Some of you know we bought a short term rental property last year down in Florida. They say invest in what you know, and I LOVE houses and know real estate better than the stock market. I have an IRA that is invested heavily in stocks (since I’m only 39 we have time to ride the waves of the market) but I wanted investments I could access cash from sooner than the traditional retirement age.
I read lots of books (I mentioned many in this blog post) and listened to at least a hundred real estate investing Podcasts) and decided like with all my other career adventures I had to put skin in the game. The best learning is on the job training in my opinion. As a nurse and blogger this was absolutely true and I as I transition into a real estate investor I expect the same.
I am not a financial expert so please read this as my personal options and not investment advice. Any investment is a risk you take for potential future gains. Market crashes both in stocks and real estate are a real and unpredictable thing. There are lots of ways to lose money in real estate – I HAVE DONE THEM, so do your research.
I wanted to highlight what I feel are the main pros and cons to real estate investing.
The Cons of Real Estate Investing
I would say the biggest con of real estate investing is the hassle factor. Even with a property manager you may be managing the manager depending on the set up. Bad tenants, expensive repairs, a lot can come up.
It’s also much harder to liquidate an asset like real estate in comparison to stocks. Perhaps that’s not a bad thing if you are prone to letting your emotions control your investments. A buy and hold strategy is popular for a reason.
The Pros of Real Estate Investing
In additional to cash flow (what the property takes in as income above expenses and reserves for future repairs and events) I like that real estate in general appreciates (more in certain parts of the country than others), there is mortgage pay down by tenants if you take out a loan, and there are great tax benefits for real estate investors.
We decided we love real estate enough that we wanted to change our geographic location. While Connecticut is lovely we see more opportunities for what we want to do down in Florida. My husband got his real estate license to save us money on our own transactions and also help others in our new area acquire and/or sell properties.
If you aren’t familiar with the tax benefits of real estate investing this book: The Book on Advanced Tax Strategies: Cracking the Code for Savvy Real Estate Investors is short enough that it’s easy enough to get through pretty dry material. It’s the second book in a two part series but the first was basic enough that I already knew the information from prior education. I listen to a lot of audio books but that’s one I’d recommend getting the hardcopy of because we reference it fairly regularly.
Where to Invest
That is up to you!! Invest in a market you know. I studied the Florida market for close to a year before we purchased but I don’t think you need that much time, especially if you are investing locally. I absolutely LOVE the area we are moving to so I can enthusiastically recommend it to others. Do you have such a place of your own?
Some markets, like San Fran, price out a lot of investors but you can get creative in most areas if you are determined! Figure out a way to add a bedroom or buy a large lot and sell off a portion of the land…these are just some ideas for how to get creative.
A couple weeks back I talked about how I have custodial Roth IRA’s for my kids. If you’re interested I can recap that on the blog and talk about other investments my husband and I have. Let me know in the comments below!