If you eat in a restaurant, do you think about owning & operating one? But more to my topic, if you own a home, do you consider being a landlord? You could be successful doing either of these things, right? In fact, you can probably earn enough money to quit the day-job. Well, at least 70% of those who try either one will meet relative failure. This means that only 3 out of 10 achieve relative success, relative being a word of significance. Let’s assume relative means somewhere just north of break-even.
So, 30% of the folks who become income-producing property owner/operators are relatively successful. Do you like those odds? After 48 years in banking & real estate, I have observed a few instances of more than relative success. They are rare. And, the relatively successful investor operates a break-even operation for months, maybe a couple of years, then liquidates. He resumes inexpensive and less expensive hobbies like fishing, golf or tennis. He walks away with bumps and bruises. That investor purchases a property at “less than market” but learns that the market never lies. That lesson requires more cash. On the flip side, he elects to purchase something really, really nice, paying “more than market”. He learns that sellers often lie and that lesson requires even more cash.
The budding investor needs significant cash reserves. And, he must have additional income and a very accommodating banker. Think long and hard about being a real estate investor. In addition, a relatively successful real estate investor must be a great listener. He needs to retain data easily. And, he needs unusual discipline. Also it helps to be able to do a 180 when his intellect tells him that is the only way to survive i.e. pride can never be an issue. Considering all of the aforesaid, if you really want to take a costly plunge that may reap significant reward, you have a 30% chance. Oh, it might also help to enlist the services of an honorable real estate broker who always shoots straight.