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The lords of land

April 27th, 2010 at 12:59 pm

My mom was telling me yesterday about an aunt of mine who owns a rental house. The trash compactor, a toilet, and now the AC are all broken and needs to be fixed. It's not clear how they were broken, so they're in the middle of a small dispute with the tenant about who is paying how much for what repairs.

I don't know the exact details. I just want to pose the question of, "Why?" Why is my family so dead set on physical real estate for income? Why not mutual funds or REITs instead? It would be a lot more liquid and it would take out the headache of having to deal with tenants. There's also no property tax, insurance fees, and Homeowners' Association to deal with either.

Now, I'm not saying that physical property can't be an investment. I think it makes sense for some people in some situations. I just don't think it's for everybody.

I did gently ask my mom if my aunt really wanted to go into real estate, and her response was, "Of course! She's getting older and needs to secure an income stream to retire on. She just had bad luck, that's all."

Wow.

Posted in Uncategorized | 4 Comments »

4 Responses to “The lords of land”

  1. Joan.of.the.Arch Says:
    April 27th, 2010 at 01:34 pm 1272375268
    1272375268

    Oh, my. Being a landlord would be one of the last ways I would want to make money. I just couldn't take it.

  2. monkeymama Says:
    April 27th, 2010 at 01:52 pm 1272376330
    1272376330

    I think it's a pretty commonly accepted myth that "real estate = easy money."

    It's particularly bad out here because a lot of people made small fortunes on land and real estate around here the past few decades. But, it seems to me clear as day that it has run its course. Even with the bubble "burst" we are at a rather unsustainable peak in many areas of the state (think Manhattan prices. Prices like that don't double overnight). Yet, everyone I know wants to buy a rental with 3.5% down. It's ridiculous. (The current rental vacancy rate is also absurd, by the way).

  3. baselle Says:
    April 28th, 2010 at 04:54 am 1272430463
    1272430463

    Yeah, its funny how in some families every family member loves one asset class to the exclusion of all others. My grandpa and his gang loved stocks, a couple of my friend's parents loved bonds and T-bills... and then there are the real estate people. As a farm girl, I can only shake my head. Bad enough that you have to do a ton of work to keep a roof overhead or maintain a crop; worse that you have to do a ton of work and maintain tenants to keep up a passive income stream.

  4. Broken Arrow Says:
    April 28th, 2010 at 12:25 pm 1272457524
    1272457524

    Yea. To be perfectly fair, I do trade stocks. So, it's not really like I have room to talk. Big Grin

    But I don't know. I'm not exclusively stuck on stock trading though. It just suits my current risk appetite and financial lifestyle right now. Who knows, in a few months from now, depending on my job situation, I may go back to a completely passive portfolio, or perhaps I may get more time to delve into options trading. We'll see.

    But my thing is that all of my aunts and uncles are in or approaching their 60's and are planning to retire. So it kind of blows my mind that they feel it's appropriate to put all of their savings into buying houses to rent out.

    I guess they'll be alright though. They're really wonderful people, so for their sake, that's why this worries me.

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