Buying Investment PropertyBack in the early nineties I was looking for a little extra income. If all went like the real estate investment gurus said I could be swimming in cash in no time. I bought a cheap little old house and advertised it for rental. Over about the next three years I learned a lot about making money from rental property. The payment for the house, excluding taxes, insurance and upkeep was only about $140 and we advertised it for $250 per month. This looked like a profitable venture but as months with no rent pile up profits can dwindle. After three different occupants and one family that decided not to pay for a while, we sold the house for a little less than we originally paid for it. The only thing this venture was good for was an education and a loss on our taxes. The question now is: Is rental property a good investment at all? In my opinion the answer is that for some it can be but you must be careful and not expect overnight riches. If you finance rental property it is a risky investment. The bank will expect payments even when you don’t have renters or the renters are not paying you. The more you leverage yourself into a property the higher the risk. Many of the gurus teach you to leverage yourself in with no money down or even to borrow more than the value of the property and pocket the extra. This is the highest risk that you can take on; do not buy investment property this way. If you can pay for a rental property in full it is the best way to buy. With paid for property a gap in rental income will not hurt you as bad. Even if you have the money saved to pay for a rental property in full, ownership can have its hassles. You will have to deal with late payments, no payments, damage to the property, taxes, rental property insurance, regular maintenance etc. Rental properties are not the easy street that some portray, you will have to work hard. Buying investment property, real estate in general, can be a good investment if paid off in full and with the understanding that you will have to work. Put some good hard thought into it before you jump into the rental property market. One final thought; never buy investment property while you still have bad debts and it may be wise to sell any rental property you have if you are deep in debt. You can always buy again once you are debt free.
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