Buying income properties is a good strategy for branching out in your portfolio and getting into real estate. But so far, it's a strategy I've stayed away from.
Don't get me wrong -- I'm a big proponent of real estate investing. But so far, my personal strategy has largely centered around buying and holding REITs, or real estate investment trusts.
Of course, I've toyed with the idea of investing in income properties, and I even have funds that are earmarked for a vacation home, which, ideally, would serve as sort of a hybrid investment. But if I'm going to purchase an income property, I'd only move forward under these three conditions.
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1. Home prices would need to be less inflated
Right now, home prices are sky-high due to low inventory and strong buyer demand. Throw in rising mortgage rates, and all told, it's just a really bad time to buy. If I were to purchase an income property, I'd wait for home values to reach more moderate levels. Based on sluggish inventory, that may not happen anytime soon, but thankfully, I'm also not in a rush.
2. I'd need to extensively research rental markets
Buying an income property in the wrong market is a great way to lose money. That's something I'd rather avoid, and so before moving forward with a purchase, I'd make sure to do plenty of research. Specifically, I'd want to buy in a market that isn't oversaturated with rentals, where job growth is strong, and where home prices are just high enough to fuel rental demand.
3. I'd need a partner or the help of a property manager
Writing is my full-time job these days, and one that keeps me very busy. As such, I don't have time to take on the work of managing a property. And so if I were to purchase a home to rent out, I'd either need a partner to deal with things like physical maintenance, or I'd need to outsource that work to a property manager.
A big mistake some investors make when buying income properties is thinking they can manage all of the work themselves. I'm not about to fall into a similar trap. I know full well that I'm not a handy person at all, and so fixing things that break isn't something any tenant would want me doing.
Plus, I can be honest with myself and admit that I really don't have the patience it takes to manage tenants and deal with the many problems that could arise in the course of working with them. So while I'm willing to put up capital for an income property, I'm not willing to deal with ongoing hassles.
Owning an income property isn't for everyone, and so far, the circumstances have not aligned to make that a viable investment for me. But if I do decide to purchase an income property, I'm only going to take that leap when the price is right, the market is suitable, and the work won't fall solely on me.
