Determining if I should buy an investment property to rent out and earn side income. For those who bought a house / condo / apartment as an investment, teach me your ways! Is it worth it?

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It is worth it but being a landlord comes with some headaches unless you’re willing to eat up some of your margin to have peace of mind.

If I had enough money on hand to buy an investment property outright, I wouldn’t, I’d probably buy muni bonds, but because I can’t access the kind of income I’d like in the bond world with the level of cash I have, leverage is the primary reason one buys an investment property. It’s key to find the right loan. I like portfolio loans, they’re more flexible and usually have better terms than your standard agency-conforming products, but they’re also generally harder to find. Look for the largest local credit union in the area you wanna buy and try to hunt down a 85-90% LTV with a balloon, or ARM feature and now we’re talking.

Some people like buying “fixer uppers”, that’s cool, but I prefer turn-key properties because I have less work upfront and the tenants don’t call me as much. I’ve done one of each in my short career as an investor, and I’d rather buy a place that requires little to no work upfront and pay a premium for it. Over the long term you more than earn back your equity. Although, most residential properties are depreciated on a straight line basis, which is good if you lock in a nice cap rate, but sometimes accelerated component depreciation of new items/remodels can be worth it if you’re selling the property by the time you reach your balloon term.

Regarding the first point, unless you plan on being Johnny on the spot with all repairs, move in issues, unseen costs, etc (and there always are), then hire a property manager (they usually take like 10% trailing fee on monthly income generated). It’s worth it for peace of mind but you’ll end up getting like a 3% cap rate which sucks... so do your math.

Hope that’s helpful

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^absolutely never rent to friends, friends of friends, family, etc etc etc. unless you wanna deal with people hitting you up for rent discounts for the rest of your life

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Buy in an area you’re familiar with and try to only rent to friends of friends or friends of family. And go back in time and buy in 2009

BAML 1 REs

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