jdbee wrote:Been a landlord for 30+ years. About 20% of NWorth is southern Cal residential income property. All free and clear/cash flowing now but still have times where you have to drop everything and fix something or deal with a tenant. If you have someone else manage it I don't think you will make much, if any, $ until you get below 50% LTV. I would look at it as a diversification and eventual cash flow instrument. If apartments = pure cashflow, little appreciation, particularly if cap rates go back to historical norms. If condo/home, you also have a shot at appreciation as a "for sale home". Best time to buy is when the market is getting creamed and you can afford to feed it/keep a tenant in it for a few years, cost basis is key. If you want to get technical, read Case-Shiller's study on housing appreciation from about late 1800's to about 2005 (or thereabouts); the takeaway is national housing has appreciated at about the rate of inflation, so I guess you could look at it as an inflation hedge as well. Compared to historical returns of the stock market I think you will make more $ with less tenant hassle factor (especially with California's pro-tenant laws). There are many former landlords and former passive landlords for a reason.
This. Owning rental real estate is a part time business that sometimes turns into a full-time job. It's easier to do if you have a flexible schedule or already run your own business, and if you are handy with tools and enjoy that kind of work.
I just fell into being a landlord by my wife and I having well-paying careers that meant whenever we moved we didn't need to sell our previous homes. We're also lucky to live in a booming metropolitan region with rising rents, and specifically in a university town with a restricted housing supply and young, easy to manage tenants. I only buy RE investment properties when the market is down, and rarely sell as I see them as long-term investments with high transaction costs. The capital appreciation has been ok, but stable and rising rents mattered more. RE is now a significant part of our NW and throws off a nice income stream.
It's a very different business in other locales. Most of important though, owning rental real estate is a business. Expect more work than index funds (though I don't agree that learning to invest is all that easy either--it might be as easy as watching paint dry once you have mastered the discipline, but there's still a learning curve...).