Real estate is wonderful isn’t it? You get to buy a property with other people’s money at a dirt cheap interest rate. Your costs are largely fixed while rents keep on going up thanks to inflation. You get plenty of tax deductions. And you get to earn a $250,000/$500,000 tax free profit upon sale in America, depending on if you are single or married. No wonder why real estate is my favorite asset class to building long term wealth.
But I haven’t done a good enough job over the past eight years telling you about the negatives of owning real estate. The main reason why is because I’ve been bullish on the asset class – coastal city real estate in particular. What a shame it would be to have convinced you out of buying years ago, like some doom and gloom sites who only focus on the negatives because their author missed out.
After a massive run up in property prices, my bullishness has turned neutral-to-slightly-negative. Supply is rising. Valuations are expensive. Rents are falling in places like NYC and SF (where I’m a landlord). While mortgage rates may finally tick up, although they’ve continued to remain low despite the Fed’s moves. Therefore, I’d like to share a reader’s horror story about being a landlord in the last down cycle. I’ve shared my own horror story, which sounds like a first class trip to Paris in comparison.