{"id":4209,"date":"2022-11-07T05:43:09","date_gmt":"2022-11-07T05:43:09","guid":{"rendered":"https:\/\/imsfund.com\/?p=4209"},"modified":"2022-11-07T05:43:09","modified_gmt":"2022-11-07T05:43:09","slug":"owning-your-own-properties-is-overrated","status":"publish","type":"post","link":"https:\/\/imsfund.com\/index.php\/2022\/11\/07\/owning-your-own-properties-is-overrated\/","title":{"rendered":"Owning Your Own Properties Is Overrated"},"content":{"rendered":"<p> <br \/>\n<\/p>\n<div :class=\"{ 'hidden': $store.proContent.showFullPrompt() }\">\n<section class=\"px-4 relative border border-slate-200 mobile-toc lg:hidden\" x-data=\"{open:false}\"><button class=\"flex items-center gap-4 my-2 border-none w-full\"><br \/>\n<svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"h-6 w-6\" fill=\"none\" viewbox=\"0 0 24 24\" stroke=\"currentColor\" stroke-width=\"2\"><path stroke-linecap=\"round\" stroke-linejoin=\"round\" d=\"M4 8h16M4 16h16\"\/><\/svg><\/p>\n<h2 class=\"font-semibold text-slate-800 text-base m-0 js-toc-ignore\">In this article<\/h2>\n<p><\/button><\/p>\n<\/section>\n<p><span data-preserver-spaces=\"true\">By now, you\u2019ve heard about how real estate is a great way to build wealth. I don\u2019t disagree with that. However, before getting started, you should also consider the downsides of owning real estate and the opportunity costs. For most real estate investors, it\u2019s better to be a limited partner or take on roles that don\u2019t involve much of the day-to-day operations, which I\u2019ll discuss in more detail.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Here are some of the downsides of owning your own real estate.<\/span><\/p>\n<h2><span data-preserver-spaces=\"true\">Downsides of Owning Real Estate<\/span><\/h2>\n<h3><span data-preserver-spaces=\"true\">Being a landlord<\/span><\/h3>\n<p><span data-preserver-spaces=\"true\">As you already know, being a landlord and doing your own property management is very tough. For one, you\u2019re responsible for the property and everything that goes on. This includes finding and screening tenants, maintaining the property, and dealing with any issues that may arise.\u00a0<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Additionally, you\u2019re also responsible for collecting rent and ensuring that your tenants are paying on time. If they\u2019re consecutively late, you may have to pursue legal action to get the money you\u2019re owed.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Furthermore, being a landlord also means that you\u2019re responsible for any damages that may occur to the property. This can be a financial burden, as you may have to pay for repairs out of your own pocket.\u00a0<\/span><\/p>\n<h3><span data-preserver-spaces=\"true\">Being the asset manager<\/span><\/h3>\n<p><span data-preserver-spaces=\"true\">Let\u2019s say you eliminated these responsibilities by hiring a property manager. This seems like a good idea, but it\u2019s tough to find a great property manager (PM), even for a large apartment building (however, you can find one through BiggerPockets\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/real-estate-companies\/property-management\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">here<\/span><\/a><span data-preserver-spaces=\"true\">).<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Even with a PM, you ultimately still have to be the asset manager, which has multiple functionalities, including managing the PM and making sure that they\u2019re doing their job.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Here are some responsibilities as an asset manager:<\/span><\/p>\n<ul>\n<li><span data-preserver-spaces=\"true\">Making sure that the property remains in good condition.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Controlling your operating expenses.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Making sure the rooms are rented at market rate. This sounds simple, but it\u2019s much easier for your PM to rent out the units at 5-10% below market rate, so that\u2019s what they\u2019ll usually do.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Making sure your PM is not stealing your money, which can happen through leases or by marking up maintenance requests.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Monitoring the\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.investopedia.com\/terms\/p\/proforma.asp\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">pro forma<\/span><\/a><span data-preserver-spaces=\"true\">, including rent growth, vacancy rate, concessions, etc.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Preparing the asset for sale.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Dealing with loans and accounting.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Be prepared to take over PM responsibilities at any moment.<\/span><\/li>\n<\/ul>\n<p><span data-preserver-spaces=\"true\">Basically, even if you hire a property manager, your investment is still not considered\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/passive-income-from-real-estate\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">passive income<\/span><\/a><span data-preserver-spaces=\"true\">. There are still many tasks to take care of and plenty of issues to deal with, so don\u2019t assume that your real estate investments will be passive income and you can do it on the side. Some can actually become huge headaches.\u00a0<\/span><\/p>\n<h3><span data-preserver-spaces=\"true\">Starting small<\/span><\/h3>\n<p><span data-preserver-spaces=\"true\">Another common misconception that beginning real estate investors have is that \u201cit\u2019s better to start small.\u201d The risks are actually higher when owning smaller properties because having a few bad tenants can really hurt your business. Whereas in a 100-unit apartment complex, two or three bad tenants are only a small portion of the overall building.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Additionally, bigger projects can afford you to hire full-time staff, which will make your job much easier.\u00a0<\/span><\/p>\n<h3><span data-preserver-spaces=\"true\">House hacking<\/span><\/h3>\n<p><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/real-estate-investing\/house-hacking-strategy\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">House hacking<\/span><\/a><span data-preserver-spaces=\"true\">\u00a0is a popular strategy nowadays. Buying a duplex or triplex and renting out the other units to get a healthy cash flow, refinance this property, then repeat, is a great way to build financial wealth step by step, but there are some major downfalls.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">The first downfall is that this will only work in a secondary or tertiary market. It\u2019s almost impossible to cash flow well in a gateway market like New York, Los Angeles, or Seattle. If your rental revenue can cover the debt service, you\u2019re doing well already.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">The second downfall is your living quality is limited. Depending on the circumstances, you might be living with strangers inside your own unit, which can be bad if they turn out to be terrible roommates. Obviously, if your screening methods aren\u2019t sound, you could be stuck in a bad situation for a long time.<\/span><\/p>\n<h2><span data-preserver-spaces=\"true\">Smarter Ways To Build Wealth<\/span><\/h2>\n<p><span data-preserver-spaces=\"true\">Although what I\u2019ve been saying seems discouraging, I\u2019m not proclaiming that owning your own property is entirely a terrible idea.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">What I want to emphasize is the opportunity cost of your money and time. We all have limited time on this Earth, so let\u2019s think about how we can utilize it to our advantage. Here are some tips on how you can invest smarter.<\/span><\/p>\n<h3><span data-preserver-spaces=\"true\">Investing in a syndication<\/span><\/h3>\n<p><span data-preserver-spaces=\"true\">A good operator can make great profits consistently. I\u2019ve seen portfolios with over 30% historical\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/internal-rate-return-irr\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">IRR<\/span><\/a><span data-preserver-spaces=\"true\">\u00a0on average. With this type of return, you can basically double your equity every three years.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">It\u2019s very important that you do enough upfront work to understand the operator\u2019s strategy. There are many things to consider when choosing an operator, so here\u2019s an\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/syndication-passive-investor\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">article<\/span><\/a><span data-preserver-spaces=\"true\">\u00a0on this topic.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">As a limited partner, there isn\u2019t really anything that you need to do besides waiting for payday. Some operators focus on cash flow, while others focus on doubling your money as quickly as possible. The latter is generally riskier. There aren\u2019t many investments that can beat the returns of a good real estate syndication. Why bother spending hours every week on your own deal when you could achieve better results by spending a few hours a year?<\/span><\/p>\n<h3><span data-preserver-spaces=\"true\">Being a general partner<\/span><\/h3>\n<p><span data-preserver-spaces=\"true\">If you want to be part of a syndication as a general partner but don\u2019t want to deal with the day-to-day operations, such as asset management, construction management, sourcing deals, etc., then here are a few responsibilities that you can take on.<\/span><\/p>\n<p><strong><span data-preserver-spaces=\"true\">Loan Guarantor<\/span><\/strong><span data-preserver-spaces=\"true\">\u00a0\u2013 If the syndication requires a recourse loan, then a loan guarantor is needed. The guarantor needs to have enough assets and liquidity.\u00a0<\/span><\/p>\n<p><strong><span data-preserver-spaces=\"true\">Capital Raising\u00a0<\/span><\/strong><span data-preserver-spaces=\"true\">\u2013 This might be the perfect role for you if you have a strong network. It varies from case to case, but usually, you have to raise at least 30% of the required capital.<\/span><\/p>\n<h3><span data-preserver-spaces=\"true\">Diversification<\/span><\/h3>\n<p><span data-preserver-spaces=\"true\">Even among real estate syndications, there are many ways to diversify your portfolio. In terms of property type, you might want to invest in more than one type of property. For example, COVID-19 halted the hospitality industry but boosted the demand for industrial properties, so don\u2019t put all your eggs in the same basket.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">You can still diversify even when investing in the same property type.\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/guides\/buying-multifamily\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Multifamily<\/span><\/a><span data-preserver-spaces=\"true\">, for example, varies significantly from market to market. An important attribute of a market is its location quotient, which is an indicator of the professional specialization in the area. For example, San Francisco has a very high location quotient in technology, so when many people in technology are suddenly allowed to work from anywhere, the multifamily industry in San Francisco collapsed. Even today, the market is still recovering from the pandemic. On the other hand, the multifamily markets in Austin, Phoenix, and New York have been doing extremely well.<\/span><\/p>\n<h2><span data-preserver-spaces=\"true\">What\u2019s Your Passion?<\/span><\/h2>\n<p><span data-preserver-spaces=\"true\">The majority of real estate investors are here to gain financial freedom. Most people aren\u2019t waking up every day excited about going to The Home Depot and doing another house flip. This is why we should think about what exactly we\u2019re giving up by getting into real estate. Would you rather spend all your hours doing real estate? Or would you rather find a profession that you\u2019re truly passionate about? Excel in your passion, make enough money to invest in real estate passively and build wealth.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">I\u2019m personally very passionate about real estate and obsessed with how co-living can bring people together and revolutionize the multifamily industry. I believe in building communities where everyone can feel like they belong, which is why I\u2019m an active developer and don\u2019t want to be on the sidelines.<\/span><\/p>\n<p><em><span data-preserver-spaces=\"true\">I hope you\u2019re also passionate about real estate in your own way, so I want to hear about what brought you to real estate. Please comment below.<\/span><\/em><\/p>\n<div id=\"hero-block_62df1a82bfc88\" class=\"first:mt-0 hero-block    has-background has-slate-200-background-color has-text-color has-slate-900-color\">\n<div class=\"gap-10 lg:gap-20 flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n<div class=\"relative z-30 lg:w-2\/3 \">\n<main class=\"py-4\"><\/p>\n<p class=\"has-slate-800-color has-text-color has-large-font-size\" style=\"font-style:normal;font-weight:800\">Run Your Numbers Like a Pro!<\/p>\n<p class=\"my-3 md:my-5 lg:my-8 has-slate-900-color has-text-color\" style=\"font-size:16px\">Deal analysis is one of the first and most critical steps of real estate investing. Maximize your confidence in each deal with this first-ever ultimate guide to deal analysis. <em>Real Estate by the Numbers<\/em> makes real estate math easy, and makes real estate success inevitable. <\/p>\n<p><\/main><\/div>\n<div class=\"lg:w-1\/3 first:mt-0 relative h-full lg:flex lg:items-center\">\n<img decoding=\"async\" class=\"object-cover w-full relative z-20 my-0  rounded-md\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/08\/REBN_cover_mockup_01-e1666813743854.png\" alt=\"real estate by the numbers\" title=\"Unpopular Opinion: Owning Your Own Properties Is Overrated 2\"\/><\/div>\n<\/div>\n<\/div>\n<p class=\"italic\"><b>Note By BiggerPockets:<\/b> These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.<\/p>\n<\/div>\n<p><br \/>\n<br \/><a href=\"https:\/\/www.biggerpockets.com\/blog\/owning-your-own-properties-is-overrated\">Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In this article By now, you\u2019ve heard about how real estate is a great way to build wealth. I don\u2019t disagree with that. However, before getting started, you should also consider the downsides of owning real estate and the opportunity costs. For most real estate investors, it\u2019s better to be a limited partner or take [&hellip;]<\/p>\n","protected":false},"author":5,"featured_media":4210,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"fifu_image_url":"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/11\/real-estate-is-overrated-1024x517.jpg","fifu_image_alt":"","footnotes":""},"categories":[9],"tags":[],"class_list":["post-4209","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog"],"_links":{"self":[{"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/posts\/4209","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/comments?post=4209"}],"version-history":[{"count":1,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/posts\/4209\/revisions"}],"predecessor-version":[{"id":4211,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/posts\/4209\/revisions\/4211"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/media\/4210"}],"wp:attachment":[{"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/media?parent=4209"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/categories?post=4209"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/tags?post=4209"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}