Why don’t average people real estate invest?
Two key reasons average folks don’t in real estate in my experience:
- Financial reasons can weed some out (for example, having 25% down for an investment property). In many metro areas and both coasts of the US, you would likely need six-figure cash (or equity you can convert to cash) to enter the market for a viable small multi-unit property.
- Personal reasons can also be a factor. Unlike a more passive investment (like stocks, bonds, ETFs, index funds, etc), there are real people and real problems with real estate. You own it—from the aging roof to the leaking basement, from the leaning tree in the front yard to the falling fence in the backyard. And the people you meet allow you to enter the orbit of all sorts of folks (whether you like it or not). Even if you hire out management, you are still on the hook in the end for the property and the major decisions.
But there are caveats or ways for the average Jane or Joe to invest in the real estate space. An average person can actually operate a unit (or few) and maintain a normal life (with the right precautions). This part-time landlord topic is the theme of my book! Plus, if you own a house or condo, you are technically investing some of your earnings into real estate (though the home and a place to live is the main objective). Maybe you even have an accessory apartment in your home…. Finally, many folks have done well in REITs or ETF’s around real estate, a more passive way to invest in real estate.