Some More Thoughts on Real Estate

Although the focus of this blog is mostly on economics, politics, and investing, I do like to discuss real estate from time to time.  If you are in the right position, I think you should seriously consider getting into investing in residential real estate.

If you are broke, I wouldn't recommend it.  I also wouldn't recommend it if you move around a lot, although this situation could be overcome.

Some people say that they don't want to be landlords.  It is understandable that some people don't want to deal with finding tenants and collecting rent each month.  They also don't want to deal with other problems that arise.  However, it is easy to find a company that will manage your property.  They will typically charge you an upfront fee to find renters for you (maybe a month's rent) and then will charge you a fee each month to manage the property.  This might be about 10% of the rent.

Of course, you will have to pay for anything that needs to be fixed, but even here the management company can help you.  They may have a handyman who will do things for a reasonable price.  If there is something more expensive, then the management company will notify you to get your approval.

I said above that it helps if you are not moving around, but even if you are, you can still hire a management company.  I still think it is preferable to be close to your properties, but some people just don't have this option.

It is important to have some extra money to make it easier to buy a property and to give you a cushion for any additional expenses, particularly if there is a month or two in which it is not rented.

If this is something that interests you, I would recommend buying something inexpensive, but in a decent area.  I would recommend something simple like a 3 bedroom/ 2 bathroom house.  You don't want to buy too much house.  You will not recover the extra cost as the rent will only be slightly higher.

Also, be sure to lock in a fixed rate mortgage, unless you are paying cash.

You should only buy something if it will give you positive cash flow, not counting months where it is not rented or you have additional expense.  Overall, you don't want to be digging a hole for yourself.  It should be something that will usually put extra money in your pocket each month.  If you can find such a place, it might be worth considering.

You don't have to buy a whole neighborhood or apartment complex.  Just start with one house and see how it works.  You can always buy more later.