonderful thing is that as you are creating this wealth, you don't necessarily have to be consumed by hours upon hours of work each day.  A well maintained, well managed rental property should run itself.  I recently had someone tell me (they were a maintenance handyman) that they hadn't been to property X in almost two years for a maintenance issue and hadn't been to property y in over a year.  How many businesses can say that.  There is certainly management work, paperwork, bills to pay, etc but nothing actually at the site.
  • Return on Invest (ROI)
    There are a number of metrics that people use to gauge whether or not an investment (of any kind) is worth while.  In layman's terms, ROI is the amount of money someone "makes" as it relates to how much money they put into their investment.  Buy/Hold real estate, when carefully purchased can have a great ROI.   --- although, when talking about real estate using other metrics like NOI or Cap Rate are a better indication of how your investment is fairing.   Any investment you make in your retirement account is having a good year if the year in - year our return is 4 or above.  In buy/hold real estate, in SOME markets, it's not uncommon to have average CAP rates between 6-10%, and sometimes higher (in some markets, that's not the case, but often those markets have higher appreciation).
  • Check out the three links below for more information:
    https://www.biggerpockets.com/blogs/4269/30123-cal...
    https://www.biggerpockets.com/renewsblog/2015/08/2...
    https://www.mashvisor.com/blog/cap-rate-coc-return/

*This list is by NO means complete and is specific to my views.  Your rationale could be very different.

Let me close this by saying that the list of "CONS" against buy/hold real estate investing could be just as long, or longer.


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