It’s a legitimate question that many real estate investment professionals have questioned over the course of their careers.
Are rental properties always a good investment?
Yes.
Or, possibly no.
It’s you, not the market.
The question has much less to do with the market and much more to do with your experience, your intentions and your current financial condition.
Rookie Mistakes
One of the most common mistakes of novice investors is the tendency to follow the momentum of the market. Seeing prices on the rise, they leverage to the hilt and risk ending up with more than they can handle. Should they neglect to conduct due diligence on tenants or end up with a dud investment, they could end up panic selling at a loss when their personal cash flow can’t support the bump.
So, for the novice investor there can certainly be times when it is inadvisable to invest in rental property. In such a case, exercising caution and ensuring the numbers compute before making a commitment are the better course of action.
Smart Investors Display Savvy
Conversely, the smart investor may be in a better position to invest, even in the same marketplace.
A smart investor exhibits patience rather than allowing pressure to influence long term decisions. The properties they consider are located in the most desirable neighborhoods and they maintain a stringent tenant screening process. Their diligence extends to their finances, and they are careful to avoid over-extending their leverage.
Patience Prevents Panic
The smart investor avoids being thrown off balance by staying within a comfortable range. When the occasion arises that a tenant can’t make rent or the market turns south temporarily, they aren’t forced into panic mode. It goes without saying that it’s easier to make rational and logical decisions when panic is avoided.
The smart investor is always aware of the inherent risk of real estate. Even when making property deals with the intention of a short term flip, they won’t purchase without the knowledge that they can hold on to the property for longer should conditions make a sudden turn.
Where do you stand?
No one wants to admit to being caught up in emotion and making rookie mistakes, but it happens. You likely know a few stories of young careers taken off course by preventable judgment errors. You’ll want to take care and avoid a similar path by thinking and acting like a smart investor out there.
