Why Real Estate Investment Makes Sense: My Journey and Lessons Learned
Investing in real estate is a time-tested way to build wealth, and for me, it’s been both a rewarding and enjoyable journey. While real estate isn’t my only investment, it’s a key part of my portfolio because it consistently delivers solid returns. With everything factored in—equity growth, tax benefits, and rental income—I’m seeing annual returns between 15-25% on my properties. Here’s a deeper dive into why I chose real estate, the lessons I’ve learned, and what you should consider if you’re thinking about getting started.
Why Real Estate?
For me, it’s simple: the numbers work. Real estate offers a strong return when managed well, and I enjoy the process of finding, improving, and managing properties. It’s also inflation-proof—rents tend to rise with inflation while mortgage payments stay fixed. And let’s not forget the tax benefits like depreciation, which can significantly offset taxable income.
But real estate is also a long-term game. It’s not just about cash flow today; it’s about building equity and watching your portfolio grow over time. That’s what makes it exciting for me.
The Challenges (and How to Handle Them)
Real estate isn’t without its challenges. I once had a tenant who became unresponsive and left the house in a mess, costing me months of downtime and repair expenses. While extreme cases like this are rare, they’re a reminder that investing in real estate requires resilience and preparation.
The key to overcoming these situations? Have a good property manager who can handle the day-to-day operations and keep an eye on potential issues before they snowball. And always budget for the unexpected—things like tenant transitions, make-ready costs, and vacancies need to be baked into your calculations.
My Best Investment Decision
One of my favorite properties is a 4-bedroom townhouse I bought a few years ago. I like townhouses because they’re typically less expensive than single-family homes, face less competition at the time of purchase, and come with lower maintenance costs.
That said, there’s usually an HOA involved, which can be a downside. Still, this particular property has been a standout in my portfolio. It’s financed at a low 4% interest rate, and the cash flow has been excellent—over $1,000 per month. This is a perfect example of how lower mortgage rates can unlock incredible cash flow potential, especially when rates drop in the future.
Tips for Managing Costs
A successful investment property isn’t just about finding the right deal—it’s about managing it effectively over time. Here are a few things I’ve learned:
Be Proactive with Maintenance: During make-ready periods, invest in preventative maintenance like installing gutters to avoid bigger issues down the road.
Hire a Good Property Manager: A reliable property manager ensures your property is cared for and keeps tenants happy, which reduces turnover and vacancy costs.
Treat Tenants with Respect: Happy tenants stay longer, which means fewer costs for you in the long run. Respond quickly to their concerns, and treat them like partners in maintaining the property.
Advice for New Investors
If you’re new to real estate, my biggest advice is to plan carefully and think long-term.
Account for All Costs: Go beyond operational expenses and factor in things like make-ready costs, vacancies, and major repairs. Ensure you can financially handle the property being empty for several months.
Understand the Risks: Real estate isn’t risk-free, and things can happen that are out of your control. Have a buffer in your budget and patience for the long game.
Find a Trusted Guide: Whether it’s a mentor, agent, or consultant, work with someone you trust to guide you, especially for your first few deals.
Real Estate: A Long-Term Play
Real estate investment isn’t about getting rich quickly; it’s about building wealth steadily over time. If you’re willing to put in the effort, stay patient, and plan wisely, the rewards can be incredible—both financially and personally.
If you’re ready to explore your options or just want to chat about getting started, let’s connect. I’d love to share more about my journey and help you take your first steps.