Q & A: Short term rental investments worth it?
Q: I would appreciate anything that you can give (good advice that is). My husband and I are wanting to buy an older home in a very good area. The price is still a bit high, but we think it’s a great investment as a rental, and also to resell in three to five years. We have been reading tons and tons on the issue of investing in real estate and if there is something you can add please do so. By the way this home is over 20 years old and will need a new roof, possibly more. We would get an inspection first. Do older homes (fixer uppers) gain at all.
And furthermore we wanted our tenant to be resident managers for themselves so we don’t have to run to are investment for every little small detail. What’s your opinion on that as well?
Thanks.
Soon-to-be investors. J.W.
A: I don’t know what you’ve read, so don’t know if what I tell you would actually be adding anything. Chances are you’ve pretty much got the ABCs covered, though.
There is one piece of advice that I took to heart when I heard it, and have passed along to whomever would listen: you make your profit when you buy the property, not when you sell it. So if you buy smart, you’ve made your profit right away. If you buy dumb, it will take years and years to recoup your investment and turn a profit.
Older homes gain as rapidly as any other property, maybe more so in older cities. To me, though, a 20-year-old house is not old—a 60-year-old house is. You don’t say where you live, and that can be a factor. The fact is that the older homes (the ones I consider older) were built better than the newer ones.
Another rule of thumb: the condition of the property you buy depends on how long you’re going to keep it before you sell. That means, as is your case, you don’t buy a house that requires major capital expenditures if you are going to sell in less than ten years. A new roof can run upwards of $6000. Foundation work more than that. If you had to re- place outdated wiring, you’re looking at another few thousand.
As to tenants being managers: One way to avoid having to run over for every little thing is to allow the tenant to fix any- thing costing less than $25 or $50. Over and above that, you want to know about it and make sure it is done properly be- cause if it isn’t, you are the one responsible for the damage or injury to some- one that results in a botched, sloppy job. Landlording is a hands-on investment opportunity. Don’t abdicate that responsibility to anyone who doesn’t have the same stake in it as you do.
There’s lots of money to be made investing in real estate if you do it smart, and lots of money to lose quickly and easily if you don’t watch your pennies and you depend on someone else to take care of your investment.
