Buying rental properties can benefit you in several ways. First, those properties can produce a nice, steady stream of income, allowing you to pay your mortgages and still keep some cash for yourself. Furthermore, since homes have a tendency to gain value over time, owning rental properties could put you in a position where you're eventually able to sell some at a profit.
But as a real estate investor, it's important to strike a balance when it comes to accumulating rental properties. And that means not going overboard.
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Is there such a thing as having too many rental properties?
There is, actually. If you take on too many properties, you might struggle to manage and maintain them. That could lead to tenant complaints, withheld rent, lawsuits, and vacancies. Plus, it could lead to a world of stress for you.
So what's the ideal number of rental properties for your portfolio? Well, that depends on a few key factors. Three to consider include:
1. How much time do you have to devote to rental properties?
If managing your real estate portfolio is your full-time job, you may be able to accumulate more properties than someone with a day job who dabbles in real estate on the side. Figure out how much time you can sink into overseeing your rental properties. Hint: If you own a couple of properties already and are struggling to keep up, you probably shouldn't buy more.
2. Will you be overseeing your properties yourself?
Some real estate investors hire property managers to handle the day-to-day aspects of their rental properties. If you're planning to go this route, you may have the flexibility to load up on more properties than someone who's tackling that work solo.
3. Are you willing to outsource maintenance?
A property manager might handle tasks like rent collection. But usually, your property manager won't be the one mowing the lawn or shoveling snow in the winter. And while your property manager can book those services for you, you'll need to foot the bill. If you're willing to do so, you may be able to take on more properties. But if you're planning to save money by doing your own maintenance, you may need to limit yourself.
Don't get in over your head
Some real estate investors enjoy great success with one or two rental properties, while others own dozens. There's really no preset number of properties you should limit yourself to. Rather, you should think about your capacity to manage those properties.
You should also think about the risk involved in owning multiple properties. The more you have in your portfolio, the more money you might shell out through the years in the form of repairs. And the more units you have to fill, the more vacancies you might encounter.
Granted, the more properties you own, the more rental income you might collect to offset your ownership costs, so ultimately, it's a balance you'll need to strike. And remember, too, that if you find you've gone overboard, you could always unload some properties to another buyer. This is an especially feasible option in today's housing market, with buyer demand so strong and inventory in really short supply.
