Many of our loyal readers know that 2012 is the year that I am looking into ways to invest in real estate. With the real estate market flooded with homes and the interest rates at all time lows, it seems like an especially great time to invest in real estate.

However, I hesitate to buy actual homes or duplexs to rent out due to my spouse’s reluctance to take on mortgage debt as well as to the many management problems that can happen with real estate.

As part of my research in real estate investing, I thought it prudent to examine my own father’s experiences with real estate investments. He did learn several lessons and he did end up abandoning real estate for the stock market.

Dad’s Real Estate Lessons

Buy and keep – ease into landlording.

In Dad’s case, he was able to ease into landlording. He bought a 4 room house (probably using the GI bill from after WWII) and 2 lots – next to each other. After 7 years, he was able to buy a bigger house and move it to the lot next door. He then started renting out that first little house (after adding central heat!).

Later in life, he was transferred to another state for a couple of years. Instead of selling the two houses he owned, he hired a manager to rent them while we were gone. This saved the cost of selling and the taxes incurred from capital gains – and brought in some extra income to help pay the mortgage on the new house in the new state.

Buy low.

Dad bought his second, bigger home (3 bedroom, 1 bath) when the super highway came through. An entire subdivision had to be either moved or destroyed. He bought a house at rock bottom prices and had it moved.

I will never forget the sight of that house turning the corner up the hill as it neared our lot!

Be handy.

Dad grew up on a farm and consequently was required to learn to do repairs. He tackled anything and everything and was usually successful. When he started renting, he and Mom (along with us kids) did all of the work on the rentals, from painting to cleaning to repairing, advertising and bookkeeping.

Doing your own maintenance, improvements and management will save a bundle.

Keep it local.

Dad’s house was right next door, making it very easy to manage. When he branched out to house flipping, he continuned to stay in the area.

If your property is too far away to personally manage, you will need to hire others to manage and repair it. You won’t be able to keep close watch on how the property is maintained or who rents it.

Don’t hire property mangers that won’t be professional.

When Dad was transferred for two years to a new state, he made the mistake of hiring the next door neighbor as a property manager. The man was a devout church goer and was guilt tripped into renting to a church member who couldn’t (or wouldn’t) pay the rent. Dad’s manager was unable to get rid of the bad renter so Dad had to start eviction procedures once we were back home. Consequently, he missed out on several months rent and incurred legal fees for the eviction. He then had multiple cleanup and repair issues to also handle.

You won’t always make a gain on your sale.

When he was transferred to another state, he bought a house. It was the 1960’s and that house was in Scottsdale, AZ – which was soon to become a VERY HOT real estate market. Unfortunatly for Dad, at the time he needed to sell, the market was down (yes even there) and he lost money. In retrospect, if he could have rented that house out until the market improved, he would have had significant gains on the sale of that house.

Start young.

Dad started keeping real estate investments when he was in his late twenties. He had the time and youthful energy to deal with all of the issues that renting property can entail.

The best looking investment can fail – even with tons of hard work and research.

Dad made one attempt at buying a fixer upper to resell. He did his research, looking for an underpriced home in a nice neighborhood. He found one that he thought would require minimal repair. He worked on that house himself, every night after work for a couple of hours and every weekend. After he finished, he was unable to sell for a gain and unwilling to keep for a rental. At the time, Mom was recovering from a brain aneurysm and he was starting to explore the stock market.

Overall it is lucrative.

Although I was blissfully ignorant of Dad’s financial status, I am guessing that he rented that first little 4 room house for at least 15 years – from 1955 through 1973, and the second bigger house on the lot next door for at least 7 years. Average rent at the time was around $87 so I assume these smaller houses would have rented for 50 – 60 a month in 1955, with increasing rates as the years marched on.

According to Zillow.com, this house is now worth about $50K and might rent for almost $745 a month.  Today, an out of state LLC owns it.

I often wonder what else Dad would say, were he still alive today, about his real estate investing experiences. Would he have drawn the same conclusions from his lessons?

What real estate investment experiences have you had – what lessons have you learned from them?