I ran into an old client last week, someone I know is a real estate investor. We were passing by each other, so we didn’t have time for a long conversation or anything, but he said to me, “Real quick, tell me why I put up with the stress of real estate investing?”
My answer was that he shouldn’t be putting up with the stress. That, despite the economy, real estate investing can actually be less stressful than it was a few years ago. Some of the reasons are the same as why it’s a good time to buy a primary residence, too, but some are actually specific to purchasing rental real estate.
Now, if you own property that has declined in value, that might sound unbelievable to you. But if you don’t have to sell, the value of your home on paper shouldn’t stress you out as much as you let it. As for other aspects of investment real estate, things can be less stressful these days. Here are three reasons why:
1. Lower prices. Property values have declined, sure, and that is unfortunate if you own property you bought while prices were rapidly rising. However, where prices are today can let an investor “make up ground” to a degree. By acquiring properties now, you can lock in higher cash flow than you could have a few years ago, which leads us to the next point:
2. Less involvement. I’ve written this before, but I will continue to harp on it: Better cash flow with investment properties affords you more freedom from them. With increased cash flow, investors can afford to pay a property management company to handle the chores that go with owning rental property. Real estate will never be completely passive investing, but hiring a good property manager will eliminate the late-night phone calls, fixing of toilets and collecting rent that many investors do on their own to save money.
3. High demand. While my belief is that falling homeownership rates are not a good thing, the result has been more demand for rental housing. And when demand rises, so do rates. More demand also decreases vacancy rates, another source of real estate investor stress. So while the acquisition costs of investment property have dropped – purchase prices, interest rates – making mortgage payments lower, rental rates remain strong. It’s never a bad idea to invest into demand.
I didn’t explain in great detail the above items to the investor I bumped into, but I did hand him my card. If he’s really stressed out by his properties, maybe he will call me! If not, I will probably give him a call.
The point to all this is that while it’s understandable that a current real estate investor could be stressed out, there are ways to alleviate this stress. For someone looking to get into real estate investing, it’s a less stressful time than it’s ever been (unless you’re looking to get into flipping houses, then it’s going to be stressful).
But if you are looking at more of a long-term investment approach – the one I’d recommend these days – holding onto a property, collecting cash flow and expecting some appreciation over a number of years, then it’s a great time