Here’s a general rule of thumb. If you have to ask a generalized question about real estate investing then you probably aren’t knowledgeable enough to adequately evaluate, manage, or negotiate a property purchase.
You’ll make many costly mistakes in your first few property investments. That’s with taking the time and effort to study and become knowledgeable about real property investing. Without the knowledge it becomes a crapshoot - will a bull market bail you out or will a bear market wipe you out?
Even with knowledge you’ll make mistakes - hopefully not as costly - because while knowledgeable you’ll lack experience.
You have no choice because bank rates are low? Over the long term treasury bonds will cover the rate of inflation plus about 2%. That’s one choice, especially while you are educating yourself in real estate investing. CDs, money market funds, mutual funds, bonds, TIPs, REITs, closed end funds, syndicated real estate deals, high interest private real estate loan funds, plenty of choices.
And one more thing. 80% of property managers do not perform adequately. Either because they’re incompetent, unmotivated, over worked, have other more important business interests, are managing property as a sideline or lack people skills. The 20% that do perform adequately have more business than they can accept, and often turn down offers. Finding an adequate property manager for a war zone property may be impossible. I know many people who purchased war zone type units and were relieved to sell after 12 months. They made money, sometimes high cash flow, but looked like they aged 10 years in those 12 months. Please be cognizant of the fact that purchasing a apartment complex, especially a small class c or d complex in a less economically strong area is not anything like investing in stocks, mutual funds or syndicated real estate deals. It’s at a much higher level of intensity, commitment, and risk.
