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Good for you OP. Rental properties are an amazing cash flow vehicle and also have amazing tax benefits. They are perfect to keep for the long-term; you don't want to flip properties if you want sustainable wealth for decades to come. Also, don't listen to the naysayers on here or in the real world. Everyone always has horror stories/blah blah blah/etc but just tell them to Eff off you know what you're doing. If you want to know the power of rental properties, look at my situation below:
I currently own 34 rental properties (44 total units) and I am 44 years old. I have owned all 34 properties between 6-12 years. About 30 of these 34 properties have loans on them (I own 4 outright as of today). I have always been on 15-year fixed rate mortgages, and they start to come off the books in about 4-5 years and snowball from there over the remaining 3-4 years. My plan is to completely retire at age 50 (I currently work a full time job in the pharmaceutical industry) when all the mortgages are satisfied. I currently manage all 34 of these properties myself and I honestly spend less than 2 hours a month managing them and I sleep like an absolute baby. When something comes up, I just text my plumber/hvac guy/electrician/handyman etc and its handled without even having to take time out of my day. My rental properties never cause me more than a minor headache every now and then (that includes a tree that fell through the roof on 1 of them last month that I had to spend $9,000 on in 24 hours removing the tree, reframing the attic trusses, and doing a completely new roof; thats just part of the game and I guess some people would be freaked out by it but I did not go through insurance as I keep $10,000 deductibles on each property to keep annual premiums so low). When I retire in 6 years, I will be cash flowing around $1,000/day for the rest of my life (that includes weekends, or 365 days a year), or around $365,000/year cash flow from the rental properties (that is AFTER accounting for taxes, insurance, vacancy, maintenance, and capital expenditures). I of course have the typical 401K and brokerage accounts that most people do but I will never have to touch those as I'll be making way more money in retirement than I am while working and will honestly never be able to use all the money I am making in retirement. When I die, I'll pass all my properties on to my wife and/or 2 daughters and they'll be set for life and get to inherit the properties at a stepped-up basis, thereby not ever having to recapture depreciation or pay taxes unless they ever sell them one day (but they'll get to sell at stepped up basis saving them an insane amount of money). Rental properties are amazing, but you definitely need to know how to buy right, analyze your market area, and have large cash reserves so if you have to drop $15,000-$20,000 in a month it is not anything more than a blip on the radar. Some months you make more, some you make less, but overall, you make alot!
Congrats! Save the pics of the home from the MLS listing ( or Zillow) so you can advertise the home for rent before you take ownership of it. Getting the property rented out ASAP means income coming in quicker. Best of luck.
Best of luck and please keep us posted. I know it's hard to make things pencil out right now.
But I'm going to offer my personal perspective, which may be unpopular.
I always found the behavior side of investing to be more important in determining MY success than the pure math particulars. In other words, what got me to success wasn't that I agonized over, and picked the right index fund that had the max return, rather its that I chose to automate maxing out my 401K.
in this same way, I like rental properties in the sense that they are a forced savings vehicle, even more so than my 401K to me. After I pay the initial downpayment, it's as if I forget that I'm even paying a mortgage (technically my tenants are!), and it adds to my net worth by working at both ends, that is both appreciation and debt pay down.
I certainly want to make sure my property is at least cash flow neutral at the start, but point being someone could make a case that my real estate investment would have been more productive in stocks, bonds, CD's, etc. And while that may be true, I find that my personal habits do much better when I'm "forced" to pay them each month, like a mortgage. And the double ended net worth generation, combined with tax benefits and ability to pull cash out TAX FREE 10 years from now, and I'm glad that I kept expanding my portfolio, somewhat independent of getting too nitpicky on the math.
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
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Quote:
Originally Posted by freshjiv
Good for you OP. Rental properties are an amazing cash flow vehicle and also have amazing tax benefits. They are perfect to keep for the long-term;...
My plan is to completely retire at age 50...
When I die, I'll pass all my properties on to my wife and/or 2 daughters and they'll be set for life and get to inherit the properties at a stepped-up basis, ...
Rental properties are amazing, but you definitely need to know how to buy right, ...
Good plan for an early retirement.
I left wage employment before age 50, and rental props have been paying me for the 18 yrs since. Have not had to touch Qualified accts (yet). My kids don't want to be bothered by the props (and neither do I in old age) so the plan is to sell and carry back the paper and take spread out gains.
I could 1031 into a 'no-hassle' NNN RE investment (if I can find one), I've done several 1031's, but when Bush offered the tax holiday, I settled and took the gains on LT 1031 accts. One needs about 10 props to justify outside managment (and their goals are not always aligned with YOUR goals.
My easiest RE wealth building has been in vacant view properties / building sites.
and... the $500k tax free gains of building and rolling your primary residence every 24 months. (no need for a job, but it requires access to capital) Which was easy during low interest times. Using Heloc or investment margin accts. I visited my last bank in 1993.
Congrats! Save the pics of the home from the MLS listing ( or Zillow) so you can advertise the home for rent before you take ownership of it. Getting the property rented out ASAP means income coming in quicker. Best of luck.
Thanks and great minds think alike! I did save the pics and description and started to advertise prior to officially taking ownership.
The property closed yesterday. Advertising is now in full force as of today. The goal is to get it rented before end of Oct to bring my real estate investment back to positive cash flow starting next month. I just paid 1st month mortgage due on Oct 1st from cash-out refinancing the 1st rental so this month of October has been negative cash flow as expected.
Only minor repairs are needed seen during inspection. My criteria for investment property is for it to be turnkey so I can rent it out asap. I only one weekend to get the house ready for future tenants.
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