It’s easy to find clickbait that promises financial freedom through real estate investing. It’s a lot harder to find financial freedom, especially in the days of high home prices, higher interest rates, and astronomical tax and insurance rates. In 2022, I remember having the first conversation with an owner about a purchase. We knew it would break even off the bat, and that felt okay given “the long game” of real estate. Fast forward three and a half years, and it’s actually now LOSING about $50 a month.
Ouch. There aren’t a lot of people who buy real estate to lose money every month.
The owner I’m talking about in this example is me. I purchased a property at a 8.75% interest rate on a DSCR loan. Since then, I’ve had to put in a new air conditioner, and the roof is on borrowed time. The taxes and insurance in our coastal area have exploded in the last few years (the taxes have increased 80% since I purchased the property). Repairs are a profit killer.
I could sell the home, but in the current market, that feels foolish because there’ll be money left on the table. So I grit my teeth and press forward. Here are a couple of mindset shifts I tell myself to help ease the pain:
- Good tenants are a sort of profitability. Let me explain: I’m not trying to assign a monetary value to people here, but there is an inherent value in having great tenants. In this particular home, I’ve been fortunate to have some really fantastic tenants over the last couple of years. When the first family that lived there moved out, the home was left in immaculate condition. I attribute this to being a small home in a very desirable neighborhood zoned to elite area schools.
- Home value is still going up. Overall, in our area, and as a country, home values continue to trend upward. It may be a hard time to sell, but the inherent equity in the home is rising. The home has appreciated by at least 15% since I purchased it.
- The debt value is still going down. Where else can you get someone else to pay down your debt? Real estate. That’s it. So while I wait for things to bounce back, the outstanding principal is being chipped away.
- It’s not taking up any of my time. Last year, I lost several hundred dollars on the property, but I gained some great tax write-offs and didn’t spend more than an hour thinking about this property all year (alas, the benefit of an excellent property manager!)
I’ll end with this, too: good deals ARE still out there. Since the purchase I used as an example in this post, I’ve been a party to several real estate deals that were much more lucrative, so I do know they’re out there. Here’s to happy hunting for us all!
