What are some hard questions you have to ask yourself?

Question

What are some hard questions you have to ask yourself  before buying a rental, and also getting your time back from managing a large amount of rental homes? Thank you in advance for helping a young investor.

Randall Alan · Answer

My first question is always  “What is my exit strategy?”I want to have options.  I gain options by buying below market price.  One would lose options by buying at or above market price.  So if I buy below market, and the market moves lower, I can still sell and be ok.  if I buy below market and then have to do some improvements, I can still sell and be OK.Conversely, if I buy above market, and the unit doesn’t cash-flow, and the market moves lower when I was counting on an appreciation play, I’m screwed if I want to sell.  (So don’t go that route… only buy cash-flowing properties if you want the maximum options to exit the property).So don’t get me wrong, I buy to usually do long term holds, and to date appreciation has been awesome!  But there have been a few properties we bought that 1-2 years later we are like “we shouldn’t have bought this”…. We have high turn over, and the property just seems to be frustrating with either repairs, or tenant issues.  So we will “listen” to what the property is telling us… which is “you wound be so much happier without me!”… and we’ll sell it. So know your exit strategy going in, and buy right to maximize your options.All the Best!Randy