After selling my last investment property, I’ve officially exited the real estate market and want to share the lessons I’ve learned along the way.
My experience reflects a familiar scenario: high earnings, an expensive living environment, and a desire to diversify investments. I began searching for viable investment options and, after a few unsuccessful attempts and months of researching various cities, I chose one in the Midwest.
I traveled there to meet with a realtor and property manager and ended up purchasing two duplexes, excited to build my portfolio. I meticulously calculated the numbers, convinced that the rental income would exceed the mortgage payments.
However, I quickly faced numerous unexpected issues with the properties, from costly repairs like broken air conditioning units to unnecessary expenses during tenant turnovers. Each eviction cost around $10,000, which contributed to financial strain, despite optimistic projections.
In months where I collected rent, I only recovered a fraction of my anticipated income, leading to financial worries. The tension of having a mortgage without reliable income caused concern about my financial stability. Even though I could handle the initial investment costs, the ongoing risk felt increasingly overwhelming.
Key takeaways from my experience include:
- Always have personal ties to a property manager if investing out of state. It’s unclear whether my issues arose from bad luck or mismanagement, but increased expenses during renovations were concerning.
- Secure independent professionals for property management, real estate, and legal advice to ensure oversight.
- Assess your personal risk tolerance. I prefer a conservative approach and maintain substantial savings for peace of mind.
- Clarify with your property manager the exit strategy for their services, ensuring all processes are documented.
- If you prefer to keep your investments discreet, consider using an LLC to protect your anonymity.
In conclusion, I feel like a failed investor. Although I technically broke even on one property and made around $20,000 on the other, the experience was a significant drain on my time and resources. I’m sharing this in hopes of helping others learn from my trials.