Is now the time to invest in rental properties? (investments, housing, landlord)

[zz4guy]

I've heard that it is good to invest in real estate now since soon we will be seing massive inflation when Obama's spending hits the market. But I've also heard renters will have less to spend on rent.

ANy thoghts?

[love to shop]

I think it is hard to answer this generically. I've been looking into buying rental properties as a way to diversify from the stock market - both long term and vacation.

I would only be willing to do this if I could have neutral cash flow from the start. I can't find any properties where the numbers make sense. Most don't even come close to making sense. Makes me think real estate needs to drop quite a bit more before we come to equilibrium.

If you find a property where the numbers work, it's a great time. If you don't then it is not a great time. I'm sure there are some areas of the country where it does make sense. I'm not willing to invest where I am counting on a lot of appreciation to have the investment make sense.

[Chuckity]

I think it's always a good time ... if you can make the numbers work.

We just purchased another SF rental - great neighborhood, great schools, needed 1 major mechanical and a couple minor things - but we got it at at least $25K under market value. (And since we're talking about $100-$125K typical values, $25K is a big chunk of change.) It's should have a net annual return of investment of 10%.

I'll tell you though, being a landlord makes me wanna scrub my eyes out with a wire brush and Lysol sometimes - but the advantages of the "right" property make it worth it. IMHO, you have to have a perfect combination of a thick skin, a good judge of character, handy with power tools and an unpublished private number & home address to be a good landlord.

If you're serious, I'd advise you to finding a local real estate investors club and going to one of their meetings.

[love to shop]

Chuckity,

Just out of curriousity, 10% return on what - the purchase price of the house or what your cash outlay was if you financed?

Thanks

[chet everett]

Above advice is pretty spot on. As I had rental properties I used both some pretty sophisticated estimating techniques to gauge potential for long term and short term profit as well as a lot more basic / emotional analysis. I decided that the grief (literal) at having some renter's life fall apart and them trying to take that out on ME was just not worth the fact that I could recoup my investment and a handsome profit that I could then put back to work in the financial markets that I have learned are not as opaque as they seem.

When people have rising incomes they can pay more rent, when their income does not increase they cannot pay more rent. Pretty simple. When it is cheap to borrow money people that are renters can afford to become owners. When money gets more expensive housing prices will not appreciate. Also pretty simple.

There are ALWAYS some properties available for far below the cost of their neighbors because the property is in disrepair. Putting into good condition can take a little money or a lot, your return is a function of how willing people will be to rent out places that have only minimally cost you money...

If you get a nice enough place at a big enough discount you MIGHT be able to make money on it. Lots more places flood the market that are NOT going to make good rentals....

[Chuckity]

Originally Posted by love to shop

Chuckity,

Just out of curriousity, 10% return on what - the purchase price of the house or what your cash outlay was if you financed?

Thanks

Cash purchase. 10% return on cash investment - after deductions of insurance, taxes, repairs, 2 month/year vacancy, etc.

[Chuckity]

Originally Posted by chet everett

Lots more places flood the market that are NOT going to make good rentals....

Agreed. And just a rambling thought - I always have friends & family ask me to keep a good eye out for that "perfect" investment.

I have to laugh because if I find that "perfect" investment - and they can be a needle in a haystack - I'm going to buy it first.

[aneftp]

Originally Posted by Chuckity

Cash purchase. 10% return on cash investment - after deductions of insurance, taxes, repairs, 2 month/year vacancy, etc.

But you could have put it into the stock market the last 9-10 weeks and made a 30% return.

If you have too much cash tied up in illiquid investments such as real estate, you miss the big return on stock investments.

On the other hand, if you were to buy to diversify your assets with real estate, than it is fine to buy property at this time.

[Chuckity]

Originally Posted by aneftp

But you could have put it into the stock market the last 9-10 weeks and made a 30% return.

If you have too much cash tied up in illiquid investments such as real estate, you miss the big return on stock investments.

On the other hand, if you were to buy to diversify your assets with real estate, than it is fine to buy property at this time.

Well, thank you, unknown-financial-guru-on-an-internet-message-board-who-knowns-nothing-about-my-net-worth-or-the-the-exact-reasons-why-my-own-in-person-financial-go-to-guy-who-manages-my-entire-financial-portfolio-has-advised-me-to-pay-cash-for-this-investment.

Sheesh. That's a long title.

Thank you for giving me your blessing.

[2bindenver]

I am always look for a good long term investment. I know real estate so my money is in real estate.

Real The Millionaire Real Estate Investor, by Gary Keller. It is required reading for investors who want to use me as their agent.

If it fits with your investment strategy, do it.