I’ve been contemplating buying a rental property for a long time. I remember years ago when I was considering buying one, it just didn’t make financial sense. At the time, prices were at the point where I’d end up renting the property for less than the monthly mortgage payment. I can vividly recall reading articles from people like Robert Kiyosaki about how you just couldn’t go wrong with investment properties. He would cite how critical they were to building wealth and seeing your net worth increase. I’m so glad I didn’t listen to him and take the leap back then. If I had bought something back then, I’d still be dealing with a negative cash flow investment property and would have lost a TON of equity.
Fast forward to today and investment properties are a lot more attractive. Every time I do the math on a potential house, I find myself looking at somewhere around a $400 per month positive cash flow after factoring in the mortgage, taxes and insurance. The reality is that I haven’t seen such attractive equations in my life time.
With valuations so attractive these days, I find myself thinking about it almost daily. I think the thing that is keeping me on the sidelines is whether we’ve really found the bottom in real estate. If this isn’t the bottom, it’s got to be pretty close. The reality is that, even in a relatively prosperous area like the Northwest, house prices are much more in line with income levels. When you couple that with historic low interest rates, it’s really hard to find the downside to buying a property.
I said it’s hard to find the downside to buying an investment property, but it’s not impossible. I’ve had to really mull over whether I want to be a landlord. Is the positive cash flow worth the hassle of keeping it rented, dealing with crazy tenants and fixing things when they break? I don’t know. That’s one of the factors that’s keeping me on the sidelines so far.
What do you think? Are you considering buying a rental?
I’m a rent slave with no hope of buying any home, so I’m not considering buying anything.
And I have philosophical issues with building wealth off the backs of rent slaves.
I agree with this post and have been considering a jump into real estate investing as well. The combination of low market prices AND incredibly low financing rates if you can get the loan make this a great time (assuming you have your financial ducks in a row – out of debt, emergency fund, etc).
@RentSlave – I don’t understan your philosophical issue. You rent and therefore I would think you would be happy that people create rental opportunities. I am not discrediting your opinion, I just don’t understand it, but would like to. Can you expand on it?
@Jason, make sure to include short sales in your list of potential properties. More and more banks are starting to support short sales and the deals can be fantastic!