Being a housing provider always has it's little annoyances. Some of them are bigger than others. But if you want to get involved in rental housing, there are some things that you'll have to face on your journey to building your own real estate portfolio. Many people get into this business and think that all it involves is signing a generic lease and collecting the rent. If you're hiring management, it can be like that, however, most people self manage due to the expense of management. If you're going to self-manage, then owning an income property is more complicated than "set it up and forget it!" An income property is a housing business. We say it all the time here at RHAWA, "Rental housing is a business; treat it like a business." Once you've changed your perspective, things become much easier. But there are some pitfalls to watch out for and RHAWA has done it's best to try and solve them for you!
If you have been thinking about getting into a larger investment within rental housing, buying yet more houses might seem a bit unwieldy. It can be difficult to make repairs and keep up with tenants when your investments are all over town! However, the multi-family building has the advantage of having multiple units in one spot. When most people think of apartment buildings, they might think of massive buildings that cost millions of dollars, but that's not always the case. Small buildings starting as small as a duplexes or triplexes and going up to 4-10 units can be well within someone's price range. Many of these buildings are coming up for sale as older owners look to exit the business. This means there is tremendous market opportunity and these buildings usually have tenants already in place and they are already generating income. This can make getting financing or finding a partner much easier than buying an empty house.
Real Estate Investment takes many forms. It's been a popular way to gain income for awhile. Online websites like BiggerPockets, Landlordology, and popular YouTube videos have reasonable sounding people standing on camera talking about how they built their real estate "empire" and ended the 9-5 grind. The reality, as any RHAWA member will tell you, is quite a bit different. However, if you're looking at real estate investing, it is definitely a journey. Let's talk about that rental housing journey.
Cameron Cowan | Knowledge Steward
Many people see the marketing opportunity in rental housing. This is especially true in our Greater Seattle area and throughout the Puget Sound region. However, sometimes wonder if they have the background or experience to get into rental housing. One of the nice things about rental housing is that if you choose to buy a property and hire a management company, there's not much for you to do. If you are planning on keeping your portfolio small, then there is an area of knowledge that isn't required either. However, most of RHAWA's 5,800 members self-manage their properties. If you are going to self-manage your rental housing business then there are a few things that you will want to learn and if your real estate investment portfolio is expanding, then there are certain skills that you will want to acquire. Let's go over some of those.
In a hot rental market, it can be easy to buy a property that is increasing in value rather than a property that can generate positive cash flow. The temptation to simply flip a property for a lump payment in the future or near future can be too tempting for some. However, this strategy has some pretty nasty downsides. Let's dive into the differences between appreciation investing and cash flow investing.
When people get into the rental housing industry and buy their first income property, they often buy a distressed house and fix it up, even if it is a personal home that they are turning into a rental. However, this solution can be expensive if the new housing provider can't do much work on their own. A more expensive, albeit easier, option is to buy a rental property that has been fixed up. The so-called "turnkey" rental property is an attractive option for investors who like a more hands-off approach to their rental property and don't want to put in time to fix up the property and make improvements. On the surface, this can seem like an ideal solution for an investor who is ready to jump into the industry.
The rental housing industry can be very profitable and a pathway to greater wealth. However, this industry is not for everyone. Many people get into the rental business and think it’s as easy as signing a lease, handing over the keys, and then sitting back and collecting the rent.
It’s always exciting to be able to invest in the next big neighborhood. Gentrification around city centers usually goes in a pattern that starts with artists and others who need cheap housing that no one else wants. Then their friends and others interested in vibrant culture start to move into the area, particularly if there are older houses that surround the area. Then recent college grads with entry level jobs move into the area. Soon, those recent college grads become professionals bringing in more professionals into the area, particularly if there are single family houses for sale. Now the neighborhood has fairly well gone mainstream. While this process is well understood, another factor that many metropolitan areas, like Seattle, have within their expanding cities is the LGBTAQ+ community.
Cameron Cowan | Knowledge Steward
There are some really great and interesting ways to build your real estate portfolio and in this blog post we're going to talk about two of them. These aren't always easy but it can help people at different economic levels enter the real estate market and start building wealth. Both of these options are really popular for younger people, including our younger members. They make getting into rental housing more affordable and they both provide the foundation for a great rental housing business.