Is owning a rental property a good investment?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:If $1200 per month will cover your mortgage--sure. But it shouldn't cover "most of your mortgage." It should cover all of it, plus your taxes, with a little buffer for vacancies in order for it to be income generating. If it's an area where you expect rents to rise you could maybe be a little under that for a while, but in most part of New England (perhaps excepting Boston) that isn't a sure thing right now.

If the primary purpose is just to be sure you'll have a home that you can eventually give to your son, that might be somewhat different math, though.

Would you buy property in NoVA that did not cover monthly mortgage (covers only interest and taxes but not principal) if the objective was to buy a place that your kid can use in about 10 years or so? If this place turns into a Bay area what with all the Tech companies moving away, would that not be a good investment (assuming of course I can cover the principal as well as any deficit arising out of the occasional vacancy)?

No, definitely not. Not because it's not a good investment (although it isn't!) but because if home prices are that out of sync with rents, it is a huge red flag of an oncoming housing bust, at least in that region. You'd be far better off waiting for the rents and home costs to level out if you don't need the property immediately.

The only exception would be if the rent would cover the principal for a 30-year-loan but you choose to do a 10-year-loan to pay it off faster. Then I'd be okay with the home being cash flow negative in exchange for being paid off by the time you need it, because you'd always have the option of refinancing into a longer loan if needed.

Thanks! I was job poor by the time I was ready to buy (2012ish) and couldn't buy property without a job to prove income. Will wait for a couple more years to see if things drop. I've been building up cash over the past 3 years hoping for just that but it looks like I have longer to wait..

[Anonymous]

Anonymous wrote:Money in stocks returns an income stream too.

Yes. Even if the rent covers the mortgage interest and expenses, you also need to look at how the surplus + appreciation compares to what other things you could be doing with the principal.

[Anonymous]

I sold my investment properties and invested the proceeds in stocks and bonds and am doing much better with none of the headaches involved with being a landlord. Sooo much easier.

[Anonymous]

Anonymous wrote:I sold my investment properties and invested the proceeds in stocks and bonds and am doing much better with none of the headaches involved with being a landlord. Sooo much easier.

How many properties, what were the rents and sale proceeds? Which area?

[Anonymous]

Are you handy, OP?

[Anonymous]

Anonymous wrote:I sold my investment properties and invested the proceeds in stocks and bonds and am doing much better with none of the headaches involved with being a landlord. Sooo much easier.

Yes but stock values fluctuate all the time, whereas real estate is much more stable and since you are paying down a mortgage each month, there is less of a risk of losing everything.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I sold my investment properties and invested the proceeds in stocks and bonds and am doing much better with none of the headaches involved with being a landlord. Sooo much easier.

Yes but stock values fluctuate all the time, whereas real estate is much more stable and since you are paying down a mortgage each month, there is less of a risk of losing everything.

Diversify. It shouldn't be all one or the other.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I sold my investment properties and invested the proceeds in stocks and bonds and am doing much better with none of the headaches involved with being a landlord. Sooo much easier.

Yes but stock values fluctuate all the time, whereas real estate is much more stable and since you are paying down a mortgage each month, there is less of a risk of losing everything.

That’s not necessarily true. Repairs, maintenance, accidents, natural disasters, nightmare tenants, and lack of tenants are all scenarios that could cause a real estate investor to lose everything. If the house is mortgaged and you can’t keep up the payments for whatever reason (lose job, no tenant, poor health, tenant stops paying), you will lose the house. That’s not the case with stocks and mutual funds.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I sold my investment properties and invested the proceeds in stocks and bonds and am doing much better with none of the headaches involved with being a landlord. Sooo much easier.

Yes but stock values fluctuate all the time, whereas real estate is much more stable and since you are paying down a mortgage each month, there is less of a risk of losing everything.

That’s not necessarily true. Repairs, maintenance, accidents, natural disasters, nightmare tenants, and lack of tenants are all scenarios that could cause a real estate investor to lose everything. If the house is mortgaged and you can’t keep up the payments for whatever reason (lose job, no tenant, poor health, tenant stops paying), you will lose the house. That’s not the case with stocks and mutual funds.

+ 100

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I sold my investment properties and invested the proceeds in stocks and bonds and am doing much better with none of the headaches involved with being a landlord. Sooo much easier.

Yes but stock values fluctuate all the time, whereas real estate is much more stable and since you are paying down a mortgage each month, there is less of a risk of losing everything.

Diversify. It shouldn't be all one or the other.

Exactly.

[Anonymous]

Watch the movie the Super before becoming a Landlord, here is plot.

Louie Kritski is a heartless slumlord who was born into money, thanks to his ruthless father, "Big Lou" (Vincent Gardenia), also a slumlord. However, the tables turn on Louie when he's threatened with prison for his failure to keep his New York City slum up to code. The judge gives him another option, which he accepts: he must live in a vacant apartment of one of his own shoddy run-down apartment blocks until he brings it up to livable standards.

The sentence is an effective house arrest; Louie is not allowed to leave the apartment except for routine exercise, grocery shopping, medical emergencies and business relating to building repairs. In addition, Louie is not authorized to make any changes to the apartment he has been assigned unless all other apartments had the same upgrade beforehand. At first Louie is adamant that not one repair will be carried out, and will wait until his father bails him out. However, Louie has a change of heart after meeting and getting to know the building's residents, including a small-time hustler named Marlon (Ruben Blades), and a struggling street boy named Tito (Kenny Blank).

Over time, Louie grows more sympathetic with their problems and makes amends for his greediness through actions such as donating space heaters to the tenants to help them cope with the winter. Unfortunately, Big Lou Kritski is the owner of the property in title, and he resists his son's entreaties to spend money to improve the tenements. When Louie confronts Big Lou who is about to set fire to his own tenement, all the residents appear on the roof to back up Louie. The film ends with Louie's building completely refurbished, Marlon becoming the new super, and all the tenants gathered outside to see Louie off with a gift: his Corvette fully restored. A grateful Louie drives away as a large man appears and angrily demands to know who stole his car; all the tenants point in the direction in which Louie drove off in.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I sold my investment properties and invested the proceeds in stocks and bonds and am doing much better with none of the headaches involved with being a landlord. Sooo much easier.

Yes but stock values fluctuate all the time, whereas real estate is much more stable and since you are paying down a mortgage each month, there is less of a risk of losing everything.

That’s not necessarily true. Repairs, maintenance, accidents, natural disasters, nightmare tenants, and lack of tenants are all scenarios that could cause a real estate investor to lose everything. If the house is mortgaged and you can’t keep up the payments for whatever reason (lose job, no tenant, poor health, tenant stops paying), you will lose the house. That’s not the case with stocks and mutual funds.

+ 100

+1000
A diversified stock fund--passive index--will never "lose everything" unless all business in the country or world goes under and no new business emerge--in which case the world has far more problems than having a bit of stable income will help. But you really can lose everything with a specific property. You can even lose more than what you invested with liability suits or required repairs. I think people really underestimate what a risky endeavor it can be.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I sold my investment properties and invested the proceeds in stocks and bonds and am doing much better with none of the headaches involved with being a landlord. Sooo much easier.

Yes but stock values fluctuate all the time, whereas real estate is much more stable and since you are paying down a mortgage each month, there is less of a risk of losing everything.

Diversify. It shouldn't be all one or the other.

Exactly.

But you can diversify by buying a REIT if you think real estate is a good investment or a dividend aristocrat stock fund if you need ongoing income. Buying a leveraged property for income is a huge gamble on one particular building (and you already have a leveraged gamble on real estate if you own your own house).

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I sold my investment properties and invested the proceeds in stocks and bonds and am doing much better with none of the headaches involved with being a landlord. Sooo much easier.

Yes but stock values fluctuate all the time, whereas real estate is much more stable and since you are paying down a mortgage each month, there is less of a risk of losing everything.

Diversify. It shouldn't be all one or the other.

Exactly.

But you can diversify by buying a REIT if you think real estate is a good investment or a dividend aristocrat stock fund if you need ongoing income. Buying a leveraged property for income is a huge gamble on one particular building (and you already have a leveraged gamble on real estate if you own your own house).

I agree, diversify by investing in stocks and bonds. If you want more exposure to real estate, add in some REITs.