Physt’s Guide to why you are probably a faggot if you think you can do well with real estate.
So someone told you that investing in real estate is a good idea. They are only right, if you are the right person for it. You probably aren’t even close. Below is a list of things you probably didn’t consider.
The average Joe was lead to believe they could do this:
Mortgage a house for no money down, get a renter, use his rent to pay his mortgage. THIS DOES NOT EXIST AND IS A FUCKING TERRIBLE IDEA!!!! PERIOD! DO NOT ATTEMPT THIS UNDER ANY CIRCUMSTANCES! YOU ARE PROBABLY TOO DUMB TO UNDERSTAND WHY!
But my dad did it?!
YOUR DAD LIVED IN A MUCH DIFFERENT TIME DUMMY!
- If you get a mortgage for a house and you don’t have 20% down you must pay PMI. This will eat up hundreds of dollars out of your bottom line. Until you have that 20%. Don’t even bother.
- No matter what happens you must pay property tax, this is thousands of dollars per year.
- All home improvements are tax deductible, but who gives a shit, you are still at a giant loss if you need to replace a roof or even just an AC unit.
- Your margin of profit is much much smaller than you think even after you own the house outright.
- HOAs and Utilities will eat into your profit. Nearly every house out there these days has a small HOA, don’t bother with the larger ones if you are thinking of profitability in the slightest.
- You have an investment that is 1 flushed maxi pad away from being a multi thousand dollar liability.
- Good tenants do exist, but even the best of them have issues. You now have to deal with them on a professional level. Are you up for that? If they simply decide to stop paying rent, you will have a very difficult time removing them.
- In between renters you will likely have to do things like replace the carpet and repaint everything. The security deposit will not be enough to cover this unless you plan on devaluing your property by putting in the cheapest, nastiest shit possible.
- You now have to deal with home repair contractors. Enjoy disputing things your tenants have broken vs things that break over time. you will be getting screwed until you find ones you can rely on. They will become like a new family you will have to manage. Even at one house.
- You might think property management is a good idea. 10% of your rent is what they charge. Avoid.
By the time all this is accounted for, and you have a couple of disasters per year the actual rent vs the mortgage you are paying will be much different numbers. You need to have a lot of money saved up in order to cover the difference or be a person with a lot of income already. The bonus is that you can write everything off, it’s not great but it does take the edge off right?
There are people out there that did things like buy a house a year for 30+ years and were able to funnel that money around and make it all work. These people knew what the hell they were doing and treated it like second full time job… because it was. They were able to spend next to nothing in taxes due to all they had to spend on this. These are people comfortable living in near poverty. This will only work in circumstances that you probably aren’t prepared to understand.
You are not ready for this.
I own property out right that I rent, best I ever do is about 6% and I have a very large support system looking out for me that you don’t have. You can do better with much less work for your money.
-physt