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Being a Landlord Sucks-Why You Shouldn’t Invest in Real Estate

By in Debt, Make Money, Real Estate | 29 comments

Should I Invest in Rental Real Estate?

With interest rates still very low, you may be considering investing in real estate. It’s all quite glamorous when you read the “no money down” success stories. There are more than enough real estate gurus out there to show you the way.

But before you buy, I’m going to share with you reasons why you might not want to invest in real estate, now, or ever. In fact, I gave up owning rental property decades ago because being a landlord sucks.

Find out why being a landlord sucks & 27 steps to buying rental real estate

So, let’s imagine that you’re seeking that glamorous lifestyle of the rental real estate owner. You think you’ll have a host of properties and the rent checks will simply roll in.

Bonus; Are You Cut Out to Buy a Fixer-Upper?>>>

My Real Estate Back Story

I was raised in the real estate world. My dad started a company the year I was born where he purchased cheap run down homes, renovated them, and resold the newly remodeled homes.

As a child, Sunday’s were spent driving around the city looking for property to buy. In elementary school, my mom got in the business and became an awesome agent. In today’s vernacular, dad was a real estate flipper. I saw him work his tail off, go to sheriff sales to buy foreclosures, and deal with multitudes of bad tenants. When I got older I spent a few years in the business, delivering eviction notices, bidding on property at sheriff sales and buying and selling real estate for my own account and others. I had my share of “bad tenants” who didn’t pay their rent!

Later, I worked as an investment portfolio manager for a real estate holding company. There I managed the stocks, bonds and other investments and left the real estate management to someone else!

Owning Rental Real Estate Is Not a Get Rich Quick Scheme

Certainly, it’s possible to make money as a landlord, and some people thrive in this business. With interest rates lower than they’ve been in years, now might be a good time to invest in real estate if you are financially, temporally, and emotionally able to handle it. Buying and managing real estate is a lot of work and requires deep pockets. Yet, real estate investing can be a way to boost your net worth, slowly, in spite of the stressors of being a landlord.

Additionally, you might get lucky and get the perfect tenant who’s neat and tidy and pays her rent on time. And that tenant might stay forever and never balk at a rent increase. But, don’t count on it-because you’re more likely to have a string of tenants moving in and out.

Here’s what they don’t tell you in “invest in real estate” courses, books, blogs and seminars. Read this overview of what owning and managing rental real estate is really like and why I think being a landlord sucks.

26 Steps to Buying and Managing Rental Real Estate 

  1. Search through many real estate listings and visit potential properties.
  2. Meticulously analyze the potential income and expenses of each property, making sure to allow plenty of cash for unexpected repairs and vacancies.
  3. Complete reams of paperwork when applying for a loan.
  4. Analyze records of the current owner before purchase. Have the judgment and experience to recognize whether the owner’s records are accurate or not. Call utility companies and verify utility costs. Check with the assessor for tax rates.
  5. Make an offer on a prospective property and negotiate until either your offer is accepted or rejected.
  6. If you can’t come to an agreement on price and terms, move on and start the process over.
  7. After the initial offer is accepted, follow up on all property inspections to make sure the real estate is in the expected condition.
  8. If repairs are needed, negotiate with the seller about completing the repairs, or reducing the purchase price.
  9. If all goes as planned, sit through an hour settlement, sign all the papers for the mortgage and the purchase and get the keys to your real estate.
  10. Clean, repair and remodel the property so it’s ready to be occupied.
  11. Create lease agreements, arrange for service to check credit ratings of potential tenants, and set up a bookkeeping system for the property.
  12. Advertise the property for rent.
  13. Vet potential tenants on the phone.
  14. Meet with the tenants to show the property.
  15. Review the prospective tenant’s rental application, credit report, and phone the their references.
  16. Waste a lot of time with potential tenants who don’t show up or are not financially stable.
  17. Select a tenant for the rental.
  18. Meet with the tenant to sign the lease, receive the deposit and rent payment. Walk through the unit with the tenant and note the condition of the property. Make sure to record existing flaws in the home. This is important at move out so that you can decide whether the property is in proper condition for the renter to receive their security deposit.
  19.  Field phone calls at inopportune times when there is a problem, a clogged drain, a broken window, a broken stove, etc.
  20. Arrange with a repair person to make the needed fixes and pay the bill or make the repairs yourself.
  21. Call the tenant when the rent is late.
  22. Evict the tenant when they fall months behind in the rent.
  23. Go to court to handle the eviction or hire an attorney.
  24. When the tenant moves out and leaves the property a mess, you need to go through the entire process again.
  25. Pay the monthly bills and maintain the financial records.
  26. If you hire a property manager it’s not always much better. Then you have to pay the property manager and oversee him/her to ensure they are doing a good job. You also have to comb through their records to verify accuracy.
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Why I’m Not a Landlord

If you’re considering rental real estate ownership, go in with your eyes open. Make sure you have some cash for a down payment, spare time to invest in this project, and the endurance to oversee the ongoing management of the rental real estate.

If you have the endurance and enthusiasm, then try out becoming a landlord. Be aware that you’ll end up dealing with a variety of people-good and bad. And you’ll need more cash than you imagined for unexpected expenses and to cover the bills when the property is vacant.

At one point, I thought being a landlord was fun exciting. But that excitement gave way to exhaustion and annoyance at being a landlord.

Eventually, I realized that I can still invest in real estate, enjoy the cash flow and capital appreciation without being a landlord. Read about other ways to invest in real estate in part 2.

Click here for Part 2 – Quick and Easy Ways to Invest in Real Estate

 Have you ever considered investing in real estate? What are your real estate thoughts and experiences?

A version of this article was previously published.

    29 Comments

  1. After the crash a couple of years ago, I was really excited about the prospects of picking up a rental property. Unfortunately, the prices are still too high in my area compared to rent. I’m not interested in eating the negative cash flow for a couple of years. If the prices drop some more, it will make a lot more sense.

    Bret @ Hope to Prosper

    June 10, 2012

  2. Great tips! Now is a great time to buy homes and rent them out. With home values and interest rates at historical lows, why not. Renting out property is not as scary as you think, but it is front end loaded. Screen the tenant as though they were going to live with you and you will be fine.

    krantcents

    June 10, 2012

  3. I really think buying real estate now is excellent if you can stick with it for 5+++ years. The rental yields are fantastic, and borrowing costs are low.

    It is UNBELIEVABLE thanks to Bernanke and the power of rental inflation how positive things have turned out for landlords 10 years later.

    Slow and steady indeed.

    Financial Samurai

    June 11, 2012

  4. @Krantc-I like the tip to screen the tenant as though they were going to live with you. Great advice!
    @Brent-I’m glad you brought up the idea of negative cashflow. It is important to realize that even with a large down payment, unless the purchase price and rents are right, you may need to put in some cash.
    @Financial-Obviously with such amazing low interest rates, dropping prices and steady rents, if you have the time and temperament, it is a great environment to invest in real estate.

    Barb

    June 11, 2012

  5. I love your points. People who think real estate is a quick way to riches need to read those. Maybe read them aloud! It’s a tough walk.

    AverageJoe

    June 11, 2012

  6. Great post on the reality of RE investing Barb. I just re-tweeted it. I’d love to post it on my blog with your permission and attribution, of course. Just Call 408-252-8900. Thanks.

    Michelle Carr Crowe

    June 11, 2012

  7. @Average-Sounds like you’ve had a walk on the rental real estate road. Lots of folks talk about the great buys and low interest rates. Don’t forget about the months between tenants where you have to pay the loan payment.
    @ Michelle, Great to see you here. Of course, I’ll be in touch.

    Barb

    June 11, 2012

  8. Do you find a difference in buying & renting homes suitable for lower wage earners vs. “middle class” earners? I’d add avoid section 8 to keep your sanity.

    Brent Pittman

    June 12, 2012

  9. Thanks for such a thorough post Barb. I have wanted to invest in real estate for a while now but we aren’t quite there financially yet. I will definitely rereference this article as we get close though,.

  10. @Commercial-Good neighborhoods command a premium. If you could get a bargain there, you’re lucky.
    @Brent-We’ve had some huge properties (hundreds of units) and section 8 in our company. You probably need a staff to handle section 8 properties.
    @Miss T-A nice alternative for a high yield is to check out peer to peer lending. Small investment and big returns. I’ve been investing at Prosper since October. (Check out link on sidebar)

    Barb

    June 12, 2012

  11. I am about to say something that will either sound cheesy or you will think that I am sucking up to you. I just copied and saved the points you make. When I am in position to buy rental properties the list comes out and I’ll be on the roll.

    Simply put: thanks.

    maria@moneyprinciple

    June 12, 2012

  12. @Marie, To the contrary, I am honored that you feel the information is that useful. Thank you.

    Barb

    June 12, 2012

  13. I did consider investing in real estate with my parents and even wrote a three post series about it. Ultimately we decided it wasn’t a good time for us but I see how it has the potential over a longer period of time to pay off. Lots of work for “passive” income though.

    Lance@MoneyLife&More

    June 12, 2012

  14. @Lance, It totally goes in waves. You can have months with no work and then boom… full time workload. Don’t underestimate the time and capital required.

    Barb

    June 13, 2012

  15. Good list.

    At some point probably around step 10.5 a landlord also ought to familiarize themselves with the local, state and national laws related to landlord and tenant dealings.

    jim

    June 13, 2012

  16. Jim, An often overlooked task is knowing real estate regulations. Thanks for bringing it up!!!

    Barb

    June 13, 2012

  17. Investing in anything, even real estate, should be taken with research and serious thought. Buying a house or a rental property is the biggest investment you can ever make in your life.

    Effective Thirroul Real Estate

    September 14, 2013

  18. Great tips! Before investing in real estate, arm yourself with money and passion. Both go hand in hand.

    One Agency Sorell

    April 18, 2015

    • You better be prepared for some upsets, so that passion comes in handy!

      Barbara Friedberg

      April 18, 2015

  19. Hahahahaha!

    I hear you, real estate is not for everyone.

    On the plus side, RE was the main reason I retired at 52. It’s managed by a company for me, so I have very few hassles with it (I actually live over 1,000 miles away from my properties.)

    ESI Money

    February 24, 2017

    • Perfect response! Because it illustrates that no one method of wealth building is appropriate for all!!! Great to hear from you!

      Barbara Friedberg

      February 24, 2017

  20. I think your upbringing soured you against being a landlord. Not uncommon. It’s not for everyone. The key to less stress is to have a management company.

    BTW – the 2 popups that greeted me while I was trying to read your article nearly made me leave your site for good.

    Lynn Dye

    March 17, 2017

    • Hi Lynn, Thanks for writing in. I’ve tried using management companies twice and found managing the management companies time consuming as well. Yet, I get that investing in real estate can lead to wealth, and I haven’t ruled it out forever…..

      Barbara Friedberg

      March 18, 2017

  21. Nice list of what to consider when investing in rentals. It is definitely not a get rich quick strategy like you see on TV. If you treat it like a business, buy and hold for cash flow and take care of your tenants, you can retire quicker than traditional routes (401k, Ira, extreme frugality).

    It also helps to buy nice properties in nice neighborhoods to attract nice tenants.

    Mr ten

    March 18, 2017

  22. Mr. ten, I can’t disagree with you. For those trying to build wealth, there’s more than one route. Especially if you live in a lower cost of living area, real estate can be a viable way to wealth. Like any endeavor, it’s crucial to understand what you’re getting into – in advance. Also, it’s key to have enough discretionary capital to pay for emergency repairs and to cover sudden tenant move-outs.

    Barbara Friedberg

    March 19, 2017

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