Are you thinking about managing rental properties or flipping houses? If so, you’ve probably already spent countless hours researching the pros and cons. Whether you’re considering to do this as a full-time job or just to make some extra income, you’ll need to consult experts who invest along the way.
If you need more convincing, read on to see our top 5 reasons why you should NOT invest in real estate on your own.
1. You Might Not Find the Best Investment Opportunities
You’re competing with professionals
The professionals are sending out thousands of offers each week. We aren’t talking about handing out flyers that say, “Are you interested in selling your home?” We mean literally thousands of actual offers. These professionals may have virtual assistants working overseas who are generating these offers to hundreds of banks on foreclosed homes.
Are you really going to find a bargain on your own by driving around town and calling the numbers on each “For Sale By Owner” sign? I’m not saying you can’t go up against professionals or find that diamond-in-the-rough investment opportunity; it just may not be the wisest decision to make on your own.
The best investment opportunities may not be local
As Robert Helm says, “Live where you want to live, and invest where the numbers make sense.” You need to look at the best opportunities, margins and spreads of what you’re spending versus how much money you’re bringing in per month for rent.
Rule of thumb: does the monthly rent equal 1% of what you paid for the house? For example, if you spent $100,000 on your property, you should be charging at least $1,000 per month for rent. Does the market in your area support that rule? If not, you’ll be squeezing yourself too thin because of what you’re paying for upkeep, property taxes, vacancies, etc.
The bottom line: your local area might not be the best area.
2. The Four Ts: Tenants, Toilets, Termites, and Trash
Think about your lifestyle; do you REALLY have time to deal with tenants? Maybe you’re young with a lot of energy and free time, or your job has flexible work hours that allow for you to tend to your properties during normal business hours.
Even if you do, property management is a 24-hour, 7-day-a-week job. Do you really want to get that maintenance call at 2 a.m.? Will you actually have the energy or desire to fix a pipe leak at the end of a long day at work?
3. Flipping Houses Is a Full-Time Job
A lot of people like to buy, fix up, and then sell houses. There’s nothing wrong with doing this. In fact, it’s a good way for a lot of people to accumulate cash. But really, it’s just a job.
As soon as you finish one flipper, you have to go do another one to make income. Because of this, you’re not really building up passive income.
You need to look at flipping houses for what it really is: it’s a transaction that requires you to continue doing the transaction.
4. Tackling Legal & Accounting Issues
There are a ton of legal and accounting aspects with real estate investment opportunities. Are you knowledgeable enough in these areas? Legal issues such as evicting tenants or how you’re reporting your income for tax purposes are all very complex.
If you really want to manage properties, you should always consult an attorney and a CPA to help with the nitty-gritty legal and accounting work.
Otherwise, you’re probably going to get hammered at some point by something that you may have overlooked. It might be something related to a legality, or even a tax incentive that could be advantageous for you. You’re losing out if you don’t utilize these resources for advice.
5. You’re Going to Run Out of Money
Whether you’re investing in single-family or multi-family homes, and no matter how much money you may have, we all have limitations on how far that money goes before it runs out.
You want to bring other people’s money in wisely, prudently, while helping people at the same time. Look for passive investors to tap into so you can expand your opportunities and make things happen.
If you’re looking for resources to guide you through your journey in real estate investing, we can help.
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