Advanced Personal Finance

Although it’s been popular recently, I’m not one for owning rental property. If you want to invest in a REIT (Real Estate Investment Trust), that’s one thing, but to own property outright is another. I just have no interest in it for a couple of reasons.

First, it strikes me as a riskier way to invest, since picking the correct property is key. Second, I have no aptitude for property selection and that’s obviously key to successful real estate investing. Third, property isn’t liquid enough for me. Finally, property ownership strikes me as a lot of work assuming you also manage it. If you don’t manage it yourself, that takes away one of the good reasons to own property in the first place - cash flow. A lot of the cash is flowing to the management company.

It’s that last one that’s a biggie for me. Like I said, I don’t own property, but I imagine these are some of the job requirements:

• Collect rent checks and deal with late payers

• Maintain the property (either yourself or by hiring someone else)

• Conduct legal proceedings against deadbeats

• Show the place to prospective tenants

• Deal with disputes between tenants

This post by Q got me thinking about this whole thing. Apparently, he’s having trouble with one tenant in particular who’s paying late or not at all (the relevant part is about halfway down the post). Then I read Lazy Man having some issues with a tenant.

I think people who advocate property ownership tend to discount the total cost of ownership. If you truly factored in all the time and money you as an owner put in to the property, I’d be willing to bet your ‘income’ is a lot lower than it looks on paper.

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