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- Marcia Castro Socas has been a landlord for years.
- She says the landlord-tenant relationship is an often overlooked aspect of owning rental property.
- She says it’s not always best to buy the cheapest property and that the news shouldn’t dictate your plans.
One of my biggest financial goals is to invest in real estate. I’ve always wanted to own a handful of properties around the country that I rent out to tenants to generate passive income. Although it will be years before I’m in a position to purchase my first investment property, I’m doing what I can to understand how the whole process works.
In addition to figuring out how much cash I’ll need for a down payment, renovations, insurance, taxes, and to cover fees before a tenant moves in, I also want to know what else I should know before jumping into real estate investing.
To find out, I spoke with Marcia Castro Socas, a real estate investor, home renovator and real estate agent who has made millions from her investment properties over the years, about what she would tell any new investor. Here’s what she had to say.
1. A lower price is not always the best deal
In my free time, I like to look at properties for sale to see which ones I would buy if I had the cash today. I also look for the cheapest properties, as I expect my budget won’t be big enough for my first investment property.
Castro Socas says looking for the cheapest house is not always the right move.
When she bought her first investment property, it was a house that needed renovation. She knew it would take time and that she would have to pay off the mortgage while she renovated. But what she didn’t think about was all the money she would have to spend on the repairs, and that added up to more than she expected.
“Sometimes it’s better to buy a property that doesn’t require quite as much work, even if you have to pay a little more for it,” says Castro Socas. “The lesson I learned here was to be honest about how much money I have available for a project and how much work I can comfortably afford.”
2. Don’t let external news change your real estate plan
As someone who is interested in investing in real estate, I always wonder if there is a right time to buy and I am nervous about potentially entering the real estate market during a recession and then it might be more difficult to rent the property.
Castro Socas recommends not letting external news influence your long-term planning. That’s exactly what she did in 2008 when the real estate market crashed.
She owned numerous rental properties that had lost significant value, and while other real estate investors rushed to sell their properties to get out of debt, she held on to hers.
“Instead of listening to this news, I saw that every property except one was generating rental income that exceeded the mortgage amount,” says Castro Socas. “Even though the sales market had crashed, I didn’t care because I didn’t want to sell. I was content to keep the properties and continue to rent them out and pay off the mortgage every month.”
Years later, Castro Socas still owns several of these properties and their value has reached new record highs.
“Keeping a cool head and looking at the actual facts rather than reacting to market panic has proven to be much wiser in the long run,” says Castro Socas.
3. Being a landlord is not just a question of money
One of the main reasons I want to get into real estate is in the hopes of generating passive income and growing my overall financial portfolio.
However, Casto Socas says that owning property is not just about making money. She says that while it may be easy to just focus on the amount of income and return on investment, being a landlord is also about the relationship between landlord and tenant.
“Tenants who have a personal connection with you take good care of the apartment, stay longer and are more likely to do minor repairs themselves,” says Castro Socas.
In return, Castro Socas ensures that this good relationship is maintained by taking care of problems quickly and treating tenants well. She says this attitude has led to an increase in her income over the years.
“Since several tenants have been living in the rental apartments for over eight years, my income is higher because there are no vacant apartments in these properties,” says Castro Socas.
This article was originally published in October 2022.
