Just been thinking about this… mostly because of changes i’m making so that if i choose i can go to disney world for a month and not worry about much…
I know there are more than a few on this board that understand this but i think it’s something that needs to be visited more often…
the people on this board have skills… many are basicly one man bands that thru work&skill sets produce income… I’ll be honest there is no way i could work enough and charge enough in a week month or year to cover my set expenses… and i don’t live large… maybe if i billed $100hr and worked a full 40hr billable week i could… but even in that dream every month would depend on me… and me alone have’n that work…
with the skill sets most have on this board I see very little reason for people here not to have rental property… I with a little help manage to keep up with and maintain aprox 50 tenants… i know time invested in this is less than 10hrs a month many months less than 5…
there are others here much better at it than I.. who i hope will add to this topic… ut i see guys around here work for 30 yrs and then have no outside income unless they keep working… btw… i’ve been 90% unable to convice anyone to do this (guys who have worked for me and friends even when i offered to help)
it just ain’t that hard
p
Replies
I see very little reason for people here not to have rental property...
In my market, virtually every single family and duplex owner is subsidizing their tenants. ROI is horrible. Was talking with a friend this week who gets $700 on a $175k house. Median house here around $300k.
Rentals paid off until recently only with appreciation, now absent. I can get 4-5 times the return by carrying a "sub-prime" mortgage-with no overhead. LTV is critical.
Larger complexes I don't know about, been awhile since I was aware of market value for them.
PAHS Designer/Builder- Bury it!
Edited 3/2/2008 10:35 am ET by VaTom
I first tried renting when I was 26, as worked with a guy who was buying houses by just taking over payments (Seattle depression 1971).
Found out real quick I had too soft a heart.
Rentals for me would have ended up being a charity operation vs. income.
Only time I rented since then was to relatives, for at least 2 years, and at < 1/2 market value - that way the capital gains on the house they lived in was tax free.
Prefer outside income to be dividends and capital gains.
PS: If I did not enjoy my day job, I probably would have started moving into a fixer every 2 years when the 2 year no tax on capital gains from home sale started. That is one area where I'd think anyone in the construction business could get a leg up on their income, especially if young and basially willing to work on their own on weekends.
BTW, don't think there are many areas around right ow though where even a fixer could be sold at a good profit in 2 years, but one never can predict.
Edited 3/2/2008 10:47 am ET by junkhound
Only time I rented since then was to relatives, for at least 2 years, and at < 1/2 market value - that way the capital gains on the house they lived in was tax free.
I hate to burst your bubble, but the only time you can get tax free treatment on sale of house is if it is YOUR personal residence and YOU lived there for 2 out of the last five years.You get out of life what you put into it......minus taxes.
Marv
burst your bubble
Did the law change since 2001?? Up till then it was you or your immediate family.
2001 tax year is the last time I did the relative rental (did have to be immediate relative-as in son)
Heck, read all the IRS rules, sent documentation to IRS with exactly what had been bought/sold/rent, etc. I did pay income tax on the depreciation I'd taken the 2 years before on the rental, but IRS sent me a check back said I didn't even have to pay income tax on that.
Did the law change since 2001?? Up till then it was you or your immediate family.
This is incorrect. The law has always said it must be your personal residence. The IRS does not examine every return for accuracy. You get out of life what you put into it......minus taxes.
Marv
exactly why i got away from residental and went to commercial.... laws favor owner vs tenant in commercial... besides that... dealing with people that understand rent is just a business expense helps... plus... only thing i maintain is the parking lot and roof and that expense i can roll back into the cam fee...
but i know people who do very well as landlords... buying right is what will make the deal... no you can not buy something for 200k and rent it out for 1k a month... but you can buy four 50k properties and make money renting them for $650 a month each...
p
I agree Ponytl.It would be very hard to buy property through a realtor and get it to cashflow based on residential rents. It doesn't normally work if the investor is honest about all the elements that affect the bottom line: vacancy rates, management costs, mainenance, etc. Most everyone wants to only look at the cost of servicing the loan as their basis for "cash flowing" but that really isn't realistic. Your entry method into the commercial properties makes sense. The retiring landlords know that if they don't structure their owner finance deals correctly, they'll end up taking the property back with several more years of deferred maintenance. After all, they know if you're going to lose it back to them, you'll grab as much back as you can before they take title to it. Obviously, you, the buyer still has to make sensible deals and have a plan...One thing....I wouldn't categorize 50k single family residential rentals as "passive income". That is an IRS categorization and I think it is misleading when discussing the actual workload that is attached with it. Your tenants are commmercial and I suspect that you have a lot of NNN contracts, which is significantly different than a boatload of low income properties in tough neighborhoods. Your situation is passive and if you are wondering why more carpenters don't get into the commercial end of things, then I agree. It's a good question. Bob's next test date: 12/10/07
Several people have mentioned that they can't find a good deal through a realtor. IMO, there is really only one reason for that: the market in which you live.How many of you are familiar with more than one local market? No one is, not really. Why? Because it takes all your time to be on top of one single market locale. Anyone who has been seriously in the real estate business knows it's true. In cities the brokers only know one neighborhood.If the market is such that you can clearly make money with rentals (such as where I live) there will be a steady local business of people doing exactly that.As any market tightens (more of a market value based on the "market approach" and NOT on the "income approach") there are fewer good deals. So who do those good deals go to? They go to the people who are willing to beat the bushes, such as ponytl.And why can't you find such a deal through your realtor? Because if s/he finds one s/he will buy it or hand it off to a family member or personal friend. So much for the Realtor Code of Ethics. IMO, it rarely exists in practice.Just my two bits. For disclosure's sake: I'm a broker, but not a member of any Realtor organization. I have mostly shunned residential rentals so as to not be in competition with our customers. I do have a few commercial tenants.
"Doubt is not a pleasant condition, but certainty is absurd."
~ Voltaire
I'm not sure what you are trying to get at. I think what you are talking about is, what I call at least, income streams. You are getting income, even little amounts, from various sources and collectively they add up to more money than you normally can generate. Owning rental property is one of those ways.
Assuming above is what you meant, then you want to blow it all on a one month vacation in Disneyland or places like that!!!!!!!!!!!!!!!!!!!
I have rental property and small amount of "income stream" but I don't blow it. You have the right idea about getting ahead but when you say in one breath you don't live large and the next breath you say you want to vacation for a month, somethings wrong.
Most people wonder where all their money goes but they are bleeding from a thousand little cuts. They all look back at their spending looking for major spending and can't find it. They can't see the obvious.
No offence but you make it sound going to Disneyland for a month as not a huge thing. For me, even a weekend in Disneyland is too much, and I can more than afford it!
When my wife and I first got married we saved every penny. Going out ONCE a year for supper was a big deal.
You are starting to think right about making money. The next step is to hang on to it. Take a lunch and a thermos EVERYDAY and don't go to Disneyland for 20 years:)
roger
The next step is to hang on to it. Take a lunch and a thermos EVERYDAY and don't go to Disneyland for 20 years
Each to his own. For me, life is too short to pinch pennies all your life and not enjoy it.You get out of life what you put into it......minus taxes.
Marv
You are very right but for me its worked. At 34 my wife and I took off and travelled the world for almost 2 years. A few years later we went back to Australia and lived for 6 month. A few years after that we bought a Class A and travelled North America for almost 18 months.
The most I have ever grossed in one year was around $45,000.00 and that was only once. It's not how much money you make but what you do with the money you do make. You are right though..................I have a reputation of being very frugal:)
roger
LOL just for the record... my kids have not been to disneyland... but i'm at a point in life where I want the option... it's not a disney world thing... it's making a point of me being gone 30days... something i haven't done since i was 18...
and i agree with saving money... i do it everyday... it's not what you make so much as what you don't spend... i preach it to tenants (all except 1 duplex is commercial) in business any money you don't spend is money you don't have to make... low overhead will keep you in business... even if it's just me show'n em how to save 30-40dollars a month on things... doesn't sound like much... but that $40 saved equals sometimes 3-400.00 in sales you don't have to make to cover it...
p
I'm not sure what your question is. I have 6 units rented right now. I'm pleased with my houses but I dont think i'll be able to "take off to Disney for a month" for awhile.
The houses flow cash right now but certainly not enough to kick back and relax. I've only had my houses for about a year so the loans are all new.
One of the things that dissuades people is the ups and downs in real estate and the risks involved.
For example, I live in Kansas and for a while there has been talk about investing in real estate in Junction City Kansas and offering rentals to soldiers at Ft Riley in the "Big Red One" division.
http://www.1id.army.mil/
I don't know all the details but there was a projected need for additional housing for soldiers in conjunction with the War In Iraq.
So they built a lot of homes.
Recently the additional Soldiers came into Fort Riley needing housing and they balked at paying the high prices to rent the new homes.
The Soldiers found cheaper housing in small communities surrounding Ft Riley.
Again I need to do more research, but my understanding is there are a lot of new homes, intended to be rentals, that are sitting there empty.
I just wanted to throw this out as one reason people shy away from the risks involved in real estate.
Those homes were built on speculation and not on an established market. Anyone who bets the farm on what the military will be doing in the future is not to bright, IMO.
"Doubt is not a pleasant condition, but certainty is absurd."
~ Voltaire
Well, I agree with you.
And my family has done it both res and comm for two generations before me. I've seen it work. Whole trick that works , from what i have gathered, is that the money is all in the purchase.
Finished a house last Sept., rented immediately, regrouping from that, getting caught back up with customer work, and will turn around and do it again. I don't like banks, so it takes me some time to build the war chest back up.
Remodeling Contractor just on the other side of the Glass City
ponytl,
You are absolutely correct, for you! Your situation is somewhat unique because as I've looked around over the decades I can't find any home that has a sufficent RIO to even cover it's costs.. (Ignoring my labor)
I set the criteria of the rental income must meet payments plus expenses and worked with 5 differant realitors and never once found any place.
I was willing to donate my labor and my time knowing that as the property appreciated I would recieve compensation and within some finite time I could profit.
It's like my discovery that sawmills sell wood really cheaply!
In over 9 years of touting my local sawmill they haven't had any other home builders come around..
The conclusion I arrived at is few are willing to actually work for something..
i think you hit the nail on the head... when you said "realtor"
if you look to a realtor to find you a property that will cash flow... JMHO but 99% of the time it just won't happen... never has for me... except the once a realtor who is a friend mentioned a build was for sale that i wanted to buy several years before... him not knowing i was ever interested... in 5min i'd made a few calls and had entered into a contract to purchase it...
i spot a property... find out who owns it.. give them a call... and tell them who i am and i'm interested in buy'n it if they ever have an interest in selling...
my first commercial properties i purchased from owners as-is with owner financing... all required tons of work... (more than materials) ....
p
ponytl,
Rents that are affordable around here won't support the most basic sort of fixerupper.. Going too far away doesn't make sense either since affordable means at least a 30 to 40 minute commute one way. Those are also in sections of the town where the rate of appreciation are extremely poor thus negating entirely the real reason to own investment properties when the rent doesn't subsidize the costs..
ponytl. I love the whole concept! I can't find a way to make it work in spite of decades of looking..
Let me give you an example This spring I looked at a really modest home. $165,000 which assuming I could get for $150,000.
Meant with a 20% down payment and taxes (considerable) plus potential maintinance I would have to raise the currant tenenats rent by $350 a month to break even. That tenant was a month to month guy and he was already paying about 10% above currant rental rates because he took the only property available at the time without a lease..
These are all homes off the lake in a nearby community of modest means..
Property around me starts over a million dollars if it's on the lake..
just curious... where do people that live around you.... that work at a big box store or McDonalds?
i did watch one of those house shows where a young couple in NC had a 100k to spend on a home... ended up spending 120k i think for a "manufactured" home... man i just don't see that at all... didn't know one (like they got) would last the life of the note they signed up to pay...
If i had to... i could find a place that might not be first choice but that'd i'd be ok with within 30 miles of me... for 60k... not a first choice mind you...
the rental market is pretty strong here... people that aren't buy'n still have to live somewhere... btw.. you can buy pretty nice in a trendy area here for under 200k maybe even down to 145k on the smaller single family homes...
p
ponytl,
We are importing them.. Mc Donalds etc. tends to pay nearly $9.00 an hour which makes commuting possible.. Even my teenage daughter was working for nearly $8.00 an hour as a clerk at the local grocery store.
Edited 3/2/2008 1:34 pm ET by frenchy
10 yrs ago outside atlanta they were offer'n $12 at mcdonalds... burb off the public trans route... this was for workers during school hours... they had staff after... every worker there was over 70 i think
p
BTW, was at Disneyland for 4 days last week - well, I drove right past it everday and could see into the park from the hotel room, does that count as partial vacation or taking time off???
Probably stayed right next to Knott's berry farm 5 weeks in the last 3 years, but have never bothered going in.
Probably stayed right next to Knott's berry farm 5 weeks in the last 3 years, but have never bothered going in.
Other than the restaurant and the Old West town, it ain't what it used to be. They have a brunch on Sat. and Sunday that is best I've ever seen. Reasonable price too. The restaurant is just outside the park so you don't need to pay the admission. They also have preferred parking for the restaurant.
I don't know...............
I have keenly paid attention to you and Tim Mooney and a lot of others, discussing rentals. I got the repair skills and most if not all of the money to buy "something". But I'm am staying in the background waiting for the deal to "find" me. Maybe it will or maybe it wont.
Don't want to be a residential landlord. I hate the thought of evicting the single mother, but I really hate the thought of giving away my money. I guess I'm like junkhound, my hearts too big.
But you do commerical rentals. They appear to be a lot easier to manage. Not as much "personality" involved.
I just don't know about all the ins and outs of commerical rentals. I sorta think one needs to learn in small steps and one of the 1st steps should be a cheap residential rental. But I don't want to do that as I said above. I'm relucant to drop a lot of money on commerical property and then lose my shirt due to my crummy managment of it.
I love passive income. I get it from mutual funds and from interest income. Sure beats slaving your guts out. I think this is what everybody is working towards. They call it retirement. You (and me ) just want to take it earlier than age 65. I agree with your philoshpy and envy the situation you have created for your family and your self.
Ipresently work 40 -60 hrs a week, but have started to take lots more time off when I can get away with it. (schedule -wise, not money -wise)
in my minds eye...
i see each property as both a job and an employee...
it's a job in the effort it requires...
it's an employee in that i expect it to make money for me... just as what you would expect from any emplyee...
I also think there is a comfort level in large numbers... if i have 5 units that do well and one becomes empty... i don't panic... where if i have one large tenant stop paying... it could hurt... i booted a 15yr tenant back a few months ago my largest... they had problems and ...it's was do i take the shot? or wait for the infection... still hurting me every month but... not like it would if they were my only tenant...
it's not pain free and if you stress about money then might not be the thing for you... but I've always known i could live in a trailer and kill small animals for food... so... never stressed me too much ... i'm not home free don't know if i ever will be... but i still have fun...
Mooney always has great insight and advice and lives it more day to day in his dealings than i do... so maybe he'll repete his advice on this sublect to those who might have missed some of his postings...
as for those with mutal fund or other investment advice/experience... chime in... the more streams of info the better
p
bump
Peach full,
easy feelin'.
Some of what you are talking about is inititive, some is cash, some is area.
There are folks here that could do the work, but can't afford to get in the game. There are some that are really leery of getting stung with falling prices. You seem to be blessed with prices that are affordable and enough $ and contacts to do what you do.
When I bought my first property (Long Island, NY), it was a deal with my girlfriend's family for the down payment, lots of sweat equity and a few good breaks. It cost me 40K. At the time, my salary was about 2/3 of that. Can't find those deals any more. Now, if you see properties in most cities/suburbs, the starting price is a lot higher. The house I had would likely be $400K today. How do you afford those numbers?
One reason I went with that property was that when I talked to local real estate folks, they couldn't find me a property with positive cash flow. Everything I looked at had an income from rental that was less than the mortgage and taxes - forget repairs and improvements. Today, it might be different in some places, but it's still like that in many. As far as commercial stuff, I can't fathom how you can start there; big numbers. Where did you find the cash to start?
I've got rentals now and last year was an eyeopener in terms of bad years. Had 30-50% vacancy for a while. This year looks a little better, but I'm thinking more of diversification. I don't want most of my money tied up into this. I like the idea of some income coming from the bank. Their checks are pretty dependable. 20 years ago, I was told to diversify and scoffed. Well, now I understand. Don't know how many I'll sell this year, but I told somebody last week every house I own (except our residence) is for sale.
If you have the money to get into the game, the area that can support rentals and the character to keep the property in repair and keep the tenants in line, it can be a great way to make a few bucks. If all the stars aren't lined up, it can be a difficult way to make a few dollars, or lose some.
Don K.
EJG Homes Renovations - New Construction - Rentals
I agree with you also.
It's not a flip business as far as I am concerned, more of a long term investment.( But I aint married to any house - throw a good profit at me, and I'm movin' on to the next one)
And I also don't see it as easy to get into as just running to the bank for some money. That's why it's an extra money game for me - meaning - when I throw 70 to 100K together I start looking for another opportunity. And I am convinced that the money is in the purchase - so if I can't steal it - I won't buy it. I am rediculously conservative, so I choose to do it slower, and safer. Everything I have is paid for - lets me get creative with things like insurance, etc. to maximize the upside.
Pony's got a point too. I know for me it's a match made in heaven. I already own the tooling, knowledge, and everything else it takes to redo a property. And I really like what I do. It's just that much more fun to do it on nights and weekends with a beer in my hands, the stereo blastin', the kids helpin' and learnin', and noone making decisions 'cept me.Remodeling Contractor just on the other side of the Glass City
first commercial prop. was for our office... small building that i took down to the studs and rebuilt... our company had grown and we needed /wanted nice offices... guess i was.. 25-26 at the time... owner financed.... took 12,750 to totally rebuild new hvac plumbing siding drywall hardwood floors the whole deal...... the building served us well... and we still own it... (wife & I ) somewhere along the line we got married the business was great but 24/7 wasn't the best deal for us... so i went off and opened some small loan offices... again we needed buildings so.. i bought em... again owner financed... few years later sold out to a national chain... but kept the buildings and leased them to them... (i'd gathered a few res rentals during this time around the local collage) now retired... i spent time build'n & race'n cars but found i was better at sports marketing so i spent a few years doing sponsor deals and play'n ... got lucky and was invited to invest in this new company that had the next best greatest idea... something called "blue tooth" even now i don't understand it... but at the time 9-10yrs ago no one had a clue... got bought out by this small time company "amazon".... in the mean time i'd kept one loan company just so my oldest bro would have a job... i started buy'n old 70's strip centers when malls were hot... i mean junk that had no maint done in years one was to be torn down part of the RTC deal...
except for the asphalt work i did and do it all... (now have asphalt equipment) except a laydown machine...
I haven't purchased anything new in a few years... last purchase was a small 2 tenant brick building on a main street... barber on one side and a cafe' on the other... owner was old... and i got it cheap... needs a little work but the rents are cheap and they can't pay more so... it is what it is...
so i guess thats the story... just for the record... even with 50% LTV with national long term tenants... it's hard to get loans right now... i don't sweat it...
easy? no... but i see so many trades guys have very little when they are 70... I hate to see hard working people get older and have money issues... that in my mind... didn't have to be... i don't care if it's one duplex in the hood... an extra 700-800mo when ur 70 years old would help... even if the duplex is worth exactly what you paid for it 30 yrs before... at least it's paid for itself and now it provides for you... maybe thats too simple... but i just don't think it is..
p
With most of us being carpenters we tend to want to fix-up & rent houses. When I looked at the rate of return on houses I just couldn't see it. I went for a larger old commercial unit nobody really wanted & broke it into smaller ones that little companies could afford. Several years later and its still humming.
i've never done it but i did look at a small "industrial type park" deal in fl... what it was... was... easy to put up 40 x 60 ft metal buildings with a small office in the front and a drive in door in the rear... i spoke to the guy who owned it... he built em one at a time 15-20 ft apart... some he split right down the center for 2 20ft x 60ft spaces... he had everyone from contractors to small cabinet shops... plumbing co's crafts type people ect... when i met him he had 3 slabs ready for buildings... told me he did 3 slabs at a time... then one building at a time... he seemed to be doing well and filling a need... it's an idea i've kept in my head for "future things to do"
p
we've got a deal here in town that has always interested me,built like a u store it. each unit is about 20' wide 40' deep with one overhead door,has it's own utility with a bathroom built at the end of each unit to service 10 units. construction is stick built with brick veneer and 4/12 pitch shingle roof.
these are set up to rent to a small business like car repair,cabinet shop,warehouse etc. last i knew of they were renting for 800 a unit/96k a year per 10 units on a 8000 sg ft building.thats a pretty good return for warehouse type space. common rate on warehouse here is in the 4-5 a foot range.
i'd like to try one if the right piece of ground pops up.
real estate guy i know swears the best place to be is 2400-3600 sq ft warehouse buildings.larryif a man speaks in the forest,and there's not a woman to hear him,is he still wrong?
i have a small strip center where the bays are 15 x 50... 750sf... some tenants have up to 3 bays.. it's a class c center but with 2 great national tenants... rents today are $675 per bay... think 24 bays total... none empty.... same space 1 mile away same road new construction... $1200mo. same traffic count...
p
ponytl, i was reading thru this thread and one question i had in my mind was "i wonder how long he's had his commercial?" now after i have read your last post i have that kinda answered.
my experience with rentals and comm. in particular is back in the mid 80's when the market was in the dumps with the rtc and high interest rates that comm could be bought right. i purchased some comm.properties starting in 82 and up till 96. they have all proven to be great moves and i can still remember the risk i felt on that property in 82 when the loan officer told me my var. rate could top at 19.5.!!!
i'm not sure if i've just gotten older and more cautious or what ,but it would be really tough to buy a comm. prop. around here today that would cash flow and have a reasonable amount of risk.around here [wichita ks] most of the comm. stuff will throw off about a 5-6% return if everything goes well. [compared to the 10-20% in the good ole days]if you have one that goes vacant and sits on you awhile ,your in the brackets pretty quick.
i 100% agree that the commercial is a great place to be if you can make it work ,but in todays world for most small investors i believe that housing either single or up to a fourplex is the most comfortable place to be for the small guy. if you have a 1/2 dozen homes the chances of half of them being vacant for 4-5 months are pretty slim. usually if a house just needs a touchup and release you won't eat over a months rent and your rolling again. also when the time comes to sell i feel houses are easier to move ,with the exception of someone may come knocking on your door for comm. and i have never had that happen on a house.
i can completely understand why a guy in the trades wouldn't want to be involved in the rental business. there is a lot more to it than just being able to swing a hammer or put a roof on.lots of problem solving and working with people and some of it gets pretty unpleasant.
theres always the disscussion on buying right, but after that comes alot work and risk,then comes the rewards. i've done the deal at disney with the kid and your right it's great to be able to do that,but at the same time while i was riding space mountain my cell phone was in my pocket waiting to take care of those unplanned happenings back at home. larryif a man speaks in the forest,and there's not a woman to hear him,is he still wrong?
You are so right. Having a source of rental income at retirement time is a good thing, no doubt. Even if you change your mind and decide to sell it, pocket the money and use the interest &/or principal, the extra funds are a good thing.
When we met at Memfest, I remember talking about something commercial instead of all residential. Looking at the market in the town I'm in now, (pop. 1800 or so) there's lots of space available. Some isn't real expensive, so it might be a time to buy. Some has been vacant for years. I have my eye on an old motel right now. It's being used somewhat. About 12-15 rooms, asking price is ~250K. Haven't gotten to the owner's books or even taking a good look.
If the numbers work, the question eventually becomes how much stuff do you need to work on? I've got about 6 months worth of work to do, mostly on my own houses right now. None of it's paid time unless something sells. Who has time, or money, to go to Disneyworld? Maybe next year - but by then something else will have come along that needs to be done. :-)
Don K.
EJG Homes Renovations - New Construction - Rentals
in the mid-80's, we had new zoning which severely limited commercial zones
i built some commercial condos and wound up buying one... for $90 K
at that time i could have bought 2 small houses on 50 x 100 lots in the "village" for $45K each
by 2000 i sold the comm. condo for $120K
the $45K houses were now selling at $450 K
my point is residential appreciates much faster than commercial
local conditions vary... but this is the same thing i've observed in other townsMike Smith Rhode Island : Design / Build / Repair / Restore
Ive not been checking this board but responded to a meg on it this morning .
I havent finished the thread yet but I was going to make your point thus far in reading .
The reason I have residential is profits from the long term investment .
I know that cap rates are better on commercial and the now money is better . I can buy some duplexes and triplexes for the sale of one residential house .
So , Ill offer this for those discussing the differences ;
Ive seen apartments grow like grass around here since interrest and lumber is cheap at the same time lately. It used to scare me when a 100 unit complex went in . Ive lived through several apartment booms . They havent touched my income because a three bedroom house is always a step up.
I have one two bedroom house that came up for rent a couple weeks ago. I ran a 6 dollar ad and got over 50 calls on it . Theres no telling how many times I could have rented that house in a week. I dont have empty houses but I see apartments in the paper every week and they look like the same ones .
They tell me they dont have to be full . I did the numbers and they are right . They also can take some non payers and make a profit . They can live off lost deposits by the tunover . Its a business either way.
I just keep thinking that if I sold my stuff it would sell quickly to individuls . My scare if I had an apartment complex and we were over loaded with them what would happen then? I understand if they are paid for its not a big deal though.
Tim
Maybe you're right about the crowd here being more prone to the concept.
But It's sooo much easier to learn how to select a good dividend paying stock that will equal or outperform such RE projects. The dividend keeps going up in addition to the stock's price. Of course, sometimes they don't, but that happens to the RE investments too. And I get to sit home and play on BT, instead of fixing someone's toliet after their massive movement.
And the transaction fees are soooo much less than a realtors commission. And there's no annual property taxes, or insurance bills, or inspections, appraisals, refi costs, etc.
But hey, we all gotta bear our burdens...
i'm with you... i only preach what i know...
i just want people that work hard not to always have to...
no matter the way....
thanks
p
people that work hard not to always have to
Sometimes I think that working hard is genetic. Also the opposite.
Not sure I could ever just 'not work' for more than a few days at a time until unable.
Do have one 40 YO kid though who has not really worked more than a few days at a time since he was 24...so know it works both ways.
Stocks wont match it . Not in several years.
But then I could buy a stupid house and you you hit a goal mine of a stock.
This would be a good discussion. All by its self .
One thing is for sure . I need to know more an about stocks and you need to know more about the business here at hand.
For starters you dont buy from agents. You only pay up to 70 cents on the dollar cause youre a wholesale buyer . Fergit retail . So ya bought this this house for 60 cents on the dollar and go to the bank and get a 100 percent loan. You rent it out and collect 300 per month profit . On what ? Nothing invested . Youre makig money on the banks money if you choose. So it rocks along just like that for 10 years . House gets paid for and you own it , but wait , you never made a payment out of your pocket . How could you own somthing with out ever paying for it ? All the while its been a write off actually saving you money on taxes. All the while you might have 2 hrs a month in it . But thats all you ever invested .
Where can I buy stock that competes with that ?
Tim
Tim,
What you've described is very similar to stock options & futures. Highly leveraged, volatile, and risky investments. That 100% financing is why we're currently in the economic condition we're in.
And stocks can be bought on margin - commonly at lower rates than RE.
What happens when your renter dies, loses his job, doesn't pay? All of a sudden your cash flow has been "beavered." And your taxes, insurance, utes still continue.
Stocks don't have the opportunity to rent to meth-heads. Your near-slum investments have plenty of that. Who pays for the Hazmat team in the cleanup? I'll bet your renter won't have a penny to his name.
Recent years you mention? Gotta be more specific. Since '01, I'e pulled over 15% - unlevered. On margin, that's better than 30%. Without margin, I got's no worries about any other individual losing his job.
Well studied asset managers are well aware of both of our classes of investments. And they understand that we are both right. And both wrong.
The best investment portfolios have both asset classes within them.
Wanna stock similar to what you want? ACAS.
Edited 3/5/2008 7:20 pm ET by peteshlagor
"What you've described is very similar to stock options & futures. Highly leveraged, volatile, and risky investments. That 100% financing is why we're currently in the economic condition we're in."
We have to have a place to start.
In my case , thats not what I described. The bank would not make the loan if they felt that way, however they probably would not do the loan for people with good credit lacking history. If you were an established car dealer with a lot of experience , the bank would make the same type of loan.
I think we could probably come together here on this point . Im guessing you are comfortable buying stocks because of knowledge. When I buy a house for 60 cents on the retail dollar , Im not gambling . Im really doing it . If I didnt have the knowledge I would not be comfortable . That said the tv shows are a bad influence because most of the people they show dont have it . Not any where close .
Now if I start buying stocks with little to no informaton or houses , then Im sure I would be setting myself up for failure. I firmly believe knowledge is power in these cases especially. I dont know squat about stocks and will not go there . Im very comfortable in RE .
I dont gamble but I do the deals I mentioned .
Edit ; I love to gamble but not on RE.
Tim
Edited 3/6/2008 10:04 am by Mooney
"What happens when your renter dies, loses his job, doesn't pay? All of a sudden your cash flow has been "beavered." And your taxes, insurance, utes still continue."
Ill treat this as a legitimate question.
The rental business has flex built into it . Its enough flex to make it flow. However if a "softy" is at the controls , it wont work. Management must fo their job. If they do then the tennant will be out on his or her butt reqardless of the common myth we cant get renters to move . Ive been doing this for 15 years . The very longest a non paying renter has ever stayed in one of my units is 30 days past and that was my fault .
In 24 hrs after being late its legal to issue a Pay or Quit letter . I issue one in three days . I call the night its due . If I dont get an answer Im there the next morning before they leave for work and I hope I wake them up. They sure didnt make my morning easy. I dont really listen to excuses . They dont pay me squat. I tell them up front Im not interrested in talk. Doesnt matter to me why they havent paid . Im looking for green in my hand . Thats all that matters to me.
But I do listen to where my money is at what time . When? I make the, make me an appointment in urgency. If I get the feeling or they say they arent going to have my money I offer a trailer to move them that day. Ill help them move out that day. Lets do it ! If they arent going to make my payment then I have to get someone else in there who will and quick. Ill pay the rent on a storage building that day for 30 days if they say they dont have a place to go. Ill also recomend they stay with relatives but they are not my problem and I dont make them my concern. I normally get those out in three days .
Five days late and they get an invitation to court . Ten days after that they are fined every day they are still there . So legally if management did their job the renter would be gone in a lot less than 30 days .
All renters sign years leases . The ones we are talking about lose them when they get that invitation to court or move before the time is up and dont pay. They can then be sued in small claims court and the money extracted from their earnings. Damages are added to the bill. That can also be turned in on their credit report . I dont bother with it but dont tell them that . In fact I tell them I can.
I run about 95 percent to the bottom line on rents paid through the year . The only reason Im able to do that is late fees and deposits kept. Only a small amount of renters can get through the process and reclaim their full deposit after carpet which is 75.00 non refundable cleaning . You can also figgure the interrest for on going deposits that spans years from long term renters if you are a bean counter.
The proper way to figgure it book wise is non month rents which commonly its supposed to be around 85 percent . In other words the books say that you only count on 85 percent of the rents as a business plan. They say there are lots of people doing far worse and Im sure thats true . My queston has always been ; Were those people running a good business? Or were they victims of an area of misfortune ? I dont know the answer but if they cant make their payments then they dont need to keep their rentals . It only pays to have rentals if you have paying renters every month and thats the secret of the business if there is one secret . I say that because I hear of a lot of people doing it not getting paid so it must be a secret . I dont hear people bit666 about it when they are geting paid . Its their fault .
"Stocks don't have the opportunity to rent to meth-heads. Your near-slum investments have plenty of that. Who pays for the Hazmat team in the cleanup? I'll bet your renter won't have a penny to his name."
That would be management again to check references and make good choices. I dont rent to folks on the phone . I chose from 50 calls on the last house I rented . Im not a slum lord and cant speak for them but Ill say they made that choice when they bought those kind of properties. Ive got higher dollar rental houses and since folks cant get a loan these days they are in demand .
90 percent of my inventory are 3 bd 2 b /W garages. I get to choose who lives there . If a police report gets filed one time, they are history with me and its noted in the lease .
"Recent years you mention? Gotta be more specific. Since '01, I'e pulled over 15% - unlevered. On margin, that's better than 30%. Without margin, I got's no worries about any other individual losing his job."
Normally I get about 3 percent per year increase in value along with rents. Thats been standard for my area . However over the last 18 months Ive experienced 35 percent in property values . In addition Ive only gained about 10 percent more in rents . The two combined though are a solid 45 percent .
Now how about the years I got only 3 percent with no raise in rents? I made an income from the rents no matter the condition of the economy. Like buying bread. What Im trying to say is that the rental business is a viable business if it doesnt increase in value . It doesnt have to certainly. I make a living no matter what the property value . When the value goes up though, so do the rents. Rent is fixing to get really high compared to payments most are making on value. I guess thats why people are calling all the time wanting a house rental. They put a bunch of people in the cold when they raised the standards . That turned them to me in this area.
Its the only time I ever remember lumber and interrest both being cheap.
Tim
You've done an excellent job of discussing the details and responsibilities.
But what you have described is really a "job." One that requires regular behaviors, followthrough, and a "strong" will.
You deserve the rewards you get. My hat is off to you.
What I pick up in your description is not what I would call, "passive" income - although the IRS would. There's nothing passive about your strategy.
Getting back to ponytl's orginal post: He's talking a completely different sector of real estate investing. Commercial triple net. Most likely he won't hit your returns, but I believe he'll have less effort invested.
And as we know, there are even more subsectors within real estate than these two.
Edited 3/6/2008 3:59 pm ET by peteshlagor
Well, youre right .
It is a job.
Depends on what type properties a person has to say how much of a job.
Im still buying, fixing and selling . All together its a pretty big job. It all gets mixed in the pot . If I quit buying then the rentals would be a part time job. I dont call it passive either . It is sometimes though. You just dont know when it will be . Ive went for months [a few} and done nothing . If I did that very long I wouldnt have a good business so yes Ive got to be around with my eye on it all the time . So yes its a business and not passive .
Tim
"
Getting back to ponytl's orginal post: He's talking a completely different sector of real estate investing. Commercial triple net. Most likely he won't hit your returns, but I believe he'll have less effort invested.
And as we know, there are even more subsectors within real estate than these two."
Whoops , I missed that .
DanT one time said on here ;
You can make real estate do for you what ever you need it to.
Er somthin like that. That will do it though.
Thats what I did and Im sure Pony and Dan the same .
Yes there are so many different types and with them comes different business approach. Storage units/personal has become a large business. Its a lot higher margin than mine buts its a lot more customer time consuming,. Lots lore eviction and dealing with stuff they leave after not paying rents,.
I made an illustration one time on here where if you had 10 trailers [I think] it would earn more than a carps wages,. Thats pretty sad in a way. The jest of it was they could buy the land and trailers on a 10 year note and in ten years retire more or less partially passive , lol. Ten renters is a lot easiar than being part of a framing crew.
Theres too many types to mention . I dont know sqaut about them either .
Now , heres my problem Ive always had or thought I did with stocks. {and by the way Im not attacking them]
Ive had a guy sit down with me talking about them. My problem was these things ;
Im taxed first on the money I made to pay him which is not deductable .
Im taxed on any money I make ? Or did I get that wrong ?
I dont have any control over a stock but to bail out losing if its not doing well so I guess Im trusting others.
Then it takes cash money in full investment to get started .
All that together was too big a pill for me to swallow at the time .
I bought my first house 15 years ago with a 100 percent loan. I invested 3 grand to fix it up of my money. Thats all Ive ever invested in it . Insurance money repaced the roof and bought a AC unit . Deposits have kept it painted and clean. I started out getting 250 a month over all charges of payments , taxes and insurance . The last few years I got 300 then 350 over . Its paid for now , but I never paid for it . I bought it for 32 grand and today its worth about 80 grand .
All from a 3,000 dollars and two weeks full time working investment.
"Im taxed first on the money I made to pay him which is not deductable ."
The first part of your sentence is true - as is all money about to be invested in anything - other than tax deffered retirement plans. The second part, depends. If he is providing investment advice under the proper licenses and credentials, those fees are deductible. Now if he's just trying to hustle you into an investment, whatever commission he charges is added to your basis, which essentially does result into a deduction - when you sell that investment - and his selling commission is deducted from your gross profit, meaning it, too is deductible.
"Im taxed on any money I make ? Or did I get that wrong ?"
That's right - if it's not within the previously mentioned retirement plan. But really, this is not much different than your real estate. The periodic income (the net after costs) is taxable to you (unless you've placed the property into one of those high cost "truly self-directed IRA's" that are run by several banks).
The capital gain compenent of the investment is not taxed until it is sold. Same as stocks. However, real estate does have that unique characteristic involving 1031 exchanges. Which makes it similar to an IRA.
"I dont have any control over a stock but to bail out losing if its not doing well"
Now how is this any different than real estate? Real estate values are a combination of several factors. Most notably, how you keep and maintain the piece. But how your next door neighbor's run down POS affects your value is out of your control. When the school district goes to shid, or you learn your neighborhood's dirt roads have been dust controlled with dioxins (Times Beach), or radon appears - what control do you have over that?
You gotta bail. To whom? And how fast?
Stocks can do similar backflips. (And how I know!) Stocks offer the unique characteristic of liquidity. Any day the market is open, I can sell, within a minute. At maybe a 1 - 2% commission, maybe less. What's the real estate fee? 6%? transfer taxes? recording fees? And how long would it take to get out from under that albatross? 4 months? 6? a year? My last real estate investment took 5 years to cut loose. A bad real estate deal can make some of those stupid stock picks of mine look good.
But I also have the same choice as the RE investor in such a case. I can buy more or switch sides fast and sell short. Stocks offer me nimbleness - not that I'm quick enufff to be nimble sometimes.
"Then it takes cash money in full investment to get started ."
Not really. Margin allows you to buy with half down.
Informative on the stocks side of it and you made some good points on the RE side .
Ill answer the RE concerns .
The ultimate position is to have several different kinds of properties or really locations. I dont really have different kinds of properties but they are spread out over the county , mostly in town. Even then they are peppered East, West, South, North and in a different town too. I took a hit on a 4 bedroom2 bath that Ive still got when a sad trailer park went in across the road.
The main deal is to be rooted in the properties , meaning that you own over 50 percent of their value . The 4 b 2 b would be around 70 grand and I owe 24 on it . Ive collected around 8 years of rents with out doing much. I could dump it for 40 quick. Thats not a loss of course. Now if I had been a young retail buyer I wouod be burned to a crisp. Dont forget , Im not the one who paid that morgage down to 24. Ive made money every month on it over the top. 100 percent loan. I dont have a dime in it but I do have to pay the loan one way or another .
Ive got other properties that have done very well in value which is the reason why have them spread out . Ive got some that have doubled . I didnt know they were going to build a new school but I sold them the property. It was in a farm area where no one else would have bought it . My houses there have been teriffic as well. The state bought an easment on two which lowered the priciple drastically as I applied it to principle . Ive got a damm cabin on the mountain that got a hwy built past it and city water . I had been buying the property around it for years . Ive got a house in the country that got a paved road . It has city water but the road rocks the value .
Over all things have been good to me . Cant will all the ball games.
Ill explain what I meant by the taxing.
I want to buy 25,000 in stocks , I first had to make 50 grand basically speaking in my earnings before deductions. I call that single base hits cause I can earn only what I can make myself .
I know everyone pays profits on what they make .
My point was the renters were taxed on their earnings while they made payments , not me .
Im talking the initial investment of course.
Thats also why I believe in 100 percent bank loans too.
A friend tried to what I do years ago and he got a second on his own home . He was stopped buying any more becuase he ran out of collateral. Another single base hit .
tim,i've got lots of arguments for and against real estate,but i do believe in todays market that there is not a house i can buy and get a loan for 100% ltv and make a five dollar bill on. i figure a 10% vacancy and 10% maintance on each.over a 10 year period that will fall in pretty close.now the time may be appraoching that values will fall and rents will at least remain stable if not rise.we'll just have to see how this all falls out.
tim in the stock market you have no control over what happens,i've been in a stock that the ceo was found to be stealing,can you say"there goes my money!my problem with stock is as a little guy you just don't stand a chance with the big players,where real estate we all have our own price points.warren buffet isn't interested in a 3bdr house......
in rentals i like the idea that i'm controling my money,nobody but me to take the credit or blame.but i've gotten spanked pretty good with this one http://forums.taunton.com/tp-breaktime/messages?msg=93758.1 . i have to say i never had a contingency plan for this. it still sits vacant today.this deal has really opened my eyes to the fact that you really can't depend on value to always be there.half the value is gone on this house. larryif a man speaks in the forest,and there's not a woman to hear him,is he still wrong?
Thats a bad deal. Cooking Crack will do the same to one as was said earliar.
Ive got a bad one too and I hope you read the post. Lots of good things have happened to off set it .
You own a lot of property so one house cant hit you that hard . Ill read the thread when Im not fixing to go night night . <G>
I hate to preach to you because you know fully well what Im gonna say.
Thats why we dont need to give shid for these houses . Nothing over 60 percent right now or they can keep them. We have risks people dont understand . Remember the 100 percent loan is loan to value so Im borrowing 60 grand on a 100,000 house or what ever . Not 100,00 off appraisel.
Sell a another house you already have plus this one and buy two more . Dont give shid for them and you will be even. Stealum. Youll get one house outta 10 offers . Make those offers like you got brass gonads and hold your head steady. Act like you been there before and sell why they arent worth shid .
I thought yall were supposed to have a bunch of cheap houses up there ?
compared to what some guys talk about here on bt our houses are almost free,but i don't feel that way. we do have a lot of 30k house's but they are just cash cows. twenty years from now they will be worth 30k maybe.to get what i call a decent house your going to have to get into the 60-70 and up range.
i heard on the news the other day that wichita was the number one r.e market in the country. 4% increase last year.
i don't really believe evrything i hear. larry
if a man speaks in the forest,and there's not a woman to hear him,is he still wrong?
Edited 3/7/2008 10:21 pm by alwaysoverbudget
Oops , I didnt know you put that money in it cause I didnt read . Bad on me . Labor too.
After just reading it I didnt think much of all my response to you either. Be easiar if we were sitting down having a cup of coffee. Im sure we could talk well into the night . <G>
Anyway , this will be my best shot at it and hopefully it will be useful. Although this house of yours is sounding like the spec house from hell thread. No , Im not kidding and wouldnt kid about your house. I feel for you deeply over this deal.
When I was younger I always worked my way out from under a debt load that was too heavy to carry. It worked a lot of years . Not anymore, but in therory its the same .
As I said before you cant win them all. Write down your successes and your failues in this business. As Ive been preaching for a long time on here [I dont think any one is listening ] , that you didnt pay those notes. The renters made it possible . While they were paying those notes , the property went up in value . You still have that . I do know that the stock discussion came to a stop when I made that clear. Also you have been sheltered tax wise.
If I had this house in the current affairs its in and was considering that much a reduction of price , Id have to rent it . Period. Seems to me renting it , although not what would be best for you , would be the best right now . Renters will rent anything and they are not requirng information. Let this house sit rented until this thing goes away. 5 years from now no one will care . To me this is all thats left.
You can readjust your properties to fit it in even if you have to draw a loan on another one in refinance . Thats if and its short term for me .
I would want to win the poker game though and get it back.
To do that you would have to start moving some checkers around and be creative. .
I would still sell a couple rentals paying capitol gains taxes and not income tax with flips. Move two new ones in the rental pool for a couple years or until the prices inflated. At that time cash two more out . Actually we should be doing this anyway.
Another creative way would be to do a transfer from a house to a duplex . Ive got some houses that if I sold one I could increase my rents buying a duplex in a transfer and not paying any tax. That would increase my income . I shoulda done that 12 months or so ago. Now is not the greatest time , but would still work.
The only way we make money is buying and collecing the most rents . When ya get down to it , its our most valuable tools. I rent high and buy very cheap or dont buy at all. You could think about maxing the rents and working more hours on buying/stealing .
Long term is to work harder at picking the renters and watching the ones you have selected. Anyone could do better at that and improve. If you do enough small things , it can increase bottom line and make this hit easiar.
Thers no choice but take the hit but you have to counter punch and keep you head up. Dont let it get you down. Thats hard but its the only way through it . Good luck.
Tim
tim,i really didn't quite understand this part of your post:
"Oops , I didnt know you put that money in it cause I didnt read . Bad on me . Labor too.
After just reading it I didnt think much of all my response to you either."
but you don't owe me a opps,anyway:]
i'm not sure if you read the orig thread on this house,but somewhere in there i think i talked about owning the house for 30 years, so the house is paid for and as you talk about ,i threw the down payment in when i bought it and renters have paid it off,thats the good news.
i see three options on this house
#1 sell it as fast as i could ,take my loss [and really i wouldn't have been out of pocket as it has paid for itself] go buy something else down the street that needs rehab and work on it and get back to where i was.
i tried option 1,couldn't find a buyer
#2 before this happened i would say the condition it was in it had another 5-8 years before it was ready to go thru from end to end[it's been a rental for 30 yrs!]so my thought was to go in and do the complete clean up on it now,so that no one even questions what took place or has a reason to worry about it. this is what i did and have just finished.
now with the place all ready to go i have 2 ways to go,one to sell ,2 to rent. right now i'm willing to sell short and go find something else to replace it and be away from the stigma. as you know if this house is worth 70's and i could sell for mid 50's i can go beat the bushes with a cash deal and get the same house needing cleaned up and be right back in the ball game and even have enough change left to go eat dinner.
if i can't get it sold in 3-4 months i will rerent it and go that way. i still think i will inform tenants of the situation and if they want it fine ,if not the next one will. if i don't tell them the neighbors will before the moving van is unloaded. and you are exactly right,i can stick with this and keep it rented for 5 years and no one will think a thing about it,and it will be worth just as much as if it never happened.
you mention duplexes,around here for the last 3 years they have been the hottest selling things on the market,all calif. money. six months ago those guys all packed there bags and went home so maybe before long a guy might be able to buy again.
anyway the only reason i brought this house up was just like anything you can't count your chickens,because the fox might come and eat one.this is just like the stock market it does have risk, but i don't care what happens to the economy people have to have a roof,i might be renting it cheap but it will still bring in money,when the stock market goes south, you can't eat a McDonalds hamburger with the earnings.if a man speaks in the forest,and there's not a woman to hear him,is he still wrong?
What did you ever do to that unfortunate house, Larry ? Last report was October. Did you do minimal repairs, and put it on the market ?
Greg
well as i sit here i can still almost laugh/cry. this will sound pretty stupid but still don't have a #1 plan ,but heres what we did. got possession and tried for about 45 days to sell,it should of been worth about 70k i was asking 40k and couldn't find a taker,had a offer for 20k and to tell you the truth if i had lots of money i would of sold it to him.
then decided the only way to try and get past the stigma was to clean it up big time. so we refinished the hardwood floors,skim coated all the walls and painted including clgs., put a new bath in with new tile etc.all new fixtures,new carpet in bedrooms and family room,new paint out side,new storm windows and doors .just tried to make it look as good as we possibly could.
so this weds. put up a for sale sign ,asking 59k and i will say this there isn't another house in this town better for the price,if there is i'm a buyer.
now to tell you what goes through peoples mind i got a call today asking about it. they ask"does the house have any bio hazards?] what the hail,do they think theres blood still in there?
if i come up with a good plan ,i'll post it,but after 6 months it hasn't grabbed me yet. larry
they just found the husband guilty of 1st degree last sat.i work as slow as the justice system...................................if a man speaks in the forest,and there's not a woman to hear him,is he still wrong?
Your posts are usuallya bang on.. but what does bluetooth have to do with amazon? amazon doenst own bluetooth technology.. bluetooth is a not for profit special interest group
regardless, what you preach is bang on.. regarding rental income in retirement, etc etc.. one thing that people forget, that even if a rental house is costing you an extrea few hundred bucks a month to cover all the mtg + expenses what difference does that make? you are only paying yourself.. almost like a forced savings.. at the end of it. in 20 years, you have a 400K home that you bought for 200K, whcih the tenants have been financing for 20 years..
Edited 3/3/2008 12:24 pm ET by ravz
"blue tooth" was first just an idea... or an agreeded upon platform /format.... bata vs vhs type thing... all the big players in the industry at the time agreed that there would be one standard... it was just an "idea" as described to me at the time that you could have one printer in an office and everyone could send info to it...
anyway... i was just one of a few investors in this small company that developed this operating system... i'm going from memory... but think this was 1997 or 98 when we started... and yes amazon purchased our company...
what we did or how we did it... i really have no clue... the food and company was good at the investor meetings...
even if a rental house is costing you an extrea few hundred bucks a month
IF... you lose $100 a mo. it takes the fun out of it... and i think you resent it... just hard to be all happy lose'n $100 a month no matter how you look at it... and how many properties can you afford to own at -$100 a month? but... if it only clears $10 a month you can afford to own ALOT...
I'm not preach'n to be a landlord... many ways to have passive income...
the one plus that isn't disscussed much is the tax advantages of real estate, how they help your personal balance sheet, and that they can be a source of tax free funds when you borrow against em...
in the end i don't like to see people do nothing and depending on others... i want to be that grand dad that my kids have to tell... "stop buy'n these kids stuff"
p
ponytl
I own 7 mobile homes that I rent out (average rent is $400.) When I have good renters it's great. But most all people who rent in this area have lives that are so chaotic. Family trouble, legal trouble you name it.
I have several renters who have stayed for 3-4 years. But a 1 year stay is about normal.
I net about $200 each. I bought trailers because I could buy them outright for 6K to 10 K and start receiving in income right away. The extra cash flow is nice and has gotten us through some lean winters.
I put in new flooring and new bathrooms and countertops.
Sometimes I go for a year with doing nothing but collecting the rent. But when it rains it pours.
Both my sons have property now. My 25 year old bought his 1st house for 5K down on a 32K house and then several K to fix it up. Then a duplex built in the 70s came up for sale at 105K and he was able to borrow the whole thing and combine his morgages.
His renters are a little better class than mine but most of them still have crazy lives.
My 21 year old son bought a 4 plex. I was a 1930 era creamery that some one turned into apartments in the 90s and now the bank had a bad note on it.
They were asking 205k then 155K, so he offered them 125k and the estate rejected the offer. 3 months later he offered them 110K and the bank told the estate to take the offer. He borrowed the whole thing plus 15K to fix it up. He doesn't even own a car yet and the bank had enough confidence in our family to loan him everything.
I told him as long as someone else will finance it and it will cash flow what do you have to lose?
He spend all summer renovating it but it is working out well. 3 units just about makes his expenses and the 4 unit is profit.
In this area you can't have more than 40K in a house and have it cash flow and they are far and few between.
There are some older landlords who I have talked to that may be willing to sell some of their properties on contract as the retire.
It's a mixed bag. You have to be free enough to work on them when the conditions are right and you have to know how to screen people and read them.
Rich
and it's always fun when people think you are "rich" mobile home parks are the easiest thing to borrow money on for some reason... had a chance to buy one a couple years ago... it was the trash of the trash parks... 50's & 60's silver trailers dogs everywhere... coin op laundry on site (no washers and dryers allowed in any unit) this place was a dump... people paid weekly... close to 100 units and the old guy wanted like 500k for it... if you looked at it you wanted to drive a dozer thru it... average rent was $150wk... so even if 20% were empty which they were not... thats still 48k a month.... but i'm guess'n you earned every penny of it...
Man i know you are proud of your sons... for someone to "get it" at 21 is great...
congrats...
people are quick to dis low end rentals... high problems... low cost.... but good returns... there are so many around here that can be purchased for under 10k it's stupid... and everyone would rent for $350 to $450
p
where are you?
ponytl
I try to keep nice units. All have new bathrooms. Some have new kitchens, a couple have all new windows, all have washer/dryer and central air. I like the units from the 70s with aluminum siding and metal roofs. Very little ext. maintenance. I like paneling instead of 3/8 sheetrock.
People get inside and say wow, this is nice. But they have usually been living in a dump. Hispanics are my best renters. Honest and pay on time without alot of demands.
I thought I would use the income to propel me into the "real" rental market.
But Tim needed more care, the boy's units needed my help and affordable income properties were hard to find.
We have one realtor that looks out for us and gives us the heads up. Our bank has offered us several properties that they had bad loans on. But nothing I wanted to invest myself in.
Best landlord in our town is a plumber who has 35 units. About 10 of them are new ground level old lady apartments. He has a waiting list of people who want to get into them. He has little mainteance and few problems and they leave them cleaner than when he rented them. (when they move to assisted living)
He told me he had a 7 year loan. But he bought all the houses on the block over a 20 year period and rented them out. Then he tore them down and built this complex. He frequently works the plumbing business during the day and then works the rental till 9 or 10 PM. He works Sat and Sun. He's a workaholic, but he is sitting pretty nice for passive income right now.
Yeah, I'm proud of Levi, my 21 year old. He worked hard on his 4 plex and went last summer without any income. He has had to do alot of business with people twice his age. Alot of learning went on last summer. Below is a picture of the creamery before he started.
Luke my other son started with his 1st rental when he was 21 too. He finds the sweet deals somehow.
Rich
that is a cool old building...
I have 2 hispanic grocery stores, 1 hispanic music store, 1 hispanic lawyer, 1 hispanic tax service...
looks like one of the grocery store guys is going to buy the shopping center he is in... great guy... and it's a really good shopping center... i hate to sell but... it's a good deal for both of us...
older tenants seem to be best around here
p
Interesting topic, wish Mooney would join in as well.
I had 14 residential rental properties at one time - way back in the day, even thought I'd be retired living off of them by the time I hit 45, didn't happen. I was very foolish when I bought, thats not a good thing.
But as others on here mentioned, I'm to easy on the tenants. All those properties gone now, thank god! I think Larry(alwaysoverbudget) said it best, some of us are pretty good carps or plumbers or..........but are we good businessmen? For me the answer is defiantly NO. I hate that part of the equation and I have no desire to get better at it.
I find it more enjoyable to find a house that needs work, I don't like the term flip cause I'm not doing that but I want something that I can restore, bring back from the dead, or save from the bulldozer. I feel that I have a good idea on what works and what doesn't.
I currently have two houses going and I'm looking at a house on a lake that I really want - well I want it for the "getaway" value but I think I can do something with it! Like I really need to buy more work.
It does make me wonder though when I see skilled carps/plumbers/electricians that rent, not that you have to own anything, but at least secure yourself something for the day when you can no longer do this stuff.
Doug
Ive been making these threads for a while off and on.
Ive never ever talked anyone into it either .
Take a guy pulling a tool trailer working on houses every day for a living anyway.
Its a missed oportunity.
Buck would be perfect . Id pay for a film of him getting paid late rents . He would explain the Buck way to them . Thats funny right there . Id love it .
Tim
Passive income.............waiting on the porch for the ss check to arrive
You only learn who has been swimming naked when the tide goes out.......Warren Buffet
i paid roughly 250 grand for all my property, They are worth between 1.5 to 2 million now, We earned every bit of it , Never went to disneyland which i regret but my wife did not have to work as the kids were young, I ate PPand Js and still have a 800 dollar but it paid off now for us, Plus everything is pretty much paid for, I put up properties so my boys could build and buy there homes as collateral, But it all takes sacrifice you cant sit in front of the boob tube and go to the lake every weekend. Great post but none of my carpenter friends went out on a limb and now have nothing.
i guess it's all about balance and have some view of the future... since i have fended for myself since i was 15-16... I've always known as much as i like to work... I don't want to always HAVE to work... I've also never needed instant gradification... that or maybe i get satisfaction from seeing even small amounts of progress...
you, me & others here have all noted... that we've never been able to convince others to see the big picture... but then i've never been able to save anyone from drugs and live'n on the streets...
p
What percentage residential and commercial do you have?
"Doubt is not a pleasant condition, but certainty is absurd."
~ Voltaire
i only own one res duplex... have had it some 15yrs... other than that everything is commericial... i've had single family in the past... like many others it was not my cup of tea...
i like small strip shopping centers... 30,000 sf or so... i do well with spaces from 750sf to 1500... largest tenant has 5600sf... rent to own furniture store...
have one 4 story office building in a nice part of town.... prob the best location in the city... as far as access to everything major... it requires the most hand holding... as i provide janitorial, utilities, ect... prob more work with less return than retail... the ground floor is retail... but they think they are office...
p
I agree that commercial is easier most of the time.One idea to make residential (or commercial) rental easier is to not rent it by owner. What I mean is that you can be the manager/agent for your LLC (or other entity) and rent out the homes without ever identifying yourself as an owner. Done this way the bad news is never from you, it's the decision of the owners. (negotiators will recognize this as the "higher authority" technique)."You want new carpet in there? Well, make sure you pay the rent right on time for the next six months and I'll speak to the owners and see if I can get them to do that for you."You are the good guy. Owners are bad guys. (All corporate "responsibility" works this way)Good work you're doing, p.See message 74 from me to all.
"Doubt is not a pleasant condition, but certainty is absurd."
~ Voltaire