If you’ve eaten in a restaurant, you have thought about owning & operating one, right? More to my topic, if you’ve owned a home, you have considered being a landlord, reaping all of its’ rewards? You assume that you could be successful doing either of these things. In fact, you could probably earn enough money to quit the day-job and operate the restaurant or the multi-family apartment complex on a permanent basis. Well, at least 80% of those that try either one will meet relative failure. I am going to call them backstrokers. This means that only 2 out of 10 achieve relative success, relative being a word of significance. Let’s assume relative means somewhere just north of break-even.
So, 10% of the folks who become income-producing property owner/operators are more than relatively successful. Let’s say they are butterflyers, a powerful yet elegant stroke. Do you like those odds? After 46 years in banking & real estate, I have observed a few instances of more than relative success and a few instances of complete failure. The relatively successful investor does a little dog-paddling for months, maybe a couple of years, liquidates and resumes inexpensive and less frustrating hobbies like shooting your age when you are 70, 80 or even 90, God willing. He/she walks away with bumps and bruises. That investor may have purchased a property at “less than market” but learned that the market never lies and that lesson required more cash. On the flip side, he may have elected to purchase something really, really nice, paying “more than market” but learned that sellers often lie and that lesson required even more cash. Alas, he is but a mere dog-paddler.
Unless the budding investor has very significant cash reserves and a very accommodating banker, he should think more than twice about being a real estate investor. In addition, a relatively successful real estate investor must be a great listener who retains data easily, have an exit plan or three and must also exhibit unusual discipline, yet, be able 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, jump in and let’s see how well you swim. Oh, it might also help to enlist the services of an honorable real estate broker who always shoots straight…lol