Why I'm so over owning Real Estate

Yet another undisclosed bad ass location somewhere in California.

Yet another undisclosed bad ass location somewhere in California.

Real Estate ownership is a large fantasy that most people have but seldom understand. I never got bit by the “one day I will be a homeowner” bug, but I do know how to pull dollars out of a situation that typically takes dollars from people.

Even if you are financially capable of owning a home, you never really own that home. Even if you pay off the mortgage, you still don’t really own that home. You still have to pay taxes. If you own a home like me, taxes can be as high as rental payments. Can you imagine paying off your house and then having to pay $500-$1000 a month in property taxes?

That’s the Harsh Reality. These four walled tinder boxes are brilliant at monetizing their utility.

Let’s talk about maintenance. What are you going to have to pay to keep that thing up? Yet another expense which can at times, balloon into large amounts that make owning it even less attractive. On my house alone, I have spent over $6,000 on repairs and updates. Not a huge sum relative to the appreciation rate, but still a sum.

I don’t even think it’s necessarily about the expenses as much as the mind space it occupies. Unless you have a place you’re crazy about, the stressors of owning property are ever-present. You will always have that payment. You will always have maintenance. You will always have taxes. Those three things keep you tied down and limit your options.

As a landlord, I laugh when I here the Fake Gurus and Real Estate seminar people about passive income generated through real estate. There is no such thing as passive income in real estate, that’s why I call it the Myth of Passive Income. Depending on what you own, it is more like a shitty part-time job that pays a dollar raise every year.

Don’t get me wrong; there are ways to make money doing real estate. At the time of this writing, the house I am living in is on the market and when it sells on paper the investment over all has a fantastic return. But I did have to put in effort to realize that benefit. Even now as I receive offers I find the process stressful. There are a lot of great people that you don’t want to let down strictly because someone offers you more. Then there are always the buyers and investors who try to manipulate you into selling your property for less than it’s worth, etc. All this stuff stresses me out and I’d rather not have to deal with it on an ongoing basis.

People seldom talk about the emotional cost of owning real estate, especially if you are a hands on landlord. Not all properties are created equal and some may require more attention than others. Even if you owned them all free and clear and had a property management company dealing with everything, they are still your assets and the simple fact of them appearing on your balance sheet humanizes the numbers. People are living in those houses. People are making lives for themselves. Any decision you make is going to have an impact on them.

I care about people way too much, especially ones that give me money. I will sell my house to a family over an investor if they are offering at or around the same price. To me, those are better deals. They’re not going to bulldoze your house and warehouse the land for later sale. But what if you do have to make some sort of change because that property no longer makes business sense? You see what I’m saying? That income-producing asset now has a human cost. Cost of displacement of a good person and tenant because you now want to sell because the taxes went up. So now you are unintentionally inflicting harm on someone who did no harm to you. Market conditions changed and now there is a casualty. Maybe I’m being way too harsh but this is how I truly feel about it. I don’t like zero sum business models. Not all businesses are like that. The stock market for example. People come there knowing they have the potential to lose if they make the wrong decisions. In real-estate the lines are blurred.

At the end of the day you really just have to remember that if you own it, you took the risk and you ultimately have to do what’s best for you. Everyone should understand that. People always serve their best interests, but a great businessperson figures out a way to negotiate the best possible terms for as large of a group as possible. In the end when you do this, I think it does help improve the world over all. Another one of my properties I sold to a qualified FHA buyer because I knew in this hot market, no seller would entertain anything FHA. I purchased my first house on FHA and somebody gave me a chance, so why not give them a chance? It worked out fine. The timeline was slightly longer. I think 45 days instead of 30 and I was already in Mexico, so I had someone close on the house for me, but overall I think it was a good deal. I got exactly what I asked for and they got exactly what they wanted. I felt good about it. I don’t think about it anymore, which is why I’m not too worried about this current sale. Once the deal is done and you have moved out, it’s like a breakup. There might be some initial second-guessing, but at the time it was the best thing to move yourself forward. You would not be where you are or get where you’re trying to go if you didn’t cut the line.

So to close it out, I’m more in favor of business models that allow me to move capital and generate a profit as opposed to owning real assets. I’d rather just make a shit load (or even a nominal amount) of money getting my capital to work for me and then make purchases. It’s so much easier on the mind and easier to get in and out of. Buying and selling real property is a marriage. A lot of paperwork and a lot of ongoing headaches. Ha!

All of that being said, that’s why I am over real estate. Part One.