Rental Property Investing
- Thread starter AdHustler
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I've owned an apartment complex & a SFD for around 5 years. If you know what you're doing it's absolutely amazing. If you don't know what you're doing , it can cost you big bucks.
Personally, right now i'm looking at starting a private rental investment company, then take that to a public one. There are so many opportunities to make money on real estate right now it's crazy, however many (like myself) don't have enough liquid cash to cover investments.
Just this week I passed up on this deal.
Purchase price $30,000
Rehab costs $15,000
After repair value (ARV) $110,000.
LTV return @ 80% - $65,000 (Cash in pocket)
Rental price $900/mo.
PITI + Upkeep $700.
Cash return/month $200.
So that's $65,000 instant gratification plus $200 in your pocket a month for all eternity.
In 2007 my brother and I purchased a 6 unit apartment complex for $68,000. Median rent is $425/unit, so we're clearing 44% simple interest a year.
Personally, right now i'm looking at starting a private rental investment company, then take that to a public one. There are so many opportunities to make money on real estate right now it's crazy, however many (like myself) don't have enough liquid cash to cover investments.
Just this week I passed up on this deal.
Purchase price $30,000
Rehab costs $15,000
After repair value (ARV) $110,000.
LTV return @ 80% - $65,000 (Cash in pocket)
Rental price $900/mo.
PITI + Upkeep $700.
Cash return/month $200.
So that's $65,000 instant gratification plus $200 in your pocket a month for all eternity.
In 2007 my brother and I purchased a 6 unit apartment complex for $68,000. Median rent is $425/unit, so we're clearing 44% simple interest a year.
Have friends that are. Like all money making methods, it's not as easy as it appears.
Dealing with tenants can be a nightmare, you have to watch void periods, and there is no end of legislation to comply with. However, if you're on top of all that stuff, it can be a good long term earner.
Personally, I'd go for commercial property, or renting to the military, but I'm sure they have their own drawbacks.
Am I crazy to think that I don't think I'd be happy with a $200/mo return? The reason I say this is that lets say that unit goes unoccupied for a few months or you have a major repair like a roof....that's going to eat a year+ of profits.
Then you should probably be investing more than $45,000 upfront.
It takes money to make money.
I think the difference is you have an asset. So you bought a house worth $110k and you have $80k in it AND it clears you $200/mo in profit. You collect the $200/mo for a year and then sell the house for $100k to move it quick and you come out ahead.
Either way it's hard to make money when you have a mortgage on the house. Your returns are infinitely better after its paid off.
That's the thing, id have no interest in flipping it, id want to collect income producing properties....I see it like SEO sites that make money month after month but cant get Panda/Penguin slapped. I just don't know how realistic my thinking is.
I heard there are new taxes coming for those that rent out?
If so, need to factor that in... like the dividends on stock holdings... taxes are going up....
You cant add 1 Trillion plus a year forever.. at some point that debt needs to be paid down, and the rich cant pay all of it... unlike what obama our dear leader says.
If so, need to factor that in... like the dividends on stock holdings... taxes are going up....
You cant add 1 Trillion plus a year forever.. at some point that debt needs to be paid down, and the rich cant pay all of it... unlike what obama our dear leader says.
I have 17 houses all purchased with cash. They are in the low end range and I target college students (super high rent, parents as co-signers). Average rent is around $1,000/month on a 50-80k investment.
As cheshire said going cash in the way to do it.
As cheshire said going cash in the way to do it.
I own two rental properties (duplexes) and I can say its mostly a pain in the ass. My whole family is involved in real estate, so I purchased these two from my mother as she didn't want to deal with them anymore.
When you have renters that stay, its a great investment. When you have shit renters who are trashy and squat it sucks. Especially if your state laws allow them to stay without paying if its winter, etc.
There are two methods in my opinion, flipping and long term investment. If you want to keep these properties for forty years, then you'll be happy to break even and enjoy the tax deductions. I hope to purchase a few more before the end of the year, I'm hoping owning a few more will provide some more tax breaks.
I've never flipped a property so I can't really speak to the methods or true returns you might see.
When you have renters that stay, its a great investment. When you have shit renters who are trashy and squat it sucks. Especially if your state laws allow them to stay without paying if its winter, etc.
There are two methods in my opinion, flipping and long term investment. If you want to keep these properties for forty years, then you'll be happy to break even and enjoy the tax deductions. I hope to purchase a few more before the end of the year, I'm hoping owning a few more will provide some more tax breaks.
I've never flipped a property so I can't really speak to the methods or true returns you might see.
That is why you aren't getting as high of an ROI.
Risk/Reward - SEO sites are riskier so you get a higher ROI while properties are a lot less risk so the ROI is a lot lower.
It just seems like you want the best of both worlds (high margins and low risk) which isn't going to happen.
Then ideally you'd want to pay them off. You don't owe money on your SEO sites do you? Buy the house outright, rent it out for $1000/mo. Use that income to buy another house. Rinse/repeat. When you have a handful then hire a property management company to manage them. (or just start your own property management company like I did for extra revenue.) Currently at 8 properties paid off and 2 mortgaged. Hope to have those 2 paid for by this time next year.
what are you talking about? Who said I was risk adverse? Buying properties that are hundreds of thousands of dollars is far from low risk.
This is a key point - if you are picky about who your tenants will be you'll save a lot of money and headache later.
I recently had lunch with a guy who has personally built and owned more than a thousand units here in Vegas. He now also owns multiple gas stations and storage unit complexes. He is completely debt free. He told me that you'll work just as hard in managing a single family home as you will managing a 10 unit complex. Just some food for thought.
Kind of defeats the big lure of real estate which is leverage. You have a lot of money tied up in a market that is pretty fucking scary right now. No one knows what the fuck the RE market is going to look like in 5 years.
There are a shit ton of boomers that are going to be selling their houses and moving into care facilities in the next 5 years. Dying, etc. I know there are pockets of the market that will be fine but there is going to be a lot of supply and lower demand on RE in the next 20 years. The idea that RE will always just go up is over.
Glad to hear it's working for you but I couldn't tie up that much cash in a long term vehicle that is so rocky. If you can find a really sweet ass deal and turn it within a few years with good leverage then great.
I'd love to know how managing 10x the toilets, sinks, hot waters heaters, HVAC units, locks, ovens, dishwashers is just the same as managing one.
It's only easier if you're using a management company or are large enough to have your own management system in place with employees. Once you're at his size it's probably not a great difference but like everything, it's always more efficient with size and scale.
THIS
I lived in a college town and rent was insane. Who cares. Mommy and daddy is paying the rent.
I also seen how they usually leave the house. Then again who cares. That's mommy and daddy security deposit.
Requiring capital is not the same as low risk.
Spending $100,000 on adsense sites or buying a penny stocks is high risk.
Spending $100,000 on real estate is low risk.
Likewise, spending $1,000 on adsense sites is high risk and spending $1,000 on real estate is low risk. Initial capital requirement does not correlate with the riskiness of the investment.
That statement sounds like it is coming from somebody who is risk averse.
$200 free & clear with money already devoted to escrow, about $150 to $200 per month going towards future repairs.
That also does not include the $100 or so in principal payments each month that are going to pay down the mortgage. So, in reality you're making $500 a month, just not putting it in your pocket physically.
PERSONALLY managing 100 rentals is much harder than managing 1 unit. What this individual is likely talking about is managing 1 yourself vs 100 with on-site management in place. Then it's quite easy, but you have to calculate it into your strategy.