Small business ideas...

[Mystery123]

Originally Posted by hikernut

Putting money into a small business is a lot riskier, where there is a significant chance of losing your entire investment.

Put your money into a balanced (i.e., stock+bond) mutual fund, forget about it, and then focus on your day job. Rental property can be okay too, but only if the price/rent ratio is sensible. Don't pay more than 100x the monthly rent for a property.

100x more than monthly rent?
That's pretty tough to do now.
I sold my townhouse for $121 and 6 months later, it went up to $155.
Should have rented but over $200 HOA was the main reason to sell it.

For reference, townhouse like that (1200 sq. ft. two story) goes for around $12-1300 per month so getting it now for $120-130k is pretty hard find.
Single family homes also don't bring too high even though they are much bigger than town homes.
I've seen 1800 sq.ft. two story homes bringing less than $1800 rent with property value of close to $300k so getting it at 100x is not possible in Denver (Littleton).

Assuming home gets rent 11 months out of each year, 1 month for maintenance/managing company cost and another 2 month for taxes/insurance etc... so 8 months is actual rent income.
Even if the rent pays mortgage and I don't have to pay anything out of pocket, equity build up is what counts.
If I invest $30k on a $150k house and get around $500 in equity each month, that's 100x better than what bank gives.
But the big but is Denver housing market is burning hot so getting anything in good deal is a dream only.

[2bindenver]

1. You can self manage at first.
2. Buy a home warranty, put in the lease that the tenant pays the trip charge.
3. Rent should cover PITIH (your insurance will be less because it does not cover tenant's belongings)
4. Set up an account at a local to the property bank.
a. the checking account pays all the bills for that property. Do not commingle funds.
b. the savings account is for the security deposit.
5. Use excel to keep track of rent payments and security deposits.
6. Credit check your prospective tenants. I use TRANSUNION SMARTMOVE | Colorado Association of REALTORS
7. You can test market rental rates via Zillow & Craigslist.
8. If the term is less than a year, you can charge a premium.
9. If you allow pets, you can charge a separate deposit and a cleaning fee.

There are properties to be had. You have to be approved and you have to be decisive.

[hikernut]

Originally Posted by Mystery123

Assuming home gets rent 11 months out of each year, 1 month for maintenance/managing company cost and another 2 month for taxes/insurance etc... so 8 months is actual rent income.
Even if the rent pays mortgage and I don't have to pay anything out of pocket, equity build up is what counts.

Just the property management fee will be more than 1 month's rent per year. I've seen some charge a flat 15% of gross rent, and others will charge 10% plus an additional fee every time they find a tenant.

Maintenance is tricky to estimate, and varies a lot from year to year. I'd be interested to hear what sort of budget the landlords here use(?).

Then of course, with every investment one has to be prepared to survive the tough times. I once owned three rental properties and was just covering my PITI plus HOA with the rents. When the next recession hit the rent dropped and I had to move for a different job. Between the lower rents, plus paying the property manager, I was looking at parting with about $2K/month from my own pocket to keep them going. I decided I did not want to suffer that pain, so I sold them.

If I ever buy a rental again it will be on very favorable terms from my point of view. Say, something where I can pay off a 15-year note using only half of the rent. Such a property may never show up, and that's fine with me. There are plenty of other ways to put money to work.

[Mystery123]

Originally Posted by 2bindenver

1. You can self manage at first.
2. Buy a home warranty, put in the lease that the tenant pays the trip charge.
3. Rent should cover PITIH (your insurance will be less because it does not cover tenant's belongings)
4. Set up an account at a local to the property bank.
a. the checking account pays all the bills for that property. Do not commingle funds.
b. the savings account is for the security deposit.
5. Use excel to keep track of rent payments and security deposits.
6. Credit check your prospective tenants. I use TRANSUNION SMARTMOVE | Colorado Association of REALTORS
7. You can test market rental rates via Zillow & Craigslist.
8. If the term is less than a year, you can charge a premium.
9. If you allow pets, you can charge a separate deposit and a cleaning fee.

There are properties to be had. You have to be approved and you have to be decisive.

Thanks for info. I'll have to seriously look into this.
I think I can at least get two rentals with my current job's income.

What trip charge? You mean make the renters pay for home warranty?

Originally Posted by hikernut

Just the property management fee will be more than 1 month's rent per year. I've seen some charge a flat 15% of gross rent, and others will charge 10% plus an additional fee every time they find a tenant.

Maintenance is tricky to estimate, and varies a lot from year to year. I'd be interested to hear what sort of budget the landlords here use(?).

Then of course, with every investment one has to be prepared to survive the tough times. I once owned three rental properties and was just covering my PITI plus HOA with the rents. When the next recession hit the rent dropped and I had to move for a different job. Between the lower rents, plus paying the property manager, I was looking at parting with about $2K/month from my own pocket to keep them going. I decided I did not want to suffer that pain, so I sold them.

If I ever buy a rental again it will be on very favorable terms from my point of view. Say, something where I can pay off a 15-year note using only half of the rent. Such a property may never show up, and that's fine with me. There are plenty of other ways to put money to work.

Please PM me on what are some of the ways.
Thank you

[2bindenver]

You pay for the home warranty. The tenants pay the trip charge for the repair.

Read "The Millionaire Real Estate Investor" by Gary Keller this weekend. It will give you a good idea on what's what.

[Mystery123]

Originally Posted by 2bindenver

You pay for the home warranty. The tenants pay the trip charge for the repair.

Read "The Millionaire Real Estate Investor" by Gary Keller this weekend. It will give you a good idea on what's what.

Will do.
Home warranty is something I never had.
I had insurance but never warranty.

[hikernut]

Originally Posted by Mystery123

Please PM me on what are some of the ways.

This is straying from the topic a bit so I'll keep it brief. We can take to another forum if desired.

The financial markets offer nearly any combination of risk/reward that one might care to take. IMO, this is the best way for most people to passively invest money. You just need to educate yourself a bit so you don't get fleeced by something with a very high cost structure, and you don't take more risk than you are willing to stomach.

There are certainly many people who have made fortunes by operating their own businesses. That's a perfectly good thing to try, but it's hardly passive and will take a toll in terms of time and effort, and the risk is high.