Is Real Estate Investing Worth It? Maybe

December 18, 2018

is real estate investing worth it

Investing in real estate is not easy, though many people seem to think it is. It involves significant financial investment, an acute understanding of the real estate market, and how people buy homes and properties. People lose their investments and go bankrupt with real estate business opportunities every day. Is real estate investing worth it? It depends. You’ll need to make sure you’re aware of some things before jumping in.

Flipping Homes Is For Pros

Are you going to buy, fix up, and sell home properties? As in flipping homes? It looks easy on TV, but in reality, it is a sanity testing and work exhaustive endeavor. Home-flipping requires significant financial risk, work, and time sacrifice. You might have to pay $25,000 to $75,000 just for repairs and aesthetic rehabilitation. Those are conservative estimates. Never mind the costs of paperwork, fees, insurance, and taxes.

You will be responsible for assuming ownership of the property. If you don’t have licensed and/or certifiable carpentry, repair, and/or electrician skills, then you may cause more damage than you repair. Hiring people to do the job requires more financial expense. This, in turn, makes profiting even more cost-prohibitive relative to initial investment costs.

The cost of an average home is about $200,000. If you are house flipping because you saw a TV show, don’t understand the market and don’t have potential buyers, then you have no guarantee that you will make a profit. Or break even. The sales of new homes are down to a three-year low. You really need to know what you are doing. Otherwise, the only, “flip,” you may experience is watching your initial investment money turn into a deficit.

Multi-Unit Rental Properties

If you have the investment capital, may want to invest in multi-unit rental properties. A single-family property is like a home in house flipping opportunities. It has to have some value and be attractive to buyers for you to profit. That is hard to do in this home buyer’s market. Especially if you are new at it.

A multi-unit rental property is an apartment complex. It could be a small building with a few apartments or large complexes with dozens or scores of apartments. A conservative estimate for a small multi-unit rental property could be $150,000. You could easily pay millions for larger multi-unit properties.

You can’t just invest and then passively earn. To understand your investment, you may want to live in one of the units for a time. Don’t expect to fully rent out all units. Even if you do, don’t expect tenants to pay on time. You may be lucky if 50% pay in full and on time. Can you evict a tenant if necessary? You will be responsible for paying staff, enacting repairs, and keeping up maintenance.

There are just too many variables and considerations to prepare for to list in this short article. How much you can make depends on overhead, maintenance, tenant payment reliability, taxes, the housing market, and many other variables. You might consistently find yourself breaking even and never profiting.

Get Advice From Professionals

You may want to dip your toes in the real estate business by selling properties or renting a multi-unit property. Whether or not investing in real estate is worth it to you will depend on a wide variety of circumstances. Just appreciate the financial risk and intensive work involved. Get an advisor, talk to professionals who have been through it, be prepared for a headache or two. Remember that the road to success is often paved with life lessons and mistakes.

Lastly, you have good options.  For example, you could put your investing money into the stock or bond markets. There are also lots of great alternative investments out there, such as cryptocurrency, comic books, or gold and silver.

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