Your Next Landlord Could be A Hedgefund: Are Rental Properties Making a Comeback as a Good Investment?

I’ve said for years that the contractors and investors who got burned by the economic downturn will eventually hit rock bottom, dust themselves off, and end up making as much money on the backside of the recession as they lost on the front end. This is because the same market inefficiencies that were exploited in the past are being replaced by equally exploitable new ones.

The builders who once built speculative homes on inflated market appraisals are going to be the contractors who do the work for the investors who buy the properties from the banks at 40 cents on the dollar.

The Las Vegas Sun did a story last week on how hedge funds are buying Las Vegas real properties at bargain rates, making minimal investments/improvements, and renting the properties for an 8% to 12% annual return.  Then, once the economy rebounds, the investors could expect appreciation to add more value to the investment.

As far as investments go, being a landlord is fairly labor-intensive. And, if the past 4 years has shown us anything, it’s hardly a fool-proof move.

Potential landlords would be smart to read this excellent article in the Wall Street Journal, Do You Really Want to be Landlord? The article has both horror stories and advice, as well as a forecast that rents are likely to increase over the next few years.

I got out of the landlord business two years ago, when my tenant couldn’t unclog her drains and called me every other day.  The 30 minute drive, coupled with time spent waiting on plumbers, gave me all the time to reconsider the pros and cons.

 

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