Opinions - If you were buying investment property. . . (best neighborhood, sale)

[Jkgourmet]

And had approval for $200,000 for a mortgage, cash for down payments and closings, some cash for updating the property if necessary, and were not going to manage the property yourself nor is this your primary source of income.

Would you buy multiple properties - such as 4 properties for $50K each? Two properties for $100K each? One property for $200K?

I realize this is a very open question with a lot of "it depends on" answers. But I'm curious how those who have invested in residential real estate 'on the side' would answer this question, given the current availability of decent properties in decent neighborhoods at the lower price points ($50-$100K) and the availability of nice properties in good neighborhoods at the higher price points ($200K).

[unit731]

Do you have any experience as a landord? You don't state.

If you are not living in area then you will need a property management company. Here is one that specializes in such:

LINK

There are many many many posts about renting and renters. Go read up.

If you have never been a landlord then don't even think of entering this profession now.

I was told when I was young to just invest my money and not go into the landlord business. If I had followed that advice I would be a far richer person right now.

But let some other landlords chime in. Maybe they have a good formula for success.

[unit731]

Oh, and do read up on the laws relating to evictions. It does vary by state.

[whodiman]

The answer to this would depend on the goal of your investments. If you are after highest rate of cashflow then you go with the 4 50k ones. If you want cap apreciation the 200k tends to be in a better area but won't cash flow as well as rents do follow the price up in the same proportion. However your quality of tenants might suffer a bit on the 50k properties depending on what they are. You can't really buy a SFH and expect good tentants at that price so your cashflow becomes erratic. 2 100k properties gives you the most steady cashflow

[Jkgourmet]

Originally Posted by unit731

Do you have any experience as a landord? You don't state.

If you are not living in area then you will need a property management company. Here is one that specializes in such:

LINK

There are many many many posts about renting and renters. Go read up.

If you have never been a landlord then don't even think of entering this profession now.

I was told when I was young to just invest my money and not go into the landlord business. If I had followed that advice I would be a far richer person right now.

But let some other landlords chime in. Maybe they have a good formula for success.

All excellent points - perhaps I should have said I would hire a property management company instead of I would not manage the property myself. There's no way I want to be an active landlord - I don't have the knowledge or expertise; accordingly, I will happily pay someone to do it for me.

I should also add that I have significant assets in other investments and my primary home is paid off.

[gtbguy]

I own several homes in CA. and AZ. I have everything rented and have been a landlord for 25 years. Over the years I've done very well with rentals. I've only had to evict ONE person, so I feel I have a very good track record. Oh and BTW, I manage them myself and I don't use a management company. It all comes down in being strict when you have to be and fair by treating your tenants like human beings and not be a "slum lord". You take your time to find a good tenant by reviewing applications and looking for families that have both parties working (or one person working with enough income to cover the rent), job stability, and ALWAYS follow up with their exiting and former landlords. Your gut feel seems to work best when coming up with a final selection.

My biggest problem right now is dealing with the HOAs, they can sure be a pain in the butt to deal with.

Bottom line, you need to make sure you have the time to devote to this endeavor.

Good luck on your decision!

[khuntrevor]

Originally Posted by Jkgourmet

And had approval for $200,000 for a mortgage, cash for down payments and closings, some cash for updating the property if necessary, and were not going to manage the property yourself nor is this your primary source of income.

Would you buy multiple properties - such as 4 properties for $50K each? Two properties for $100K each? One property for $200K?

I realize this is a very open question with a lot of "it depends on" answers. But I'm curious how those who have invested in residential real estate 'on the side' would answer this question, given the current availability of decent properties in decent neighborhoods at the lower price points ($50-$100K) and the availability of nice properties in good neighborhoods at the higher price points ($200K).

What kind of return are you looking for after ALL expenses? I'm getting 569 for 25K invested in a Townhouse/condo. I will get 625 for my 18,500 House in two months-with lots of sweat equity. I tried to get a friend to buy 337 E. Clarendon in the mid-40s. Old solid block home close to LR--probably could get 900 per month a 3/1. Here is another example:


This is in a better neighborhood (N 20th St between Thomas and Osborn).
It went for 86,000 after being listed for 55K during the FTBC frenzy.

[Zippyman]

You'll get much better returns in the lower price points - a $200k home likely won't rent for enough to cover the payments, a $50k home will throw off lots of extra cash, but it'll be older, need more maintenance, and attract a different kind of tenant.

Your best bet is to find a PM you trust, and chat them up - they know what they can get rented...

[unit731]

As you can read some have had great success in the rental business.

I have had some good tenants that did keep the place clean and tidy and did pay the rent on time.

But. There are the others. Always late with rent. And always an excuse that THEY think is valid.

Then there is the phantom tenant. Rent to one person and that person takes on a roomate who has never signed anything. Or as others have stated the original sublets to a complete stranger. Then there are the dog and cat people. I have rented to such and each time was a disaster. EVERY person with a dog or a cat states that THEIR dog or cat is different.

I have lots of stories. I have had propeties in nice urban areas and nice rural areas.

The posting above about rates of return sounds very good. I am not up on this nor am I up on any capital gains that might have to be paid when time comes to sell.

The rental management company on the link is very good. They handle just houses. And if you do not live in area then the management company would take care of all issues.

I'd give all some serious thought. But if you are financially set and wish this for a hobby then why not. Prices are low compared to before. If it was myself I would purchase the bestest home in the bestest neighborhood with the alloted amount of money. But I am not a financial person so do read what others state.

And again, if you are not from an HOA part of the country do read up on such. They do have very good points but do have negatives as well.

The city or town does not mean as much to me in the valley but more towards the better homes in the better neighborhoods or developments. Location is everything in real estate. To me anyway.

[oldtrader]

As someone that from 1972 till I retired not long ago, that spent their full time as a commercial real estate broker let me give you a few guidelines. I have bought, sold and managed a lot of single family homes, and apartments.

Give me the answers to following question, and I can give you a lot more help.

Take the projected income, and deduct: A--All expenses. B--Taxes and insurance. C--Deduct 5% to 10% for possible vacancy (especially when using a management firm). D--Mortgage payment (PI). E--Set aside 10% of income for future repairs and replacement and sprucing up before resale in the future. This is the one place a lot of investors get caught when these expenses come up and they will, and they have not set aside money to cover them. Do it so you do not set yourself up to have to take food off the table to cover these inevitable costs.

THE QUESTION: After deducting all of these, which investment gives you a positive cash flow. You will find some of the investments you look at will be taking money out of your pocket each month and others can have a positive cash flow. You want a positive cash flow, which depending on your needs may only be a small one, but it is positive.

Buying one home or four as you are considering should be evaluated this way. You may find 2, 3, or 4 homes will give you the safest positive cash flow investment.

FACTS OF LIVE IF INVESTING IN SINGLE FAMILY HOMES.

1--Always buy the cheapest home, in a good quality neighborhood. This is better by far, than buying the best home in a lower quality neighborhood. Buyers want to buy in the best neighborhood they can afford. The highest priced home in a so/so neighborhood or the cheapest home in a quality neighborhood selling for the same price will both attract the same buyer, but the nicer neighborhood will sell your home quicker and at a better profit. The lowest priced home, has the best potential to make the most profit.

2--Looking at the same priced investments, look at the curb appeal of the home. That first impression, is what sells homes. Curb appeal will be how the home looks at first impression. Imagine it with decent paint, a few plants and shrubs if needed, so if it does not look perfect now it can give you a chance to get it cheaper, but figure before you buy it how to give it great curb appeal. Some houses due to style, etc., will have more curb appeal than others. 50% of the decision to purchase the home, will be made by the future buyer based on their first impression. Make your decision also based on curb appeal if two homes are in the same quality neighborhood and both have similar price pick the one with the best curb appeal.

3--Before you sell it in the future, give it something that stands out. I found one of the best was a nice chandelier in the dining area, and keep the light on so it hits the potential buyer when they enter the house. If it is even half way formal, I always found a sale of a crystal chandelier as they really stand out and in most peoples eyes say quality. I alway got a little more on resale by this type of touch.