I viewed a buy and hold multi family property yesterday. And I learned a lot about myself. I learned money and top returns is not my most important goal. The numbers were crazy good. 2.5% rule! And after I've been seeing mostly 1% rule around the area. But this property was going to take more work now, and absolutely more work in the future, than I am willing to put into it.
2 units vacant for over a year (out of state owner, hasn't tried renting them out, allegedly). 1 unit in the middle of an eviction. 2 units filled on MTM leases. A boarded up, Squatter house next door.
I won't go into the finer details of what would need to be done to rent out all units. It wasn't anything major, but certainly some work. But, the most important part is, what good is a 2% rule if you aren't actually collecting the rents!
I found out yesterday that it isn't passive income if you have to go pound on doors every month to collect the rent.
I found out yesterday that I am unwilling to purchase myself a second full time job in real estate.
YUP exactly anyone who thinks low value assets are passive simply does not know what they don't know or are in denial or will get an education real quick. another out of state person who just probably lost a bundle on their cash cow dream
U can make those work if you want to be there monthly to nurse it along and a lot of mom and pop landlords do that it is their job.. they look at their properties every week etc etc..
if you think your going to buy low end rentals and sit back and just collect rent well that wont happen.
where that works is in Buying great first position performing notes that's REAL mail box money and passive.
Yikes, thanks for sharing... It's definitely worth it to view those properties, if possible, that seem toooooooo good to be true. I've learned that almost anything that hits 2% rule or higher could be more of a headache than the "paper analysis" makes it seem like.. Granted, there will be exceptions where a person could hit the jackpot with the 2% rule (there was another thread about people and their success with 2%+ properties).. but the majority of 2%+ properties seem to be pains.
So, I get in my car after viewing property, turn on an old BP podcast from 2016, and they immediately start talking about a purchase in Chicago at a 4% rule, and how it was the biggest headache ever and the money wasn't worth it. I don't believe in omens, but man was this podcast just sitting and waiting for me to play right after this viewing.
That's a great, grounding reminder about real estate investing. I've read countless posts in this forum where new investors view REI as a high interest savings account that is going to yield a fat check every month. This is a business. You have to think in terms of strategy. You have to consider a lot of variables (like rental markets, capital reinvestment, tax advantages, etc) to keep your bottom line returns up. You have to view your RE investments as your side job, even if you have a PM. It isn't for everybody and like everything in life, you just have to find what makes you happy and focus on that.
Sometimes, saying 'no' is as important as saying 'yes'.
Thanks on behalf of all of the people who read this post and really think deeply about RE investing before they jump in and cause a lot of suffering for themselves and others. :-)