Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Thanks everyone for the informative replies - I guess there are bad investors in any type of investing.
I just hope they do not bring down the system AGAIN and cause another recession.
Most of the people I know who are doing it one step at a time have always been successful. The ones who took way over too much they can handle will certainly get burned like the one overdog mentioned.
On top of the cash flow others mentioned, there are tax benefits like the depreciation and other things. The appreciation is just an icing on the cake. On top of the property taxes, mortgage interests, repairs, the rental property gets to deduct the depreciation of the real property every year.
There are a whole lot of factors that contributed to the last housing crash, not just house speculators/investors. Interesting though that you're starting to hear reports of the loosening of credit standards and banking practices that, in some cases, mirror the bad habits of past. There was an article in the Journal today on appraisers who are getting asked more and more to push up their estimates.
Also unlike last time, lot of hedge funds and foreign investors are buying investment properties for the last 2-3 years.
Doesn't maintenance, interest on loan negate whatever rent he gets?
If those things do negate the rental income, your coworker isn't picking the right properties! Being a landlord can be a huge headache, but it's also a good way to generate cash flow. Good rental properties are ones where the going rental rate is MORE than PITI+general maintenance. Plus, he may be taking out little or no mortgages generating even more cash flow.
Quote:
Originally Posted by aggierk
Are they assuming prices will go up and gambling?
Most real estate investors aren't speculators. They buy properties based on cash flow while they own them, not speculative future values. Our rental doesn't ever have to go up in value for us to make money each month. In fact, I'd prefer it didn't as that makes the tax bill increase!!
Quote:
Originally Posted by aggierk
Do you think they are overreaching and may cause another meltdown? I know banks are supposed to be stricter in lending but seeing how many people are doing this, I am afraid this is like 2007.
No, I don't because the mortgage regulations are much stricter these days. You can't buy rental properties with zero down. The mortgage approval amounts are lower now than they were.
Will certain individuals overreach and end up with foreclosures and personal financial ruin? You bet, people make bad decisions all the time.
But on a huge 2008 scale? I don't think so.
IMO, what we're seeing is an economy and a society where fewer people are getting married and they are getting married later. This, plus massive student loans, has sucked a huge chunk of the "first time home buyers" out of the real estate market. Investor landlords are capitalizing on this by buying homes that these young couples will most likely rent because they can't afford to save a down payment.
Thanks everyone for the informative replies - I guess there are bad investors in any type of investing.
I just hope they do not bring down the system AGAIN and cause another recession.
Just keep in mind that recessions are natural. The economy does not always go up, but every few years, it is bound to go down. Moreover, many of the wealthiest families got rich during the recessions/depressions. They had either the assets or cash to be greedy when others were fearful. When the economy was coming back, they were sitting pretty. Personally, I did pretty good in the last recession because I kept investing in the stock on the way down as well as the way up. If my Portfolio was 100k in 2008, it took several years for those same stocks to be worth 100k again. However, the new money that I put in during the years 2009-2014, has done extremely well. Finally, smart homebuyers can get good deals on homes during a minor crash. I am not saying that I am hoping for a 20% correction, but I am also not going to be too worried if that occurs.
Being a landlord isn't for everyone, but it makes sense for tax reasons if you're a couple, in most cases.
If you sell one house and your second is in the wife's name it usually is a major advantage. Be careful,
though.
In California my parents owned a clear title home and if you file Chapter 11 it was over a year before they could get the tenant out. You better be prepared to take a few hits.
Depending on your reliable cash flow, and your energy and age, it might be a good fit. But don't go into this thinking it's a short term money machine.
You may even be a good judge of character in a strong market, but things change for people, and you're very much a part of their lives as a landlord.
Thanks everyone for the informative replies - I guess there are bad investors in any type of investing.
I just hope they do not bring down the system AGAIN and cause another recession.
the prices they are charging for rentals is over the top- known by all the homeless numbers increasing and doubling up more and more. 2 bedroom with 8 people also rent money now is part of the " market" talk about iffy
Location: Mokelumne Hill, CA & El Pescadero, BCS MX.
6,957 posts, read 22,302,067 times
Reputation: 6471
Quote:
Originally Posted by aggierk
Thanks everyone for the informative replies - I guess there are bad investors in any type of investing.
I just hope they do not bring down the system AGAIN and cause another recession.
Good grief! Back in the 90's I lived in a Victorian flat in a lovely neighborhood that was all built with Victorian flats for the local workers at a few businesses. The lady who owned our house (she lived upstairs and we lived on the first floor) also owned 3 other houses in the same neighborhood. She bought a condo on Cape Cod as a rental property when we lived below her and she was working on buying another rental unit nearby.
This was 20 YEARS before the great recession. Did she contribute to the downfall of the world? Highly doubtful. She had mortgages, but she didn't have ARMs and buy properties that were $500K while she was earning $30K a year unlike some fools. Banks were doing tons of insane things.....no income verification mortgages has to be one of the dumbest things I've ever heard of!
In many markets, the price of rentals has dramatically increased. Some areas it's cheaper to buy a house than a rental. I know of a new apartment complex being built where the rents are over $2K a month and we're not talking about Manhattan! They already have a waiting list for units. They had a list when they remodeled the first mill building in the complex as well. Seems crazy to me, but there are plenty of people who don't want/can't own a house for various reasons. To each's own!
I have a colleague who is buying and renting out homes.
How are people able to do this?
Doesn't maintenance, interest on loan negate whatever rent he gets?
Are they assuming prices will go up and gambling?
Do you think they are overreaching and may cause another meltdown? I know banks are supposed to be stricter in lending but seeing how many people are doing this, I am afraid this is like 2007.
There is nothing wrong about it. Lots of people does the same and they don't have to face any type of problem.
I'd be less worried about people buying homes to rent out, as long as they actually cash flow and more worried about the people buying homes to live in and putting hardly anything down and buying with an FHA loan.
When buying a rental property people often have to put 20% of more down in order to purchase the property and the banks also want to see money for reserves as well.
The cheaper houses are the ones that generally cash flow better, but of course on the lower end you'll likely have more issues.
As others mentioned, even if the property value doesn't go up during the period of the loan , you are still getting your tenants to 'buy your property for you'
What happened last time around is investors didn't care that much about cash flow and were even buying properties that didn't cash flow because they thought , "who cares if I lose money every month, prices are going up like crazy and I'll flip it for a big profit soon"...of course the market eventually turned .
It's important to have staying power and reserves and to be able to ride out the bad times.
Just like with live in general, if you own a car for example you need to factor in for repairs. Living paycheck to paycheck is risky as when something 'unexpected' happens then you get in a bad situation where you need to borrow money at crazy high interest rates.
During the housing crash and even now a lot of investors are buying all cash without loans. This is because banks have made it hard to borrow for investment property.
This also helped to keep prices down as there was less demand .
It was those with cash that really benefited.
Prices have risen a lot in a lot of markets from the bottom. There are still markets that cash flow well though and are a good value.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
also rent money now is part of the " market" talk about iffy
