Being around new real estate investors every day gives me a glimpse into the trials of getting started. Is real estate too good to be true, and does it only work for the lucky few? Chances are, if you are learning from BiggerPockets, you have a sense the possibility is alive for you, too.
There is one factor that makes it work for anyone and evens the playing field. The factor is time. I won’t leave you hanging with the answer without an explanation. Hopefully, this will put some of the sleepless nights, frustrations, and worry to rest.
You Won’t Make $1 Million Overnight
Most experts agree that if you are looking for a quick way to get rich in real estate, you will likely need to take on many risks, and you will still need to work at it diligently. But if you don’t want the risk and the stress, growing wealth in real estate is doable, regardless of your circumstances. You just need to be patient.
In a recent BiggerPockets Blog post by Brandon Hall, he argues that 10 years is too long to wait to become a millionaire. He says you should be working at growing a profitable business to earn wealth more quickly. While I agree that creating a substantial income stream to invest is important, I disagree that 10 years is too long to grow a portfolio.
I also believe that it’s possible that single-family homes or passive investments can get you there over time. It depends how you define massive wealth for yourself. You may be able to live comfortably on the income from 10 paid off single-family homes.
Surviving Times of Uncertainty
Even if a property goes down in value, you only lose money if you sell it. During COVID-19, I had a non-paying tenant. I chose not to get a mortgage forbearance because I did not need the funds to cover the rent, and I did not want it reflected on my credit report. Because I could cover the payment for a few months, I now have a new tenant paying rent at over 1% of the purchase price from one year ago. (I was lucky that I was able to get the tenant to move amidst the pandemic.)
My property manager is working on getting the lost rent returned, but even if I lose a few thousand dollars, my property is appreciating. My cash flow also happens to be excellent. In 10 years, the loan will be one-third paid down on a 30-year fixed rate of 4%, my tenant will be paying more rent, and the property will likely appreciate. These are just some of the many features I appreciate about owning single-family homes.
Buy Where It Makes Sense for You
We all want the crystal ball to tell us the best place to buy. If you do your due diligence, you will see there isn’t one answer. You can purchase properties in many places if you get a reasonable price. It is more important to buy in a state where you have a good property manager, where people are moving, and where there is job growth.
It’s most important to select a place and make the purchase. Remember, time is your best friend in real estate. Time will ultimately make your numbers grow. Global Property Guide boasts numbers of how hot the real estate market has been during the pandemic and reflects upon 25-50% price drops during the big crash of 2008. Through those hard times, the people who could afford to hold their real estate found their investments were worth a lot more in 2020 than their original purchase.
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