The Pitfalls of Investing in Real Estate

George retired from the public service at 55, and wanted to build more wealth through investing. He’d heard all the old stories about most wealthy people building their fortunes through real estate, so he did what a lot of novice investors did: bought a townhome condo near his house, put a “For Rent” sign in the front yard, and rented it out to a nice young couple.

But instead of building wealth from his comfy chair, George soon discovered that he was constantly throwing money into his unit for all kinds of things he hadn’t thought of (rising condo fees, leaky bathtub, broken appliances, water in the basement) and getting calls at all hours of the day and night for the craziest things. This is not what he bargained for.

To make matters worse, George also found that his tenants had lots of “friends” who appeared to be living in his unit. He’d heard stories from neighbours about noisy parties and strange smells coming from his investment.

But the icing on the cake happened when the cheques started bouncing. George had no idea what to do. The tenants refused to leave, and when he looked for information about evicting them, he found the whole process was biased against landlords. This was not George’s idea of a simple, easy way to build wealth. He finally had enough and sold his unit eight months into a five-year mortgage, and losing thousands of dollars.

George’s experience is not unique. Most small investors who look into real estate either get fooled into thinking it’s an easy way to make money, or they realize how much work it really is and decide it’s not for them.

However, that old adage about building wealth through real estate is true. Lots of people from all walks of life have generated long-term wealth through buying and renting properties. So what’s a well-intentioned, conservative investor to do?

Well the good news is there are all kinds of ways to invest in real estate without all the headaches that George and others experienced, and I’m going to discuss these ways – the good, the bad and the ugly – over the coming weeks and months. So stay tuned and remember: anyone can make money in real estate if they follow the right system.