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Old 11-23-2018, 09:09 AM
 
5,562 posts, read 5,752,718 times
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Quote:
Originally Posted by ddrhazy View Post
Because you are using someone else's money to make an investment. If you can get a mortgage for 100k and make 7% ROI for the rental and the interest on the loan is 4%, you are pocketing a 3% profit.

But today's rentals in Las Vegas and the rates offered by banks for a 30 year fixed rate mortgage don't have the numbers to make this idea pencil out anymore. Instead, you're looking at 5.5% ROI at best. When 30 year fixed rate mortgages are 5%, why bother making 0.5% on your money when you can put the money in a 1 year CD at 3%?

If investors are buying with a 15 or 10 year mortgage or outright cash it can still make sense but there is always the fear that the price of real estate drops like it did in '07.

The house play makes you a landlord with the problem of management, maintenance, vacancy filling, tenant screening, cleaning, remodeling, rent collection, evictions and the possibility of real estate depreciating.

The CD play is risk free and insured by the federal bank.

Both tie up your money, but real estate probably ties up the average investor's cash for at least 5 years, if not longer. There's plenty of CDs that let you withdraw your cash and forfeit the interest appreciated if you decide to remove it before it matures, making CDs fairly liquid.

Buying real estate in Las Vegas on speculation is pointless now. The days of double digit appreciation is likely over.
But lets say, you dont have any bank debt. So that 5.5% ROI, you get to keep all to yourself. Lets say you have property on the coast, if you sell, you can buy two or three property in LV with 1031 exchange, and no bank debt. LV RE should continue to appreciate being so close to SoCal, and SoCal pricing out so many people. It does not have to be double digit.
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Old 11-23-2018, 12:47 PM
 
2,141 posts, read 2,217,860 times
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Like I said. Cash and 15/10 year mortgage buyers can still make it work. You're making more interest than you would on CDs and bonds, but it's not a stress free investment. You have to be an active and knowledgeable in town and hands on landlord that knows the market and how to protect yourself from all the usual pitfalls of tenants.

Also, don't base your investment on future appreciation of the value of the house. It may happen, it may go down, it may stay relatively stagnant over the course of a decade. Vegas is still below it's 2016 values, so compared to other cities that have shot past those numbers and then some, you have some historic figures that are protecting you in a way. But don't count on it too much and make your decisions on the yearly ROIs you intend to acquire.
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Old 11-24-2018, 02:28 AM
 
Location: The North
4,986 posts, read 8,742,136 times
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Quote:
Originally Posted by NJ Brazen_3133 View Post
But lets say, you dont have any bank debt. So that 5.5% ROI, you get to keep all to yourself. Lets say you have property on the coast, if you sell, you can buy two or three property in LV with 1031 exchange, and no bank debt. LV RE should continue to appreciate being so close to SoCal, and SoCal pricing out so many people. It does not have to be double digit.
Its just about returns. I buy a 300k house with 30% down investor loan, you buy one with 300k cash. If we both have the same amount of cash I can buy three homes, you get just one. When the house appreciates 3% a year (or more if you think that will happen), I keep all of that gain and so do you. But I have three homes so I have three times the appreciation. You keep all of the cash flow from rent and I share much of it with the bank, but I get to deduct those payments from my taxes, while your cash flow is taxed as ordinary income. We both get to use depreciation, but yours is just cutting down on income, my depreciation is likely to wipe out most or all of the income so I'm paying no income tax in most cases.

The real benefit though is just the slow march of equity paydown and appreciation. Even though it would be nice if I didn't have to share cash flow with the bank, I'm still netting something and the tenant is helping me make progress in paying down the loan. Whatever my cash flow is today, chances are real good in a few years I'll be clearing more and it will get to the point that unless I have some really bad issue with a tenant, cash flow will more than cover repair costs I have to pay and cover occasional vacancies. Smart landlords don't do these leveraged investments for the cash flow as much as they do them for the longer term appreciation and equity paydown they don't have to make. Think of it as a retirement fund except I get the benefit and my tenants make the payments.

Is there risk in it? Of course, but give me enough time and semi-normal conditions and in the long run my use of leverage is going to lead to a better outcome. Landlording isn't easy, but most of the negative stories you hear about it aren't common issues. Every tenant isn't going to wreck your house, every tenant isn't going to pay late, every tenant isn't going to require an eviction. Do some work and be patient on the front end, you'll usually get rewarded on the back end. The two times I took "iffy" tenants because it was a slow season to fill vacancies I ended up regretting it. For every teacher or office worker looking to rent, I'll get three security guards or strippers applying. Guess which category of renter works out better almost every time?
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Old 11-24-2018, 08:54 AM
 
Location: Here and there, you decide.
11,625 posts, read 22,799,205 times
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Quote:
Originally Posted by NJ Brazen_3133 View Post
But lets say, you dont have any bank debt. So that 5.5% ROI, you get to keep all to yourself. Lets say you have property on the coast, if you sell, you can buy two or three property in LV with 1031 exchange, and no bank debt. LV RE should continue to appreciate being so close to SoCal, and SoCal pricing out so many people. It does not have to be double digit.
Or if you have property in Vegas thatís paid for, you can still buy 2-3 properties in areas of Florida like I did. It all moves southeast. I paid 110 for the house I live in. Itís older, 2500sf, 1 floor, on an acre. I did, however put 20k in it to update it. I just bought a 1900sf golf course house in an Hoa thatís going to be a flip for 112. The house 2 doors down is 250sf less and sold last week for 190k. I will put 25k in this one to update.

The picture is the flip house
Attached Thumbnails
Do you expect the Residential rental market in LV to boom-96503d8a-3405-461f-87b0-90da0c999e56.jpeg  
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Old 11-24-2018, 06:29 PM
 
5,562 posts, read 5,752,718 times
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Quote:
Originally Posted by Willy702 View Post
Its just about returns. I buy a 300k house with 30% down investor loan, you buy one with 300k cash. If we both have the same amount of cash I can buy three homes, you get just one. When the house appreciates 3% a year (or more if you think that will happen), I keep all of that gain and so do you. But I have three homes so I have three times the appreciation. You keep all of the cash flow from rent and I share much of it with the bank, but I get to deduct those payments from my taxes, while your cash flow is taxed as ordinary income. We both get to use depreciation, but yours is just cutting down on income, my depreciation is likely to wipe out most or all of the income so I'm paying no income tax in most cases.

The real benefit though is just the slow march of equity paydown and appreciation. Even though it would be nice if I didn't have to share cash flow with the bank, I'm still netting something and the tenant is helping me make progress in paying down the loan. Whatever my cash flow is today, chances are real good in a few years I'll be clearing more and it will get to the point that unless I have some really bad issue with a tenant, cash flow will more than cover repair costs I have to pay and cover occasional vacancies. Smart landlords don't do these leveraged investments for the cash flow as much as they do them for the longer term appreciation and equity paydown they don't have to make. Think of it as a retirement fund except I get the benefit and my tenants make the payments.

Is there risk in it? Of course, but give me enough time and semi-normal conditions and in the long run my use of leverage is going to lead to a better outcome. Landlording isn't easy, but most of the negative stories you hear about it aren't common issues. Every tenant isn't going to wreck your house, every tenant isn't going to pay late, every tenant isn't going to require an eviction. Do some work and be patient on the front end, you'll usually get rewarded on the back end. The two times I took "iffy" tenants because it was a slow season to fill vacancies I ended up regretting it. For every teacher or office worker looking to rent, I'll get three security guards or strippers applying. Guess which category of renter works out better almost every time?
If you have a bank loan, wont you cash flow be less now? Interest rates are high now arent they?

Even with taxes added into the equation, there is a certain point in which I am sure you will still have higher returns even after taxes. If you pay little to no taxes because you write so much off, then you are probably not keeping a lot of it either.

As for appreciation, you see more of that per property much sooner if you have no equity pay down to begin with.
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Old 11-24-2018, 09:49 PM
 
Location: Las Vegas
1,876 posts, read 1,303,953 times
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Quote:
Originally Posted by airics View Post
Or if you have property in Vegas thatís paid for, you can still buy 2-3 properties in areas of Florida like I did. It all moves southeast. I paid 110 for the house I live in. Itís older, 2500sf, 1 floor, on an acre. I did, however put 20k in it to update it. I just bought a 1900sf golf course house in an Hoa thatís going to be a flip for 112. The house 2 doors down is 250sf less and sold last week for 190k. I will put 25k in this one to update.

The picture is the flip house
Where in Florida?

What are the rental yields on these flip properties?

I'm sick of Vegas and am ready for a sea change
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Old 11-25-2018, 10:26 AM
 
5,562 posts, read 5,752,718 times
Reputation: 2487
Quote:
Originally Posted by airics View Post
Or if you have property in Vegas thatís paid for, you can still buy 2-3 properties in areas of Florida like I did. It all moves southeast. I paid 110 for the house I live in. Itís older, 2500sf, 1 floor, on an acre. I did, however put 20k in it to update it. I just bought a 1900sf golf course house in an Hoa thatís going to be a flip for 112. The house 2 doors down is 250sf less and sold last week for 190k. I will put 25k in this one to update.

The picture is the flip house
Is Florida hot right now?
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Old 11-25-2018, 10:28 AM
 
5,562 posts, read 5,752,718 times
Reputation: 2487
Also, not owing the bank means less stress if you have a vacancy. You have less debt load. You dont have to worry about owing people lots of money besides government.
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Old 11-25-2018, 01:45 PM
 
Location: Here and there, you decide.
11,625 posts, read 22,799,205 times
Reputation: 3920
Quote:
Originally Posted by OmegaSupreme View Post
Where in Florida?

What are the rental yields on these flip properties?

I'm sick of Vegas and am ready for a sea change
im not renting them out, only flipping...

but from what I understand, section 8 will pay around 1200 for 4 bedroom, which you can buy for under 145
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Old 11-25-2018, 11:25 PM
 
Location: The North
4,986 posts, read 8,742,136 times
Reputation: 3889
Quote:
Originally Posted by NJ Brazen_3133 View Post
Also, not owing the bank means less stress if you have a vacancy. You have less debt load. You dont have to worry about owing people lots of money besides government.
Yeah sure it would be nice to start with a lot of money so I can wonder if a 5% ROI is right for me and not worry about vacancies. However I didn't and landlording homes that I purchased as primary residences that I later made into rentals has been very good to me. I didn't get every purchase right and even have a property that is slightly underwater today that everyone was telling me to walk away from in 2009. That property and the others I have, along with the two I sold give me the option of retiring at 50. At that point I'd never go into landlording another property, just sell them off every two or so years collecting my tax break. Probably will have put away a little over $1 million once all but my last property is sold and to get into them my down payments have been about $90k in total, including $7k when that was tough to scrape together to make my first down payment on a $40k salary.

Asking if $300k cash purchase gets you a good return doesn't resonate with too many people today, but most people could take my path as it's really simple, don't sell your homes unless you have to and be willing to put up with the occasional headaches of being a landlord. I have worked full time and done it without much sweat equity put into this, really anyone can do it.
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