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- Marcia Castro Socas has owned it for years.
- She says the landlord-tenant relationship is an often overlooked part of owning rental real estate.
- She says buying the cheapest place isn’t always the best, and the news shouldn’t dictate your plans.
One of my main financial goals is to invest in real estate. I’ve always wanted to own a handful of properties, around the country, that I rent out to tenants as a way to generate passive income. Although I’m years away from being able to buy my first investment home, I’m doing what I can to understand how the whole process works.
In addition to knowing how much money I’ll need for a down payment, renovations, insurance, taxes, and to cover expenses before a tenant moves in, I’m also eager to know what I should know else before entering the real estate investment space.
To help understand this, I spoke with Marcia Castro Socas, a real estate investor, home remodeler and real estate broker who has generated millions from her investment properties over the years, about what she would tell any new investor . Here’s what she had to say.
1. Paying a lower price isn’t always the best deal
In my free time, I like to look at properties for sale to see which ones I would be interested in buying if I had the money to do so today. I am also looking for the cheapest properties, as I assume my first real estate investment will not be large.
Castro Socas says finding the cheapest home isn’t always the right decision.
When she bought her first investment property, it was a repairman in need of renovation. She knew it would take time and she would have to pay the mortgage while the house was being repaired. But what she didn’t think about was all the money she would need to spend on repairs, which was more than she expected.
“Sometimes it’s better to buy a property that doesn’t require as much work, even if you have to pay a little more for it,” says Castro Socas. “The lesson I learned here was to honestly assess how much money I had available for a project and how much work I could comfortably afford to undertake.”
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2. Don’t let outside news change your real estate plan
As someone looking to get into real estate investing, I always wonder if there’s a good time to buy, and I worry about entering the housing market during a recession, which could make more difficult to rent the property.
Castro Socas recommends not letting outside information change your long-term plan. That’s what she did in 2008 when the real estate market crashed.
She owned many rental properties that lost significant value, and while other real estate investors rushed to short sell their properties to get out of debt, she kept her own.
“Rather than listening to this news, I saw that every property except one was generating rental income that exceeded the amount of the mortgage,” Castro Socas explains. “So even though the sales market had dropped, it didn’t matter to me since I wasn’t in the market to sell. I was happy to keep and continue to rent the properties and repay this mortgage every month.”
Even years later, Castro Socas still owns many of these properties and their values have reached a new high.
“Keeping a cool head and looking at the real facts rather than reacting to market panic proved much wiser in the long run,” says Castro Socas.
3. Ownership is not just about money
One of the main reasons I want to get into real estate is because I hope to earn passive income and grow my overall financial portfolio.
But Casto Socas says owning properties isn’t just about making money. She says that while it can be easy to just focus on revenue and ROI, being a landlord is also a landlord-tenant relationship.
“Tenants who have a personal connection to you take better care of the home, stay longer, and are more likely to take care of minor repairs themselves,” says Castro Socas.
In return, Castro Socas makes sure to maintain this good relationship by dealing with problems quickly and treating tenants well. Plus, she says that mindset has led to an increase in her income over the years.
“With several tenants who have been living in rentals for more than eight years, my income is higher since we don’t have any vacant units on these properties,” says Castro Socas.