The Of Two Minds blog of last year listed a number of items that what a person/family would need to meet to meet the threshold of middle class. Although I think the list is very solid, I think one aspect goes a little too far.
The factor that I believe does not need to be part of the ‘middle-class’ mix is the owning “income producing assets such as of rental property…”
Have you ever owned rental property? I’ve been around rentals for the majority of my life. My family has owned and managed the property themselves. It is work that requires a significant amount of effort, time and money. Managing rental property (one or many), is a second business. (By the way, this is how you should look at your rental operation for tax purposes.)
I’d much rather buy a Real Estate Investment Trust (REIT) or a similar note that is tied to income generating land, if rentals are the desired investment.
If you’re looking for a business to start, follow something your passionate about. Cleaning carpets, painting, mastering plumbing and exterminating bugs and rodents, isn’t likely your life’s passion. Let alone dealing with people from all walks of life; the good and the bad.
If you’re considering buying rental property, I urge you to do some serious analysis of the apparent and not so apparent costs. By not so apparent, I mean the cost of your time and your ability to deal with things that might turn the average person’s stomach. If you aren’t going to be a ‘hands-on’ owner, this means a property management firm is going to need to fill the role. Translate that cost to a 15% – 25% hit to your profit margin.
Think before you invest.