Hello, I am a young professional and my job is high paying but very stressful. As such, I'm hesitant to invest in anything that takes time/energy. However, looking at the current investment landscape, traditional options appear pretty limited. The stock market rally is pretty long in the tooth, bonds are yielding next to nothing, and commodity speculation isn't appealing to me.
Due to this, I am considering purchasing my first investment property to rent out. I'm primarily looking to store and grow wealth, not necessarily yield income. Also, I am considering real estate because it is a great shield from the tax man.
Before taking the plunge, my one biggest, biggest concern is the stress/hassle. For those of you who have day jobs and kids, how much time does it take to manage one property? Even if one hires a property manager, does it still take up a significant amount of your personal time?
Thank you in advance for your replies and advice,
Are you trying to buy fixer uppers or houses that don't need a lot of work? Do you plan to do a lot of the work yourself? So unless you buy move-in ready houses prepare to work VERY hard, even if you have a lot of cash to burn the growing pains of time management, contractors,buying materials, getting out of the office to make a some quick calls, taking some days off, you can kiss your social life goodbye, so stress/hassle? Oh yes and plenty! In my case I was a bit extreme, I bought 2 fixeruppers at the same time, TWICE, so basically everyday after work I was going to my houses to manage or do some work myself, lunches? lunch at work was calling contractors, stores, potential renters, etc. The first time I did it I swore never to do it again, 2 years later I got equity in my house, my mouth began to water, I couldn't help myself, I'm masochistic I went at it again but this time with more money and more knowledge (and I still consider myself a newbie), still a lot of stress and plenty busy, work as hard as the first time but mentally much easier. With my first rental from 2 years ago I go about 2-3 times a year for whatever problem, pretty sweet, specially when I see those rent checks hit my bank account! So got 2 more almost done and rented, I don't expect to many calls either (be picky with the renters!) and if there's something I can't do I have a good handyman that takes over.
So in a nutshell, you will be stressed out and suffer but I think you're in a unique position where you can leverage your high paying job to finance your real estate investments (like I do), a lot of work, a lot stress, but let me tell you once you're done and have that extra income is such a good feeling, if you make it happen, a few years from now you'll be patting yourself on the back. If I get fired today if I want I don't have to look for another job, I will be tight with money but live decently but I can pay all my bills, priceless...
I'm sure some other members with busy full time jobs here went about it in a smarter way so it would be nice to hear their beginnings as well.
Welcome. Get the best of the best for team members. Remember you don't have to do everything yourself. Time to build the foundation below.
Check out the Start Here page http://www.biggerpockets.com/starthere
Check out BiggerPockets Ultimate Beginner's Guide - A fantastic free book that walks through many of the key topics of real estate investing.
Check out the free BiggerPockets Podcast - A weekly podcast with interviews and a ton of great advice. And you get the benefit of having 60 past ones to catch up on.
Two Great reads, I bought both J. Scott The Book on Flipping Houses,The Book on Estimating ReHab Costshttp://www.biggerpockets.com/flippingbook
Locate and attend 3 different local REIA club meetings great place to meet people gather resources and info. Here you will meet wholesalers who provide deals and all the cash buyers (rehabbers) you will need.
Go to IREM.org search for ARM certified property managers. Call 5 ask them what sides of the city they like/dislike and why. Ask what they see them selling for and what expenses are by category. Ask if they know anything coming up for sale.
You might consider Niche or Specialized Housing like student housing. Rents can be 2-4 times more. Remember you don't have to own a property to control it.
Download BP’s newest book here some good due diligence in Chapter 10. Real Estate Rewind Starting over
I will give you my thoughts.
I think this has to come down to personality and your desires. I am a physician which means my schedule can be very erratic and I'm not interested in dealing with the stress/hassle nor do I feel I have the time. Therefore, for my previous residence (a condo) and recently purchased intentional SFR, I have a property manager (actually 1 for each property). It's worth it for me to pay for that service. They got a good tenant in my condo and all I ever hear is "your ACH transfer will arrive this week." Occasional expenses come up that they email me about and when there are bigger issues, I have to call to discuss. I'm hoping for the same with my new place, but trying to be more active so that I am giving more input about approving the tenant, etc, but still not required at all for day to day. With regards to hassles, the only hassle is when there are unexpected expenses, but if you buy right, then you'll have budgeted for them upfront so it's less of a big deal.
That being said, I have another physician I work with who has a few SFRs that he oversees some minimal rehab and manages himself. But that's his personality.
So, if you really don't want much time committment/hassle, then find a good property manager and probably focus on more rent-ready properties. You'll have to put some time in upfront to find a good property that will yield good numbers, but it's definitely possible.
Welcome to the BP family. I don't believe this is a stress free business. It is difficult to get everyone on the same page as you are on. When you hire sub contractors they don't have the same motivation as you have nor do the have the same rewards. I've heard for years no pain no gain; I believe that all jogs have a degree of stress since there are so many variables to contend with you need to be as I say like a rubber ball the harder you get knocked down the higher you bounce up. This business is full of surprises and instead of playing the blame game confront the problem and correct it. Don't be afraid to replace the players and let them know about the high standards you expect and that should reduce some of the problems. Food for thought.
I was in the same position you were. High stress, decent pay. My first home became my first investment property. Hiring a good property manager has made it much easier to have an investment and still work the full time job. I pay 12% but have only had one month of vacancy in about 3 years. However, it doesn't cash flow that great. The more stressful property is and will be my second property which is a much better deal and more cash flow but has more 'baggage' to get through. I think it's fun though.
However, I would say get that umbrella insurance policy to help you sleep at night.
@Morgan Wells ...Business is risky, but as long as you mitigate, you can make money. I purchased and managed 6 while working FT, but QUIT my job to focus on RE..I'm building and maintaining my portfolio...At some point, I will turn over to PM, but I enjoy handling the people aspect of my business!!
Finding a property- or rather, getting to the point that you feel confident that you can choose the right property- does take time and effort. IF you choose right, AND you get good management, then there's not a whole lot to do until it's time to get the next property. And it's easier the second time.
Only you can decide if it's a good idea for you at this time though.
@Morgan Wells - My recommendation is that most everybody hire a professional property manager. And for you especially, since you already have enough on your plate. But you will have to manage the manager. If they are good, it shouldn't take up too much of your time with only one property. I have several properties, with two different managers, and I probably average only 1 issue per week. With only one property, yours should average out to less than one per month.
Thanks all, I really appreciate the insight. I'm not looking to flip, I'm looking to buy largely finished properties and hold long term. I'm leaning towards hiring a property manager to keep the stress as low as possible.