This is the latest in a series of video interviews in which Pat McKeough will give his advice on a variety of topics. Some will deal with his overall investment philosophy, others on specific investment strategies and still others will be comments on events that are affecting the markets and the economy. This time, Canadian real estate investing is the subject, as Pat replies to a question from a reader inspired by the increase in property values. Is buying a property and becoming a landlord a good investment? Look beyond today’s prices before you act, is Pat’s advice. Below is the transcription of Pat’s comments. Real Estate Investing: Becoming a Landlord Q: Pat, here’s a question from a reader. Giving the continuing increase in property values, is direct investment in real estate that is, becoming a landlord, a viable option? Pat McKeough: You have to recognize that direct investment in real estate is somewhat inaccurate. It’s more like, do you want a part-time job running a house that you own, renting it out and being responsible for calling the plumber and chasing down tenants that don’t pay and so on. There’s a lot more to that than many people realize. When you do it on a businesslike basis, you have a company that owns hundreds of properties and it all averages out. But if you have a single property and you get into litigation with the tenant or into major repairs, there’s a lot of cash flow that you’re going to miss out on.
COMMENTS PLEASE
Have you ever rented out a property? Were you satisfied with the income you received and the appreciation in property value, or was it just not worth the hassle?
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So I think you need to go into a real estate investment with a lot of knowledge about how wide the variation is—don’t look at the average price increase in your home market in the past 20 years. Look at the worst case scenario: what if you have to hire a lawyer to get rid of a bad tenant who’s not paying. I think that will take away some of the desire. Having said that, many people do make great fortunes by buying real estate, using a lot of leverage, and sticking with it for 10, 20 or 30 years. But don’t kid yourself into thinking it’s the same as buying Canadian Pacific, because there’s a lot more to it.
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