If you’re a real estate investor in Westchester County, then you have likely enjoyed nice returns over the past couple of years (and longer). Often, the first foray into rental real estate investing for people is when they rent out their former residence or a residence they inherited.
After a few years, these folks realize that their rental real estate investment property has performed quite well. But since they aren’t real estate “pros,” they are often hesitant to expand their property portfolio despite their good experience owning one rental property.
No investment is suitable for everyone. For our own reasons, some of us like stocks, others prefer gold and silver. A few want every dime they have stashed in an FDIC-insured bank account, despite knowing that inflation prevents them from realizing a positive return on their investment.
That said, ignorance and fear should not drive any choice we make in life, especially our investment decisions.
If you’ve been hesitant to own more than one real estate rental property, it makes sense to understand the challenges and opportunities involved in owning multiple rental properties.
Owning multiple rental properties, if handled properly, means expanded income and the opportunity to benefit more from rising property values.
But there are challenges. A second (or third, fourth, etc.) rental property means a larger outlay of capital. It also means a more significant commitment on your part to ensure that everything goes smoothly.
We’ve all heard the old maxim, “Real estate is all about location.” There’s a lot of truth in that saying, but even more critical is the fact that real estate is also about timing.
I’m not just talking about timing the market, which is difficult and tricky to get right but rather timing with your personal life and circumstances.
Are you ready for the challenge of owning multiple rental properties?
Here are few questions to ask yourself before you take the plunge:
Do you have the experience?
Did you just acquire your first rental property six months ago, or has it been several years? If it’s been a couple of years or more, do you have positive cash flow and happy tenants? What was your emotional response (if this has happened to you) to an unexpected repair or inconvenient tenant emergency?
Do you have the time and knowledge to successfully manage multiple properties?
Adding a second or third rental property to your portfolio will increase the time you have to spend dealing with property management matters. If you hire a property manager to handle all this for you (more on this below), this may not be a concern.
Are you financially prepared?
Investing in multiple rental properties is not something you should do on a shoestring budget. Collect all the financial information about the potential acquisition(s), and then be brutally honest with yourself.
Life is not all “unicorns and rainbows,” so be ready, willing, and able to deal with the worst short-term case scenario or don’t expand your portfolio.
Is the timing right?
Yes, for sure, consider market conditions. Right now, the rental market in Westchester and surrounding areas is red hot. Real estate values keep rising.
Will this last forever? Nope, nothing does.
Are we at a historical market top? Are real estate values and maybe even the economy about to plunge into the abyss?
Here’s the bottom line – if you’re ready to own multiple rental real estate properties, then current market conditions should not dissuade you from doing so.
Forecasting economic cycles is not something I do, but I will say that historically real estate is how most people in America build wealth. I don’t see that fact changing anytime soon.
But is the timing right for you? Is there anything going on in your personal or professional life that would make owning more rental real estate problematic?
For example, do you have a business that needs more capital to scale? If so, maybe the money you’re thinking about investing in real estate is better put in your business. Or perhaps you have two children who are about ready to go to college. If you’re paying that bill, are the funds you need to invest in a second rental property already committed to family priorities?
If you think you’re ready to invest in multiple rental properties, your next step is to assemble a great team. You’ll need a good mortgage broker, an accountant, and possibly a property manager.
Your mortgage broker will do the work required to set you up with the best possible financing options. The good news? Interest rates are at or near historic lows, so right now is perfect in terms of financing timing.
Clients use Sterling Property Solutions for many reasons, but their desire not to directly deal with the day-to-day chores of managing rental properties is at the top of that list. Our landlords have satisfied tenants who live up to the terms of their rental agreements through our professionalism and good practices.
Please give me a ring at 914-355-3277 or send me an email at Linda@Sterlingpsi.com. Together, let’s form a plan for you to take full advantage of the current conditions and put in place a robust, long-term program for your success.