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Old 05-13-2018, 06:55 AM
 
Location: Eagan, MN
362 posts, read 207,736 times
Reputation: 557

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I have a solid 6-figure income due to my renters... I quit my tech job so I can travel.

I would do it again.
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Old 05-13-2018, 07:13 AM
 
2,473 posts, read 2,729,125 times
Reputation: 1095
Thank you all. I have clued my friend in. She'll have to make her own decision. Would I ever do it? Never in a century! I am a renter. Have been all my life. Never had a desire to live any other way. Appreciate the "security" of knowing the big things that I can't deal with will be taken care of by more expert folk. And I have always gotten my deposits back which says the rest, I think. Anyway, living among renters I have seen both the good and the bad. It's a terrible gamble is all I can say.

But, as I said, the decision is hers and I appreciate all your opinions. She can take a look here and read if she wants.
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Old 05-13-2018, 07:40 AM
 
Location: Formerly Pleasanton Ca, now in Marietta Ga
4,112 posts, read 3,404,360 times
Reputation: 5638
Quote:
Originally Posted by mathjak107 View Post
yes.

it is like we are entertaining buying a co-op . while the difference between our rent and the maintenance is 6k less by buying the reality is if we pay cash we give up 12k in income on the money now tied up in the apartment .

so while you say cash flow is positive because you pay cash it really is smoke and mirrors if it is not more than you can get on that money elsewhere .

there is really not much more if any security since if I did not own i would just have 300k more in cash to pay bills in tough times .
I disagree with your response.

You are making an assumption that one had to pay all cash in total to get cash flow positive. Where did I say that?

I said that having a property that is cash flow positive to start with is much less risky. That does not mean you paid 100 percent cash in full on the property to buy it. If you did not own you may or may not be making a better return on the money.
Owning real estate and having a cash reserve just makes sense. So it is not a given that if things get tough one will not be able to cover costs. This is especially true if the property is running cash flow positive.
Please note the distinction of paying all cash and being cash flow positive.

The object of this thread is asking about owning a house for income as in rental property, not a place for personal residence.
I know the trade off of buying versus renting. My first 2 years in Atlanta I had enough cash to buy a house in full but ran my numbers and instead bought rentals and rented a house for myself.
The income from the rentals paid my rent and gave me an extra 20k a year on top.

If you are buying a cooperative to live in and only care about the end cost then you shouldn't buy, just keep your $6k difference that you figured. If rents go up then it will eat into that 6k
To me a personal residence changes things as it's not always just about numbers like an income property.
It's about ownership and having less restrictions on what you do with your residence.
I did run numbers for my personal home I bought 6 months ago.
My rental was an older 1600 sq ft house with rent increases.
I moved into a 5200 sq ft dream house in a better neighborhood.
It was a lifestyle change I was willing to pay more for. Before buying I ran my numbers and on a monthly basis it costs me 2/3 what I was paying to rent the smaller house. My housing cost is also fixed to a large degree versus renting.

Making money doesn't mean much if you can't enjoy it
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Old 05-13-2018, 07:40 AM
 
Location: Floribama
13,494 posts, read 29,444,231 times
Reputation: 11900
I would never take out a mortgage for a rental property, all three of mine I paid cash, with the last being a foreclosure I bought at auction. Mortgage interest will eat up much of your income. Also, people paying a mortgage tend to be in a rush to find renters, which can be a costly mistake. Since my houses are paid for I can let them sit empty for months while I find the right tenants if I need to.

Also, you need to be somewhat handy and able to do some repairs yourself, or at least know a good handyman that wonít rip you off. If you have to hire contractor to do every little repair it will add up fast.
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Old 05-13-2018, 07:47 AM
 
12,607 posts, read 14,609,308 times
Reputation: 14101
If I had bought ten houses just like mine when I bought my house in 1990, I'd be rich just from the appreciation. If I had renters in them, even richer.
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Old 05-13-2018, 08:06 AM
 
Location: San Antonio
3,184 posts, read 9,227,803 times
Reputation: 4721
Yes. I own multiple, as do many of my friends. As a member of the military, we have to move all the time. When we move, I buy a home as a primary residence, and then when we leave, I get renters so it continues to build equity. I've only been doing this about 12 years and I have a round 700,000 in equity in all my houses combined, with having to invest very little of my own money (just my monthly payments, which would have been paid even if I was the renter). The renters pay my mortgage.

I make very little on the homes monthly, maybe an extra $300, combined, a month to my household income, but it's not about that for me, it's about the equity for when I sell them someday. Some of the homes lose money, and some make money, but the average is a net gain. I bought them all with the intent of renting them, so I paid attention to the rental market. I started off making money on all of them, but rising taxes happened faster than rising rent. I try to raise the rent too much year-to-year for the same renter, but will adjust the lease amounts when the current renters move out.

When I lose money, pay management fees, or pay for repairs, I get a HUGE tax advantage so it really helps to offset that cost. If I were to conciser all of that, vs the $300 a month in extra income, I only come out very, very, very slightly ahead, but that's OK. It's meant as a long term investment.

Also, I hire management companies to run the daily operations, to there is basically ZERO stress. I just collect the money. It requires zero extra effort on my part.
My key to doing this with no stress is to use a REAL management company, like Keller Williams, ReMax, Coldwell Banker, etc, not some local individual who starts a local website. I've found most of the people who have the problems are those who aren't using recognizable companies. I don't even pay more to use the big companies, but I get extremely good, reliable, consistent service.


Someday I hope to have them homes paid off and turn them into total income properties and make a good amount monthly, and when I'm too old or tired to deal with them, I'll sell. They'll be paid off and I expect I'll pull in a million dollars or more on the sales of the homes at that time. I'll retire in good shape. They're long term, not meant to create a giant income right now.

Last edited by dmarie123; 05-13-2018 at 08:18 AM..
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Old 05-13-2018, 08:08 AM
 
Location: San Antonio
3,184 posts, read 9,227,803 times
Reputation: 4721
Quote:
Originally Posted by ceiligrrl View Post
i did and i would never do it again...it was a nightmare.... i had to quickly move to the next state south for cancer treatment, and couldn't be running up there every month.... i hired a guy to manage it while it was for sale..... i had sunk 40 grand into that house, built a garage, landscaping, new roofed deck, gorgeous front porch with the swing, refinished the wide southern pine floors, gutted the bathroom put in new everything... kitchen and bath got new imported ceramic tile floors, stainless appliances, beadboard and shutters for that country look.... and more, but you get the picture.... long story short, the walk in closet i had created from a small bedroom walked out of the house, my $7,000 grand landscaping??? bushes ripped out by a rope attached to a truck bumper, took 5 years to sell that house and took a loss on it. heartbreaking. do not rent a house unless you can watch the tenants like a hawk.
Wow. My management company does very strict background checks with reference checks, and they take pictures of everything in the home every 6 months, and will recoup damages beyond normal wear and tear if needed. I've never had such a problem. I'm sorry that you did. My renters take great care of my property. One even replaced extremely old and out of date light fixtures with nicer ones throughout my whole house (with permission) and left them when they moved. I've been very lucky!
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Old 05-13-2018, 08:16 AM
 
Location: Formerly Pleasanton Ca, now in Marietta Ga
4,112 posts, read 3,404,360 times
Reputation: 5638
Quote:
Originally Posted by southernnaturelover View Post
I would never take out a mortgage for a rental property, all three of mine I paid cash, with the last being a foreclosure I bought at auction. Mortgage interest will eat up much of your income. Also, people paying a mortgage tend to be in a rush to find renters, which can be a costly mistake. Since my houses are paid for I can let them sit empty for months while I find the right tenants if I need to.

Also, you need to be somewhat handy and able to do some repairs yourself, or at least know a good handyman that wonít rip you off. If you have to hire contractor to do every little repair it will add up fast.
A lot of people think like you do. The idea of debt is very unappealing to them.
I own all my rentals free and clear except for two of them which I cash out refinanced. When I bought them I had no choice, poor credit and income.

Those 2 do have income eaten into by the mortgage. Instead of $600 a month clear I only get about $240.
A smaller return yes. But when I got those loans I got back all the cash I put into the houses plus a few extra thousand.
I still have about a $27K equity position in them and with none of my money into them, an infinite return. But say I had a dollar of my own money into each of them, the return would be less by a fraction, but still it would be a 2,880% return.

As far as being in a rush to find renters, I'm that way regardless if the place is paid for or not. That's not to say I am not looking for the right tenants.
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Old 05-13-2018, 09:29 AM
 
16,492 posts, read 17,513,441 times
Reputation: 23546
Quote:
Originally Posted by Hazel W View Post
I would like to ask a question of anyone who has actually owned a house for the purpose of renting it out for extra income. I have a friend who is thinking of doing just that. I have never owned any kind of property - never even wanted to; so, I am not one to talk intelligently about doing this. If you have ever done this, did you feel it was worth the expense and extra work? What kind of luck did you have getting good, reliable renters?

Thank you.
It can be worth it. We own multiple properties that we use as additional income. I would say 95% good luck getting good renters. The best thing is to set a criteria and donít deviate when screening.
Yes imo itís worth the extra work. It will take a while but eventually the investments will pay off.
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Old 05-13-2018, 05:14 PM
 
Location: Decatur, GA
57 posts, read 37,856 times
Reputation: 52
Default Mortgage on rentals surpasses all cash buyer

Quote:
Originally Posted by southernnaturelover View Post
I would never take out a mortgage for a rental property, all three of mine I paid cash, with the last being a foreclosure I bought at auction. Mortgage interest will eat up much of your income. Also, people paying a mortgage tend to be in a rush to find renters, which can be a costly mistake. Since my houses are paid for I can let them sit empty for months while I find the right tenants if I need to.

Also, you need to be somewhat handy and able to do some repairs yourself, or at least know a good handyman that wonít rip you off. If you have to hire contractor to do every little repair it will add up fast.
If you never take out a mortgage for rental investment properties, youíll never be able to buy as many rental properties. Leverage done correctly allows you to buy many more properties. If youíre 60 maybe all cash is the way to go. Letís say you have $100k. you can buy 3 $100k properties by putting down $30k on each house. Most lenders require 30% down on rental properties. You have $10k left for expenses. if you pay all cash you have only 1 house. Letís say each house produces $1000/month in rent. You get a loan at 6% because the interest will be higher for investment properties. The mortgage with taxes and insurance is $600/month. That leaves you with $400 from each property or $1200/Mo. or $200/month more than all cash. Here is the topper. All cash has 1 home worth $100,000. Mortgage guy has 3 homes worth $300,000. In 10 years heíll have more wealth than the all cash guy.
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