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.
Location: Formerly Pleasanton Ca, now in Marietta Ga
10,359 posts, read 8,597,065 times
Reputation: 16703
Advertisements
I think I was the one that pointed out the 2.7 roi to you in another post.
That's not a good return whether it's a 100k or 700k
If you can get a higher roi, what does difference in basis mean.
I had a house I was getting a 10 percent roi on. The house doubled in value so in a sense the roi dropped to 5 percent. I sold that house and used the money to buy more houses and also got a higher roi than 10 percent.
In the end the first house cost me 155k and generated a net of of about 16k a year in income after all expenses. I sold it for 345k and bought multiple cheaper houses.
In the end the income went up to 45k a year.
So rather than leaving the equity trapped I used it to increase cash flow. What's better... 16k or 45k in income?
That was the point I was making about having all that equity tied up in the condo and having a 2.7 roi.
Location: Formerly Pleasanton Ca, now in Marietta Ga
10,359 posts, read 8,597,065 times
Reputation: 16703
Quote:
Originally Posted by flyingsaucermom
Our last mortgage payment (debt of $220k-ish) was just under $2k and included all of the above. My numbers above are based on a slightly smaller mortgage and without an HOA.
Don't forget vacancy and repairs.
There is a general rule called the 50% rule that says half of your cash flow will go to expenses not including the mortgage. For me I have found this to be fairly accurate.
Now if you have a rental where it is new or you renovated everything at the start, then that 50% would go down, but your basis would be higher up front.
Our last mortgage payment (debt of $220k-ish) was just under $2k and included all of the above. My numbers above are based on a slightly smaller mortgage and without an HOA.
Ok, I guess I was assuming the 200k would come from a HELOC or something like that. You are talking about just taking 200k from your personal savings as a down payment on a 350k home and then only having a mortgage on 150k?
I think I was the one that pointed out the 2.7 roi to you in another post.
That's not a good return whether it's a 100k or 700k
If you can get a higher roi, what does difference in basis mean.
I had a house I was getting a 10 percent roi on. The house doubled in value so in a sense the roi dropped to 5 percent. I sold that house and used the money to buy more houses and also got a higher roi than 10 percent.
In the end the first house cost me 155k and generated a net of of about 16k a year in income after all expenses. I sold it for 345k and bought multiple cheaper houses.
In the end the income went up to 45k a year.
So rather than leaving the equity trapped I used it to increase cash flow. What's better... 16k or 45k in income?
That was the point I was making about having all that equity tied up in the condo and having a 2.7 roi.
I think you make some valid points.
But with more rental properties comes more time involved with acquiring tenants, collecting rent, maintaining multiple them etc. Is it worth it for the increase in cash flow? Possibly yes, for the lady you were replying to maybe not.
When you say multiple cheaper houses, how many and what price? I personally don't like buying homes that are too cheap because I prefer dealing with tenants that are little better off. It decreases my chances of ever having issues collecting rent and of them tearing up the place. Sure, I can make better money, but at what price?
I currently have multiple rental properties (single family homes) in a great city with outstanding schools that went up significantly in value. I could sell them all and buy more cheaper homes but then I get lower class tenants and in seedier areas. I may make more money but at what expense? In the long run my time and sanity is worth more than the extra money I could potentially make.
Another option would be to sell now and hold on to the profits and when the next recession comes, buy more nicer homes than I previously owned. But how long would I have to wait for the recession and homes to drop?
There is a big difference between Single-Family-Residences and Tri-plexes or Four-plexes. The math works out a lot different.
I have only done Tri-plexes, Fours and Fives and always wondered why people were so drawn to LL'ing Single-Family-Residences.
SFR's have an upside when it's time to sell. They can operate as rentals but can be sold retail. They also tend to sell more quickly for more money per sq ft than a multi.
Multi's are owned by shrewd investors and professional LL's and are a tougher market to sell to.
Ok, I guess I was assuming the 200k would come from a HELOC or something like that. You are talking about just taking 200k from your personal savings as a down payment on a 350k home and then only having a mortgage on 150k?
SFR's have an upside when it's time to sell. They can operate as rentals but can be sold retail. They also tend to sell more quickly for more money per sq ft than a multi.
Multi's are owned by shrewd investors and professional LL's and are a tougher market to sell to.
I guess so.
I bought my first as a college student. Later as a sailor when I needed a home for my family, Multis were cheaper [per sq ft], they provided the 'side' income [often greater than my salary income], and they can be a wonderful tax-shelter [if you have any income that might otherwise be facing taxes].
I bought my first as a college student. Later as a sailor when I needed a home for my family, Multis were cheaper [per sq ft], they provided the 'side' income [often greater than my salary income], and they can be a wonderful tax-shelter [if you have any income that might otherwise be facing taxes].
I wouldn't want to deal with them mainly because of the type of people who want to live in multi's. I just see them being more of a pain to deal with on multiple levels... collecting rent, not tearing the place up, etc.
Ok, so what rate of return would you make on your 200k? You would have to deal with tenants, real estate agents to list the property, repairs, (possible new roof, AC, hot water heater etc) Could you make more in the stock market with a very conservative mutual fund/index fund? I'm just curious. Maybe you don't like or trust the stock market, I can understand that.
Location: Formerly Pleasanton Ca, now in Marietta Ga
10,359 posts, read 8,597,065 times
Reputation: 16703
Quote:
Originally Posted by ufcrules1
I think you make some valid points.
But with more rental properties comes more time involved with acquiring tenants, collecting rent, maintaining multiple them etc. Is it worth it for the increase in cash flow? Possibly yes, for the lady you were replying to maybe not.
When you say multiple cheaper houses, how many and what price? I personally don't like buying homes that are too cheap because I prefer dealing with tenants that are little better off. It decreases my chances of ever having issues collecting rent and of them tearing up the place. Sure, I can make better money, but at what price?
I currently have multiple rental properties (single family homes) in a great city with outstanding schools that went up significantly in value. I could sell them all and buy more cheaper homes but then I get lower class tenants and in seedier areas. I may make more money but at what expense? In the long run my time and sanity is worth more than the extra money I could potentially make.
Another option would be to sell now and hold on to the profits and when the next recession comes, buy more nicer homes than I previously owned. But how long would I have to wait for the recession and homes to drop?
In the houses I buy they are regarded as c to b- class. Renters tend to be blue collar
The example I used was a b- class house in California.
I 1031 exchanged into six sfh in the Midwest. I paid and rehabbed an average of about $54K per house. After that they appraised at about $80K each. Each one rents between 1000 to 1200 per month.
I have been a landlord for over 30 years. I have found that the difference in the effort from these blue collar and the better tenants really isn't that much more. Much depends on your tenant screening. Sometimes those better tenants expect more and that sometimes creates more hassles.
I self managed for those 30 years until the last few years. The income off these lower priced homes allowed me to retire early with as much income as I ever attained working. I have a property manager who handles everything. I understand the time and sanity thing. I spend 2 to 4 hours a month dealing with all the properties. For some that is too much time and stress to commit to in exchange for not working anymore.
The nicer areas will appreciate better than mine. However I want the money now to live on and enjoy, not ten years later when they go up.
I did the nice properties in an A class area. The rent/purchase price ratio is not good at all. $600K for $2,000 a month rent. In all my years I have seen property go up and down in value so appreciation is all about timing. Plus when they appreciate how do you take out the equity to live on? What if you need the money and the value has dropped?
In that period I have only dropped rents for about a year and a half out of 30 years. It was a 15% drop which went back up after the year and a half.
That's what works for me. But I understand some people only want to own nicer properties. Cash flow and how much work is what is important to me.
Now going to the D class and below property is a whole different story.
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.
