Why I Stopped Buying Single Family Rentals
My primary residence was my entry point into the world of real estate investing. But even though my primary consideration was finding a place to call home, I also wanted to be sure it was a place I could eventually turn into a rental property. Having already dabbled in the stock market, there were some benefits to real estate that I naturally preferred that simply weren't available in the stock market.
After converting my primary residence into a rental, I began learning about what goes into managing a rental property. I quickly realized I wasn't a fan of finding and vetting prospective tenants, so I quickly hired that out to someone that could do a much better job than I ever would. It also taught me how to implement systems that would minimize the amount of work that I actually had to do. For example, after dealing a couple times with late rent payments and having to remind tenants to pay, I found a website that automated all that. It enabled the tenants to set up autopay, and if rent wasn't received on time, it would automatically charge them a late fee. The tenants appreciated the autopay feature and I never had to deal with it again. I also had to have systems in place to deal with repairs and maintenance requests. These were all valuable lessons, and as I always say, you can read all the books in the world, but experience will always be your best teacher.
In my conversations with others, I'm always struck by the similarities in people's goals. Everybody wants the same thing: freedom. I define that as having the ability to do what you want, when you want, where you want. Money is not the goal, it's the game we have to play in order to achieve our level of freedom. For some people, that means they need $50,000 to get there. For others, that means they need $50M. The amount isn't the point. When I reflected on the level of freedom I wanted to achieve, I realized that if I wanted to get there, I wouldn't be able to do it in the single family space because it was unwieldy in terms of acquisition and management of those assets which I felt would rob me of the very thing I was trying to achieve - freedom.
Now that I've jumped with both feet into the multifamily industry, I tell people every chance I get that had I known about investing in apartments 5 years ago, I would have skipped all the single family stuff. You get the exact same benefits as an LP in a multifamily deal as you do as the owner of a single family rental, with almost none of the work.
Personally, I'm still glad I did it because I learned a lot about managing real estate that allows me to be a multifamily operator now. But most people probably don't have any interest in managing real estate. I've talked to many people that say that they want to get involved with real estate because they recognize the unique set of benefits. They're looking for ways to achieve their idea of freedom, but they don't know how to get started. Especially given the state of the housing market as of this writing (April 2021), the numbers in many markets don't pencil out as rentals because the prices have gotten too high. There are ways around that, but they are most often time-intensive and again, they rob the person of the very freedom they're trying to achieve. I recognized this years ago, but it took me awhile to figure out that this wasn’t the solution.
Working toward a number in income or assets through single family houses would have been a one-dimensional goal that only served myself, and I have a feeling I would have been disappointed when I achieved it. I decided that due to the lack of a higher purpose and the amount of time it would take to scale, single family rentals no longer suited me. My goals for multifamily have blossomed into ideas that not only give me a way to achieve the freedom I'm looking for, but it gives me a way to help other people as well who are looking for the same thing.
