Landlord Life Is Not Fun
Issue 45 - August 13th, 2021
Direct real estate investing isn’t for everyone. The idea of owning rental homes and cashing checks every month sounds dreamy. All you have to do is buy a home, find some tenants, and the money starts rolling in building that passive income so one day you can live on the beach!
This is far from reality, and I think owning rental properties directly is not meant for everyone when you can find yield through other real estate related investments. The reason rental property ownership has become so popular over the years is this idea of “passive income” being glamorized in social media and on the internet. People reap huge fortunes being landlords or from flipping homes! People think to themselves, “this is easy! I can do this on the weekends!”
The stark reality is that owning real estate is hard work and not for the faint of heart. There is a lot of risk involved in the process and a lot of work to be successful in owning property.
There are other ways to benefit from real estate investing without getting your hands dirty yourself.
Everything expressed in this post is purely my own opinion, and I have seen first hand the troubles and also the successes of owning rental properties. I have even owned some myself early on in my career, and I learned that I would never want to own a portfolio of single family rentals for a number of reasons. I can find the yield I desire by investing in publicly traded REITs or by finding other yield avenues (and tax advantages) in private real estate investment funds. There are also cool products popping up today like Roofstock and Doorvest which give the everyday investor access to this rental property asset class without all the headache of being a landlord.
In addition to these ideas, there are publicly traded REITs for any type of real estate asset class exposure you believe in long term. For example, if you love “industrial real estate” then check out STAG; if you love “single tenant commercial properties” then check out O; if you love “apartments” then check out Sam Zell & Equity Lifestyle’s family of REITs; if you love “cell phone towers” then check out AMT or CCI; and I think you get the picture, but do your research on REITs as you may be surprised at all of the options.
Passive income is the dream, but I urge you to explore the various ways to get your mailbox money before you rush out and start snapping up rental homes.
Newsworthy Links To Share
The average sales price of new homes sold in the US was $389,400 in 2020—the highest it’s ever been. (Cool chart here)
After shooting to the moon for nearly a year and spiking to all time highs, lumber prices have finally fallen back to earth. Last week, lumber sold for $472 per thousand board feet, down from $1,515 in late May. This pricing is in line with where the market was in 2018.
Rocket Homes which is affiliated with the famous Rocket Mortgage company is hiring their own real estate agents and also launching an iBuyer program in all 50 states. (Inman)
Compass trims losses dramatically in their latest earnings and reports best financial news since going public. Agent counts are climbing too as they continue to launch new markets. (Inman)
Engel & Völkers brokerage sells majority stake of their company to private equity firm Permira. (Inman)
With unprecedented demand and constrained supply, house prices are rising across the U.S. Consequently, the iBuyers -- led by Opendoor, Zillow, and Offerpad -- are paying record-high, above market values for the homes they’re purchasing from homeowners. But they're also reselling them for more money than ever before. Read more here—>(Mike DelPrete Blog)
Sequoia leads $13M investment in Aalto, an online marketplace that lets homeowners sell directly to buyers. (TechCrunch)
Agora, a startup that has built a materials management platform for contractors, has raised $33 million in a Series B round of funding led by Tiger Global Management.( TechCrunch)