3 ms·
While I appreciate the writer's dedication, this article contains exceptionally bad advice. Unfortunately, the writer is choosing to use the absolute best case
by hluska 12y ago
While I appreciate the writer's dedication, this article contains exceptionally bad advice. Unfortunately, the writer is choosing to use the absolute best case scenario in each of his points. This is dangerous.
Consider his spreadsheet showing his rental income. First, the spreadsheet assumes that 100% of his units will be occupied 100% of the time. Second, he says that most property owners will be looking for a 10% ROI from rental income alone. In practice, a 10% cap rate would be considered exceptional. Some very, very large real estate companies get close to 10% because they can take advantage of economies of scale. But, that is a horrible estimate for planning purposes.
In the real world, investing in rental properties requires either hiring a company to manage a property for you, or doing significant amounts of work yourself. When a tenant decides to throw a big party when they leave, you're on the hook for all the damage they do. And, you won't have access to a steady stream of income for all 12 months of every year - vacancies are extremely common.
If rental properties were as safe as he assumes and truly offered 10% cap rates, there would be too much demand, prices would skyrocket and returns would plummet. The invisible hand is an asshole.
Then, there's his talk about free money from the government. The program he references is for retirement.
If the numbers worked, this plan would be amazing. Alas, they simply don't.