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Talking to several people and they all had some type of real estate investment where they buy a low priced home, put some upgrades and then rent the house.
Is this a long term strategy? I honestly don't understand whats so popular about it.
It's a long term strategy. We have had up to 6 rentals but now down to 3.....they're all paid for, provide good rent, and we have a property manager managing them so we just get a monthly income from them...if we need a cash infusion, we just sell one and they're now worth about triple the price we paid so I'll wait at least a year after I retire next year before selling due to capital gains.
Above, I've given the positive situation that I'm in now but there have been trials and tribulations and wife has been the one wanting to bail out of it so now just have a good property manager taking care of everything and they're doing a great job.
Location: Formerly Pleasanton Ca, now in Marietta Ga
10,351 posts, read 8,574,670 times
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Quote:
Originally Posted by Lovehound
Yeah. My current tenants were not married, but both had reasonable credit reports. The fact I couldn't have known was that they broke up about 18 months into a 24 month lease. I had to laugh when I contacted the co-tenant who moved out, who claimed his GF signed an agreement with him that removed him from the lease. LOLOL! His lease is with me, not her! I told him if it comes to a lawsuit we'll let the judge decide. The guy was such a snot, I can see why they broke up. The woman is really nice, but she's a single mom and is making bad career choices. She promises to make good on everything she owes, but we'll see.
The trasher tenants both lost their jobs and fled out of state back to their previous town. I estimated my chance of collecting on them was within a gnat's antenna from zero. Plus, my rentals are in a different state than my residence and suing them would have been prohibitively expensive for me, just to get a judgement against people (low lifes) who are unlikely to have any capital worth seizing or income worth garnishing.
It's just not worth my money merely to destroy somebody's credit report and eviction record, not unless I get cash back.
Out of state-all the more reason to have a property manager. If I knew my landlord was out of state I would be more tempted to burn them knowing they had no presence here and less likely to pursue which appears to be the case with you.
I agree with the other poster-you are not helping other landlords. Perhaps another landlord felt the same with your tenants before you got them and that's why you could have gotten stuck with a tenant you thought was ok.
not quite . increases have been real world for a long time . the rents fell behind decades ago when rent stabilized tenants were political pawns .
you can negotiate crazy deals to buy . no one pays anywhere near market if buying anything stabilized .
we bought multiple 7 figures worth of stabilized co-op apartments . when the building went co-op back in the 1980's those who dd not buy stayed as rent stabilized tenants .
these tenants remain stabilized . however once they are out game over . they are full market co-ops .
we paid literally what worked out to cents on the dollar .
they were all close to retirement age so it did not take many accepting a lease buy out offer for 100k to make this very profitable. the sale of just the first apartment covered everything we spent . the rest were 100% gravy .
how ever amatures are not going to be privy to these kinds of deals. this is the play ground of pro's .
Serious, not sarcastic question.....what made you a pro? Why were you privy to this opportunity.
Serious, not sarcastic question.....what made you a pro? Why were you privy to this opportunity.
it was not me that was the pro , i would never be privy to these deals , i wasn't rich enough or smart enough to know about these deals to have access to them .
but it was knowing who the smart and rich people are that got us in the door .
it was connecting up with our partner bernard spitzer , elliots dad who is one of americas top real estate moguls and privy to these deals . bernie died a few years ago worth a half a billion dollars despite all he gave away . all from nyc real estate .
the only smart thing i had to do was to have not kept our money tied up in a house so we were pretty liquid when the opportunity presented itself and i was smart enough to know my brain was trying to talk me out of committing a few hundred thousand dollars to this venture .
your brain hates losing money more than making it so it will bombard you with all the negative reasons you should not do something that risks capital.
so i fought the pounding every night and bought out a partner looking to do something else with his money .
we have the two remaining apartments up for sale now to investor groups . we will take 50 cents on the dollar .
one apartment is at a tiny loss and one a slight gain . but the one that is negative has a 26 year old son with his dad and has succession rights . so the investors want only the positive flow apartment but we will only sell as a package .
the reason it is being promoted to investor groups is it has to be all cash . no banks will finance it so even at 50 cents on the dollar you would need over a million cash .
we have the same deal on the table for the tenants with the addition of no money down and we will hold the financing . for the 26 year old it is an amazing deal since he can have 500k in equity day one by buying it . the problem is he still can't afford the payments yet . he is a young budding attorney but does not have the income yet for such an expensive place.
but we knew going in not every tenant would take a buyout offer on the lease . we actually did way better then we thought with 7 out of 9 taking the offer .
it is a very prestigious building and a nyc architectural landmark right on the corner of central park south and 7th ave ,next door to Lincoln center . it does not get anymore prime than that .
Last edited by mathjak107; 10-10-2018 at 03:43 AM..
I heard 9 out of 10 new restaurants fail within their fist year.
bell blvd in queens where we live has become the restaurant capital of queens. the strip is filled with restaurant after restaurant . most new ones come and go . the rents are really a killer plus the stores are limited by parking which sucks in the area .
we have seen so many come and go this year alone .
it was not me that was the pro , i would never be privy to these deals , i wasn't rich enough or smart enough to know about these deals to have access to them .
but it was knowing who the smart and rich people are that got us in the door .
it was connecting up with our partner bernard spitzer , elliots dad who is one of americas top real estate moguls and privy to these deals . bernie died a few years ago worth a half a billion dollars despite all he gave away . all from nyc real estate .
the only smart thing i had to do was to have not kept our money tied up in a house so we were pretty liquid when the opportunity presented itself and i was smart enough to know my brain was trying to talk me out of committing a few hundred thousand dollars to this venture .
your brain hates losing money more than making it so it will bombard you with all the negative reasons you should not do something that risks capital.
so i fought the pounding every night and bought out a partner looking to do something else with his money .
we have the two remaining apartments up for sale now to investor groups . we will take 50 cents on the dollar .
one apartment is at a tiny loss and one a slight gain . but the one that is negative has a 26 year old son with his dad and has succession rights . so the investors want only the positive flow apartment but we will only sell as a package .
the reason it is being promoted to investor groups is it has to be all cash . no banks will finance it so even at 50 cents on the dollar you would need over a million cash .
we have the same deal on the table for the tenants with the addition of no money down and we will hold the financing . for the 26 year old it is an amazing deal since he can have 500k in equity day one by buying it . the problem is he still can't afford the payments yet . he is a young budding attorney but does not have the income yet for such an expensive place.
but we knew going in not every tenant would take a buyout offer on the lease . we actually did way better then we thought with 7 out of 9 taking the offer .
it is a very prestigious building and a nyc architectural landmark right on the corner of central park south and 7th ave ,next door to Lincoln center . it does not get anymore prime than that .
From the sellers point of view......why weren’t these units available to everyone? Wouldn’t that haven’t gotten the highest return?
Back in 2009, when foreclosures were all the rage, a golf buddy of mine put several hundred thousand into an “investment” buying foreclosures at auction, rehabbing, and flipping.
All he had to do was hand the money over, and a group of “pros” would handle the flipping.
Unfortunately, the market didn’t bottom for another 2 years, so bye bye most of the money.
I’m glad I didn’t go in on that one. The stock market has its risks, but I trust it more than fast talking people looking to make a quick buck.
Glad yours turned out well. Never hurts to be lucky enough to know the right people. Over the years, I have also been fortunate in that regard.
your brain hates losing money more than making it so it will bombard you with all the negative reasons you should not do something that risks capital.
Or it will bombard you to sell your stocks for emotional reasons.
My brain is telling me to sell, sell, sell, looking at the market right now, but my gut is telling me to hold it, hold it, hold it.
It's going to be a very tumultuous day for my brain and my gut if my portfolio nears my break-even point. This happened a few months ago and I wussed out. It was the stupidest stock trade I ever made. My brain told me to sell but my guts told me to stay. I should have listened to my guts.
That was the AMZN plunge when DT dissed the Washington Post and Jeff Bezos. I had a very negative effect on AMZN for the next ~month.
I guess we all have a long history of Wall Street blunders.
Mathjack could have just not invested in real estate and kept his money in the market and avoided the big capital gain tax he complained about. Fact is he said he made a boatload of money in real estate. Even with the slightly higher taxes, he made more money in the real estate deal and paying the taxes than if he had put the money in the market for the same period.
That is why some people invest in real estate, it can be very profitable.
At least as far as we can discern from Mathjak’s postings, he got a sweetheart deal. He was invited to be a junior partner of a well-heeled professional. Had he gotten a similar deal on a hot IPO, or private equity, or venture-capital, he might have done even better. The point in this particular example is not to pit real-estate against stocks, but to observe how beneficial and lucrative it is to have a mentor, who not only shares knowledge but provides most of the funding and assumes most of the risk. But whereas with stock index funds, it is possible to be ignorant, having no mentor and no advisor, and still do quite well, in real-estate, this is highly unlikely.
Quote:
Originally Posted by aslowdodge
Why didn't you hire a property manager to help you screen tenants and stay on top of them as well as act as a buffer from tenants. ...
Probably because of economy of scale. If a landlord has say one property, worth $50K and renting for $700/month, would it still be worthwhile to hire a property-manager?
When dealing with small amounts of money, it is cost-prohibitive to sue, or to make much ruckus. I do free-lance drafting work, often for projects that take only a few hours, for a few hundred dollars each. And often, I get stiffed… delivering the drawing, but never getting paid. What am I supposed to do – file a lawsuit, for $300 in damages? Instead, I let it slide. Now, if there were a way to deduct such losses from my taxes….!?
Quote:
Originally Posted by StealthRabbit
This is a pretty good article.... basically
1) you are getting good return (if you bought the right prop at the right price)
2) Tenants are paying off your mortgages
3) You get to KEEP the income AND the property...
4) Many tax benefits (even more today)
That's a great summary, covering a question that I've been meaning to pose via new thread here (and still might). Addressing those points:
1) A very useful point, assuming that the underlying property-value at least keeps up with inflation.
2) Same as above.
3) Same as above.
4) This is contingent upon staying on the "real estate tread mill"... if selling a property, then buying another one, and so forth. Get off of the tread mill, and get immediately whacked by taxes.
The bottom line is that a REIT buys one an income-stream, without building equity in the underlying properties. Owning an actual property can produce comparable income (or slightly higher income, but with more hassle); the real advantage, however, is in equity-appreciation.
But what happens if the market value of a property declines faster than the tenants are paying off the mortgage? I don't mean a housing-crash, but the slow and indefatigable decline in property prices, over the course of decades.
Probably because of economy of scale. If a landlord has say one property, worth $50K and renting for $700/month, would it still be worthwhile to hire a property-manager?
For what it's worth:
I had 4 SFRs worth ~$950K and renting for about $1,500-$1,600/unit, and I never made enough annual profit to hire a property management company. Their 5% would have had me in a loss position for the full time. (I'm currently in the process of moving my last tenant out and liquidating my last property.)
One thing for sure, I was not cut out to be a landlord. Despite that I am pretty sure I made a significant amount of profit. Due to the complexity of my tax returns only my CPA could tell me my exact profit, only I'd have to pay her $/hour for her to do the math.
Being a landlord is an active investment, I've spent many hours and many trips to my out-of-state properties, and although I made a profit it wasn't worth the cost of my time. IMO having a property manager would have tipped me into working for break-even. I hate working for $0.00/hour!
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