Reply to I am considering buying a rental property. Talk me out of it.

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[quote=Anonymous][quote=Anonymous][quote=Anonymous]I own some rental properties and one major con is is large unexpected bills for things that break, or just wear out over time, surprise tax bills, vacancies, etc.  So make sure you have a large cash reserve to spare.

Another is the time spent on it, even if you have professional management.

The big pro is the opportunity for returns far greater than index funds.

The Bigger Pockets website and podcast is a good way to start educating yourself.[/quote]

I have been reading Bigger Pockets for quite awhile now, it partly seems too good to be true to me.

Have you been successful as an investor?  How much time did your "learning curve" take?  Do you have a manager or do you manage yourself?  I am afraid of making a very costly mistake.[/quote]

I'm the PP you quoted.  We've done OK with it so far.  We own two older duplexes in a midwestern college town and live in DC.  We break even on a cash flow basis, more or less, but there have been a few expensive repairs that have required us to pay for out of our savings.  We also refinanced one of the properties to a 15 year note, which affected our cash flow situation.  Our motivation isn't purely financial, I should add.  We've considered moving to the town, and if our professional lives had turned out differently, we'd probably be there now.

I think the most important thing to do before you take the plunge is to familiarize yourself with the various ways to calculate your ROI (return on investment), and to spend a lot of time evaluating what your expenses and cash flow situation will be for each property you are considering.  It's not that easy to do, because you have to make assumptions about rent, vacancies and expenses, but you have to do it.  Once you've done it a few times, it gets easier.

As far as property management, we did hire a property manager because we are far away and had no other choice.  I don't think I would make the same decision if I was buying something where I lived.  It's expensive, and you don't have as much control over repair costs.[/quote]

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