So you’ve decided to jump into the wonderful, wacky world of real estate investing . . . congrats! An excellent choice indeed, considering the state of the stock market and how unreliable and inconsistent the returns can be right now. If you buy the right rental, fix it up reasonably and rent it out, you can earn 10% and above on your investment year after year. To insure you’re making a good investment going in, check out the “Diamond or Dud” formula in my recently released book, The Landlord Chronicles: Investing in Low and Middle Income Rentals. It can be purchased through me at email@example.com, $17 softback and $24 hardback (add $3 for shipping) or online through www.authorhouse.com or any of the other big online sources.
The first question is whether to go with a single or multi-family building. Mainly, it depends on time constraints and your personality. As you might imagine, multi-family houses are more labor intensive . . . more units, more tenants, more fix-ups and repair issues. But! more income as well. For example, the home below is a fourplex I bought for $30,000. I had to sink $15,000 into the rehab ($45,000 total), but I make $1700/month in rent. The same numbers for a single family three bedroom rental would only bring in about $800/month.
Even though the single family earns less than multi-family, there are some great bargains to be had right now. Foreclosures are on the rise, and many of them are in decent condition. If patience isn’t your strong suit, it might be wise to start with a single family that will bring a good return on the investment. See if you have the personality to be a landlord . . . and what exactly is that personality?? I’ve been asked that question countless times over the years.
I think there are two main components to doing well at this business. First, you need to be well organized, starting with being systematic about finding your target neighborhood, finding the “gem” you want to buy, getting financed, organizing and carrying out the rehab, etc. And second, you can’t worry about the stuff beyond your control. If you’re Type A+, you may want to find someone to manage your properties for you. It will be worth the 10-12% you’ll pay them.
I do well at this career because I’m super organized but am also a “go-with-the-flow” person. As I said above, your choice of rental will be determined by your personality and time constraints. Do your homework, prepare well, and go for it!