Yes I think residential property investments can be great – I did a small development and built two duplexes, and they are cash flow neutral and become more positive over time as the property appreciates in price and rent, and I pay the loans down. Definitely something to consider for a long term investor if you have a consistent income and risk tolerance and can manage the upkeep and also have a sensible LVR loan
at least for me, no. I honestly see no advantage to rentals, it is so expensive and time consuming to buy and sell and rent out real estate. The lack of liquidity is something I do not want to deal with. I am currently selling a house of which I am the trustee, the house is in a trust for the benefit of a family member, and, between hiring a realtor, asbestos removal, a survey needs to be done, and more, I cannot get this done quickly. I strongly feel a globally diversified portfolio of equities and investment grade bonds and cash, has so many advantages over rental properties, better returns, tremendous liquidity, diversification, and much less time devoted to the investments. Here in very liberal Massachusetts, a friend owned a three family, one tenant accused him of stealing from a common area in the basement, long story short, the landlord was barred from the entire property via a restraining order, then was constantly in trouble, for not maintaining the property! Even if he tried to send someone else to fix problems, the troublesome tenant would not allow access. The final straw was when the tenant sued my friend, and won, after he tripped on a loose step, and claimed he was injured, and he won a substantial judgement. ( my buddy sold the property afterwards) I concede that this an extreme case, but, if real estate is desired, why not be satisfied with the many REITS in index funds, or, for dedicated exposure, the Vanguard REIT, VNQ, which charges a mere .12%, annually? I consider real estate an extremely expensive mutual fund of sorts, sky high front and back end loads, you know, lawyers fees, appraisals, realtor fees, etc., and very high annual fees, mortgage interest, taxes and so forth. I needed to sell some funds to finance the above referenced house, the laptop was off when I started, but it still took less than five minutes to complete, and the only cost was the electricity for the device. Meanwhile, its been 7 weeks and counting for the home I need to sell, the tax bills, utility bills and hazard insurance bills keep on coming, even though the house is empty and producing zero income…..!
I bought 5 rental houses in the down turn in 2010 for $0.30 on the dollar, all in great shape.. All of them were defaults that the banks had to get off their books. 3 of the 5 I bought within my IRA through Equity Trust in Ohio, and I’m in Georgia. Those 3 rentals were owned by my IRA and the IRA received the monthly rental income tax free. The IRS foes allow rental property to be held within an IRA as long as there’s an arms length between the rental and the IRA owner.. This worked well through Equity Trust, they were great to work with for the ten years I owned them. Was definitely worth doing at that time in the market swing..BTW each house only needed fresh paint and new carpet and I had no problem renting them…
Like so many complex questions, it depends. Until 2 weeks ago I’ve owned rental properties for 37 of the last 44 years. For the first 27 years I did do a lot of the maintenance myself. Overall, I generally found rentals to be financially rewarding. The gains from using financial leverage (ie. having a mortgage) can be huge if you’re fortunate enough that your property values and rents significantly increase over time and you’re lucky enough to have good long-term tenants. Also, my parents and siblings already had rentals so I had a lot of family expertise to guide me and help me avoid typical rookie mistakes. Further, I lived in a growing community during this time where property values did generally steadily increase and keeping the units rented was usually not a problem.
However, for me once I no longer had a mortgage the future financial gains to be expected owing the property were basically similar to the expected total returns of a basket of high-quality REITS. For me the REITS are less stressful and less risky than an individual rental.
In the past I’ve told people that rentals can be good investments if you can afford them when they’re not. Because when things go bad (and given enough time there will usually be some bad times) they can be a huge money pit. One final comment: A bad stock can go to zero, but a bad rental can leave you saddled with debt.
Yes I think residential property investments can be great – I did a small development and built two duplexes, and they are cash flow neutral and become more positive over time as the property appreciates in price and rent, and I pay the loans down. Definitely something to consider for a long term investor if you have a consistent income and risk tolerance and can manage the upkeep and also have a sensible LVR loan
at least for me, no. I honestly see no advantage to rentals, it is so expensive and time consuming to buy and sell and rent out real estate. The lack of liquidity is something I do not want to deal with. I am currently selling a house of which I am the trustee, the house is in a trust for the benefit of a family member, and, between hiring a realtor, asbestos removal, a survey needs to be done, and more, I cannot get this done quickly.
I strongly feel a globally diversified portfolio of equities and investment grade bonds and cash, has so many advantages over rental properties, better returns, tremendous liquidity, diversification, and much less time devoted to the investments.
Here in very liberal Massachusetts, a friend owned a three family, one tenant accused him of stealing from a common area in the basement, long story short, the landlord was barred from the entire property via a restraining order, then was constantly in trouble, for not maintaining the property! Even if he tried to send someone else to fix problems, the troublesome tenant would not allow access. The final straw was when the tenant sued my friend, and won, after he tripped on a loose step, and claimed he was injured, and he won a substantial judgement. ( my buddy sold the property afterwards)
I concede that this an extreme case, but, if real estate is desired, why not be satisfied with the many REITS in index funds, or, for dedicated exposure, the Vanguard REIT, VNQ, which charges a mere .12%, annually?
I consider real estate an extremely expensive mutual fund of sorts, sky high front and back end loads, you know, lawyers fees, appraisals, realtor fees, etc., and very high annual fees, mortgage interest, taxes and so forth.
I needed to sell some funds to finance the above referenced house, the laptop was off when I started, but it still took less than five minutes to complete, and the only cost was the electricity for the device. Meanwhile, its been 7 weeks and counting for the home I need to sell, the tax bills, utility bills and hazard insurance bills keep on coming, even though the house is empty and producing zero income…..!
I bought 5 rental houses in the down turn in 2010 for $0.30 on the dollar, all in great shape.. All of them were defaults that the banks had to get off their books. 3 of the 5 I bought within my IRA through Equity Trust in Ohio, and I’m in Georgia. Those 3 rentals were owned by my IRA and the IRA received the monthly rental income tax free. The IRS foes allow rental property to be held within an IRA as long as there’s an arms length between the rental and the IRA owner.. This worked well through Equity Trust, they were great to work with for the ten years I owned them. Was definitely worth doing at that time in the market swing..BTW each house only needed fresh paint and new carpet and I had no problem renting them…
Like so many complex questions, it depends. Until 2 weeks ago I’ve owned rental properties for 37 of the last 44 years. For the first 27 years I did do a lot of the maintenance myself. Overall, I generally found rentals to be financially rewarding. The gains from using financial leverage (ie. having a mortgage) can be huge if you’re fortunate enough that your property values and rents significantly increase over time and you’re lucky enough to have good long-term tenants. Also, my parents and siblings already had rentals so I had a lot of family expertise to guide me and help me avoid typical rookie mistakes. Further, I lived in a growing community during this time where property values did generally steadily increase and keeping the units rented was usually not a problem.
However, for me once I no longer had a mortgage the future financial gains to be expected owing the property were basically similar to the expected total returns of a basket of high-quality REITS. For me the REITS are less stressful and less risky than an individual rental.
In the past I’ve told people that rentals can be good investments if you can afford them when they’re not. Because when things go bad (and given enough time there will usually be some bad times) they can be a huge money pit. One final comment: A bad stock can go to zero, but a bad rental can leave you saddled with debt.