Quote:
Originally Posted by OMG!WTF!
It all depends on what you think the future value of the real estate is going to be. You may have heard that collecting monthly income is a fun way to build wealth. It is not. You must have a willingness to believe property values will rise by the time you're ready to sell. Otherwise this is not going to be worth it.
You should look at alternative cash investments as a comparison. You could buy shares in a mortgage investment corp. for example. The ones I'm familiar with have returned around 11% over the last few years. They do some shifty tax work so it's fairly efficient that way. And most importantly your money is spread over hundreds of properties, not just one. You just cash the checks. On the down side, there is no capital appreciation. Liquidity is fairly good. You can usually get out 3 or 4 times a year.
A lesser return can be had buying publicly traded REITS that typically pay about 7-8%. You can do commercial, residential, or industrial. Local or in other cities. And your shares can rise in value. They can fall too though. So you have risk. But liquidity is very high and that's important. Your shares fall to your risk tolerance and you're out.
Chances are you'll net about 4-5% return on your capital if you buy right and manage well. Your funds are tied up in one building and all the risk is in one place. Things can go very wrong owning buildings. I would not feel comfortable without 100k in the bank for emergencies.
Personally, I would never do it. Investing is about managing risk and it is impossible to manage risk owning real estate. You're at the mercy of so many different factors. And frankly there's much easier ways to make money. But if you do go ahead, get clarity on where the market is now and where it's going. If you bought in 2005 you'd be retired now. In 2008, you'd be under water to this very day.
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I have no experience owning an apartment building but I strongly endorse the above quoted message.
Want to get in the real estate market as a landlord? Own a REIT or REIT ETF. So much less risk, it takes absolutely no time out of your life, and there are absolutely no headaches.