Real estate investing may be a lot of things, but it isn’t easy. At least that’s what a lot of people think.
If you’re investing for short-term appreciation, you are in for a bumpy ride in the current business climate. I think most people would agree that short-term appreciation isn’t a reasonable goal these days.
If you’re looking for long-term appreciation, you need to purchase a property at a price that allows room to pay management fees. Or you can manage the property. Here’s what’s hard to predict: the tenants.
Depending on the local market, commercial real estate can be pretty risky too. So you are thinking about residential real estate. If you manage it yourself, you worry about excess maintenance costs. You worry about finding the right tenant. You worry about creating a lease.
You may decide to try a the truly hands-off alternative: a real estate investment trust (REIT). THis is a publicly traded fund that owns property (usually commercial) and/or mortgages. The value of these funds doesn’t trend with the stock market, so that can diversify your portfolio.
But the fund fees can siphon off your profits. What if you want a simple, low-risk long-term investment ? One where you can file the deed in your safe deposit box?
What do you think of the idea of investing your money in a single-family house, to be rented out? You can choose the house from a variety of local sunbelt markets, and you can take advantage of negotiated relationships with property managers, insurers, and mortgage originators. All this at just five to 10 percent down on each house.
An arrangement like this provides you with a balance sheet with predictable income and expenses. Your tenant will simply pay off the mortgage. In 15 years, you can sell the house and walk off with the equity.