Can't be profitable with just one property?

Question

On another forum, someone argued that buying just one property was a bad idea, stating that it will "drain me" and that you need multiple properties to be successful. I told him that if any one property can't be profitable, then you could never profit from having multiple unprofitable properties.

Any thoughts?

JD Martin · Answer

Having multiple properties is just a form of diversification. A property in a portfolio of 10 goes vacant, that's a 10% vacancy rate. Your single property goes vacant, it's a 100% vacancy rate. But every property ought to be able to stand on its own as being profitable or it should be eliminated. I have houses that are more or less profitable but all of them make me money :)

Edward B. · Answer

You are right, he is wrong.

Alexander Felice · Answer

one house can be somewhat profitable, but you don't have diversification or economies of scale. It's just not an appealing investment.

It also depends on what that one house is.

Russell Brazil · Answer

Multiple properties spreads out your risk. Owning 5 properties is much much less risky than owning 1 property.

Thomas S. · Answer

Owning one property with 100/month positive cash flow can be very draining if it is necessary to deal with tenant issues. One eviction or one destroyed property can easily suck the wind out of any investor.  When the reward is multiplied by multiple properties the bumps are easier to survive.

It is not a question of whether one property can be profitable it is more a question of whether one property is worth the effort based on that profit. Many investors have been drained by one profitable property. Any landlord can get burned out by todays tenants.

Jay Hinrichs · Answer

depends on your temperament and your goal.. and where it is.

one well place rental in the SF bay area is a gold mine.

one poorly placed rental in Detroit not so much..

so it depends..

Nicole A. · Answer

This person may be referring to a single property as a single point of failure. When it is vacant, you have zero income. Something goes wrong such as big repairs, tenants not paying, etc, there's no other properties to help you through the rough patch.

Dean Letfus · Answer

I agree completely as an investment strategy, owning 1 property means 100% of all expenses are allocated to one home and that can be problematic. Things like LLC filing fees, accountancy etc.  I tell our clients plan to buy a minimum of 10 or don't start. Of course cashflow becomes less worrisome as well as vacancy is spread more evenly over a portfolio.  I guess your point is that every purchase should be profitable but there are financial and time costs that are better spread over multiple homes IMHO.

I have also observed that investors with 1 or 2 houses have a hobby. Investors with 10 or more have a business so they treat it differently and are more profitable as a result of some focus.

Pat L. · Answer

Trust me we all started with that 'one property' & many dropped out of REI simply because of that 'one property'.

As you suck it up & continue to accumulate a larger portfolio there will always be that 'one property' that's the proverbial PITA. (We have all had a few!!!)

But as others have said ... one day you'll look back & laugh at what you went through to get profitable & achieve financial freedom. That 'one property' will become an invaluable learning experience & a test of your endurance.

I had one 15 years ago that drove me insane. Yet this year my lease to own investor (that I sold it to 12 years ago) will have paid it off $38,000 @13% & NNN.

Hang in there.

Chris Masons · Answer

It depends on your point of view. If you buy right and manage right you can absolutely be profitable and supplement your income with one property. Will it be life changing probably not but it will definitely help you save faster, give you extra discretionary spending and if you occupy it while renting out the other half (2 family situation) can give you a HUGE advantage allowing your tenant to pay 1/2 or even 3/4 of your mortgage payment (this is how I got started) over time this can really snowball into something big if you are diligent, patient and choose to keep going...

regards,

Chris

Can't be profitable with just one property?

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