Originally Posted by
notEnuf
SFH owner management of rentals is a time investment. If you aren't compensated for your time, you are losing time and money. Annual or 2 year leases are designed to stay at market rates. If you let someone occupy at below market rates you are losing money and artificially suppressing the market. That's not runnning a business or investing.
I got out because my time was more valuable and the return on the capital was about the same as a diversifed large cap equity fund. I'm no longer responsible for or have to manage anything. I made the worst real estate buy ever... a hangar. I have one tenant and they barely cover the insurance. The best part is that I know it's not an investment and don't try to justify it as one. If you don't run it as a business, it's not an investment. Would you go to any advisor for investments and walk out of the office saying "this is great, I can get my principle back in 30 years and probably break even and all I have to do is find trustworthy people, manage thier payments, fix things at a moments notice any time of the day or night, pay interest, taxes, and insurance annually, hope for no cataclysms, and repeat as neccesary every 2-5 years." Nope, hard pass. That's not saying it's not doable, just not long term on a large scale. Eventually you're time constrained and off load the management duties. If that off load then makes you a passive investor, the investment class no longer matters.
This is a quality post. SFH rental is a loser unless you’re in to get big, which is essentially a second job. You either need to use sweat equity, which will soak up all of your time, or use hired management, which will eat away at cash flow. Spikes in insurance or taxes will wreck you because your time frame to recover is long, and the market may not even support it.
There is no profit in it unless you are playing the equity game, which is a very long term play (and by no means guaranteed), or tax harvesting, which pre-supposes you have other income to shelter. I watched game players get absolutely wrecked in the collapse in 2008. Ive seen other people get wrecked with changes in local ordinances prohibiting AirB&B type short term rentals, which collapsed the local market.
That’s not to say there’s no “money” in rental, there is, but you need to be ready to play the long game, play the tax game, and that can be more hassle than you expect and is always subject to change.