Investing in real estate often seems straightforward: Purchase a house, lease it and receive monthly rent from the tenant.
But reality doesn't always follow the script, as Jason Roth of Seattle can attest.
Roth rented out his home in Rainier Valley but the tenant stopped paying rent. Roth is now owed $29,000 in unpaid rent plus utilities.
Roth is living in a van with his dog Wally, KIRO 7 News reported.
"It's frustrating, extremely frustrating. It's something I can't fully wrap my head around," Roth told the station.
The delinquent tenant also has listed the downstairs unit for $434 per night on the short-term rental platform Airbnb.
"At the very least he's generating $2,000 a month, and it's more than likely that he's generating close to $3,000, possibly even $4,000, depending on the month," Roth said.
"So, not only is he not paying me, but he's generating an income through the basement Airbnb unit, and meanwhile, I'm having to pay the utilities for that unit."
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Roth is waiting for an eviction hearing. In King County, it takes about 12 months to go through the eviction process. According to KIRO 7 News, Roth will be looking at $50,000 in losses "before all is said and done."
The city, which gave the tenant a short-term rental license, said that the license is not valid "because it was obtained using inaccurate information about ownership of the property." And Airbnb has taken down the listing.
Roth's situation shows that being a landlord is not just about collecting rent and enjoying passive income. If you don't want to deal with the hassles of being a landlord, here are two hands-off strategies to tap into real estate.
Real Estate Investment Trusts
You can think of real estate investment trusts (REITs) as giant landlords — they own income-producing real estate and collect rent from tenants.
REITs are required by law to distribute at least 90% of their taxable income to shareholders as dividends. This requirement makes them appealing to investors looking to earn a passive income.
These days, there are plenty of REITs trading on the stock market, so it's easy to invest in them. You can purchase shares of a REIT much like you would buy stocks of a company.
REITs can center their investment strategies around various kinds of real estate. Some may concentrate their portfolio on residential properties while others might hold assets such as shopping malls or office buildings.
Like any investment, REITs come with risks, so always conduct comprehensive research and due diligence before diving in.
Crowdfunding is the practice of funding a project by raising small amounts of money from a large number of people. It can be an excellent match for real estate investing.
Real estate crowdfunding platforms provide opportunities for people to invest in a wide array of properties across different geographical locations and property types. They typically have lower minimum investment requirements compared to traditional real estate investments. This means people can gain access to properties and portfolios that are typically off limits to retail investors.
Other than making the sector more accessible to the general public, some platforms also allow investors to select specific properties and projects to invest in.
For instance, if you are interested in single-family rentals, there are options to invest in rental properties with as little as $100 while staying completely hands-off.
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