Pitfalls of Real Estate Investing

When you buy a home, you’re making an investment in real estate. As an investment vehicle, though, real estate is quite attractive, so you may decide to buy additional properties. You may choose to administer your properties as a landlord, and this can generate revenue and provide a good investment opportunity. But real estate investing also has hidden pitfalls, and this type of investing isn’t for everyone.  

Real Estate Investing Takes Time

The process of finding a property, negotiating a price, putting together the paperwork and closing on the property takes time. You could spend weeks, or more likely months, acquiring each of your investment properties. If you don’t have the time to devote to this venture, or you don’t enjoy the challenge of finding a good deal, negotiating a great rate and proceeding successfully to closing, then you won’t enjoy real estate as an investment vehicle.

If you plan to administer your properties as a landlord, that also requires a time investment. As a landlord, you must find tenants, keep the building clean and in good repair and administer the paperwork and occasional problems that come along with tenants. As a landlord, you might get a call in the middle of the night to fix a plumbing problem, and you can’t just ignore it and go back to sleep.

Real Estate Requires a Financial Commitment

Real estate is a good investment vehicle, but you should also be saving in tax-deductible retirement accounts to ensure your long-term financial health. If buying real estate and administering properties prevents you from saving in a retirement account, you may not be ready for real estate investment. Most properties also require out-of-pocket expenses, particularly in the early years, which can also hamper your ability to save in retirement funds. Real estate investment should be a supplement to savings and tax-deductible retirement funds; not an alternative.

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Steve SchraderBachar is a local mortgage planning expert who resides in Iowa and provides service to the clients of his mortgage planning practice across the Midwest.  You can reach Steve at 1-515-289-4381 or 515-360-5197.