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I'm not going to move into an apartment complex with my tenants so that the bank will look at me differently. I also get the feeling that interest is/was well above 6.0% (right?), which is the highest fixed rate I currently have for an investment property. Maybe the bank will give RLCMA 100% LTV if he's willing to move in and cover closing costs. Thanks for sharing your rather unique success story.
Say, I'm enjoying this little flame war though. Keep up the mudslinging guys! lol
It's the the high-credit card debt & literate grasshopper vs. the self proclaimed milionare with a short temper.
Are such unsecured loans still possible in this current market though? From my understanding, credit is tight for owner occupied property so logically I would think risky investment property would be even more difficult to qualify for. An investor will walk away from his 2nd home or investment property before he will his primary residence. Seems like a down payment would be mandatory at this point in time, especially for a commercial RE loan (apartment building).
Please enlighten us. What's the catch? Are you paying insanely high interest? Was the loan through your local bank (good business relations)? I'm a stickler for low interest fixed rate loans, so let us know the details. Thanks!
Hmm, I bought mine in 1985, 1987, 1991, and 1993. I began selling them and went on pension in 2001.
Today? I don't know.
Our eldest son bought his first MFR in 2005, when he turned 20. Granted that is not 'today' either.
You say 'unsecured loans'. I do not understand. Perhaps one of us is not following in the same conversation. A mortgage on a property, real estate with a building and 10 dwellings: how is that an unsecured loan?
You use the phrase 'risky' when speaking of MFRs, obviously you and I have different usage of terms. Stocks are risky. Rentals are not.
Earnings of 15% are not un-common with MFRs.
The industry average is like around 80% occupancy. If you have ten units then [they say] to expect two empty units at any one time.
I have never that high a level of vacancy.
I go through the neighborhood ads, I write out the rent levels and descriptions of each unit. 1bdrm apts with no extras, 1bdrm apts with 1 extra, 1bdrm apts with 2 extras, and so on. Then I average them. What exactly is the average rent level for a 2bdrm apt with two extras?
Our leases have two rent amounts. The 'full' rent amount is the exact average for the neighborhood. If a tenant pays within five days of when the rent is due then they only pay 80% of the full rent value. So long as they pay on time, they are paying 20% less than the average.
My renters do not leave, they tend to stay long term, and they tend to only leave when they are following their jobs out of state. We seem to have a renter loyalty [which most landlords would insist is not possible].
Also I rarely advertise an empty. Most often a renter leaving will bring prospective new renters to us to meet us.
I'm not going to move into an apartment complex with my tenants so that the bank will look at me differently. I also get the feeling that interest is/was well above 6.0% (right?), which is the highest fixed rate I currently have for an investment property. Maybe the bank will give RLCMA 100% LTV if he's willing to move in and cover closing costs. Thanks for sharing your rather unique success story.
Good luck with that.
How old are you? and when do you hope to retire?
I was able to build a reasonable Net Worth, in a fairly short period of time.
I could have retired on that income stream, alas, I also have a pension. So I cashed out most of our properties and used the capital to have a debt free farm. Though the one MFR that we still own, is still showing a profit. And it could become an income stream if I were to ever need it.
It is nice to have options.
Again I wish you the best of luck with your investments.
Not all investment vehicles will allow the average investor to build Net Worth this quickly. If the 'price' is to live in an apartment, perhaps this price is worth it. I am a baby boomer, and well, I am retired.
You say 'unsecured loans'. I do not understand. Perhaps one of us is not following in the same conversation. A mortgage on a property, real estate with a building and 10 dwellings: how is that an unsecured loan?
Unsecured from the perspective of underwriting within the bank. Equity = security from the bank's perspective. In today's market the property could lose value in the short term. If the property lost any value then the borrower would be underwater. With zero down, the mortgagor has very little to lose and the bank would be at risk for losses. Yes, you would lose time, hurt your credit, and lose tiny closing costs, but not equity, since there was ZERO down. I see great risk for the bank & very little for the borrower, which is why I was initially shocked about you acquiring MFR's with nothing down. Now I see your dates of purchase and I assume great oppertunities were possible back then. Not so easy now I'm afraid.
Quote:
Originally Posted by forest beekeeper
You use the phrase 'risky' when speaking of MFRs, obviously you and I have different usage of terms. Stocks are risky. Rentals are not.
I speak of risk for the bank, not risk for the buyer.
Quote:
Originally Posted by forest beekeeper
Our leases have two rent amounts. The 'full' rent amount is the exact average for the neighborhood. If a tenant pays within five days of when the rent is due then they only pay 80% of the full rent value. So long as they pay on time, they are paying 20% less than the average.
I like this idea! A play on psychology. I assume the full rent amount is considerably higher than what you would normally charge. A great way to enforce huge late fees while creating the illusion of great savings! lol I may try this for the next lease. Thank you.
Quote:
Originally Posted by forest beekeeper
My renters do not leave, they tend to stay long term, and they tend to only leave when they are following their jobs out of state. We seem to have a renter loyalty [which most landlords would insist is not possible].
Any tips on what you did out of the ordinary to receive this renter loyalty? Thanks again for your time and effort.
I was able to build a reasonable Net Worth, in a fairly short period of time.
I could have retired on that income stream, alas, I also have a pension. So I cashed out most of our properties and used the capital to have a debt free farm. Though the one MFR that we still own, is still showing a profit. And it could become an income stream if I were to ever need it.
It is nice to have options.
Again I wish you the best of luck with your investments.
Not all investment vehicles will allow the average investor to build Net Worth this quickly. If the 'price' is to live in an apartment, perhaps this price is worth it. I am a baby boomer, and well, I am retired.
I’m 32 as of March and I haven’t given retiring much thought yet. My Grandpa turned 84 this year and still actively practices as a dentist, although recently it’s been out of the convenience of his home. Newer generations are living and working longer, so I assume I have another 50 years of work ahead of me (should I be lucky enough to live that long).
I’m NOT quite a millionaire in net worth but I do have close to a million in debt. Haha Amost all mortgage debt though, good debt I suppose. All 15 year fixed loans, 20-25% down on all properties. I have very little cash flow because they are on 15 year terms, but equity is and has been building rapidly. Like you, I suppose I’ll make my RE gains when I’m in my 40’s and sell so I can finally do something with all that capital loss I’ve been accumulating in the stock market (by offsetting the capital gains for tax free sales).
Apartment buildings scare me though. I once had a girlfriend tell me she would leave me if I was to buy a set of 4-plexes (12 units). My time was already consumed by my business, and that was before I had any investment properties. We are no longer together. She believes that the bible tells her to run from people like me (people who indulge in this material world too seriously). :/
Perhaps she’s right. Guess we’ll find out at the end of the rainbow.
Big congrats to you for being able to retire so early.
I think she was wrong. Someone has to provide the lower tier of housing for the masses to afford. Apartments provide a valuable set of housing for both the landlord and the renter. There is nothing wrong or imoral about that. You are providing a necessary asset at an affordable price to those who cannot buy into anything else.
What if there were no apartments? Homeless vs homeowner?
... Any tips on what you did out of the ordinary to receive this renter loyalty? Thanks again for your time and effort.
When we lived in each building, I kept a clipboard with everything that needing fixing listed on it. As we had money left over each month I would ask each tenant what they desired me to fix next. I would show them my list of things that needed to be fixed, and they could add any details that they though appropriate. It did not matter to me, what I focused on each month, so I did not care [so long as the list got shorter].
For the most part those individual renters stayed until I later sold each property.
When I transferred to another remote area, moving away from the building, we had a manager take over for us. Those original clip board lists had been completed. And the tenants still were paying 20% less than their neighbors. I was asked repeatedly about when was I going to raise their rent. I did not.
It is one thing that I learned from my grandfather. He lost his farm in the dust-bowl, moved to California, got a job milking on a dairy, and then began building houses. By the time he was 90 he owned 28 rental houses. When he finished a house, he set the rent at a level to cover taxes and expenses, plus a small margin. Then he refused to raise rents. When he passed away, in 1995, their were families of renters who were still paying $40 a month for rent. He had told us that only during the first couple years of renting a house, did he ever have to deal with an eviction. Otherwise his renters were loyal and stayed in the same house for decades.
Now I do understand that none of his houses had mortgages. He lost everything to banks folding, so he never again trusted any bank. His motivation was to provide housing to working class folk. And in doing so, he engendered great loyalty among his renters. They KNEW what the going levels of rent were, so they also knew what a good deal my grandfather was giving them.
I have one family of renters now that when their first year was up, and their lease expired, they brought a lawyer/interpreter to the signing of the new lease. This is an immigrant family from VN. From their previous experiences in America after the first year's lease expires [with it's artificial 'low' rates] the rent level gets doubled. I had no intention of doing a new lease, but they seemed very insistent, so I printed out a new one. In this family, both the mother and father work shift-work trying to support two children. The daughter had just gotten admitted to college, and I am sure that they were sweating her tuition fees. I did not raise their rent, I did not change anything on their lease. Now at every national holiday, they send me some token gift [a wind chime, or Buddha statue]. A couple of years have gone by. I doubt that their apartment will ever be vacant. The mortgage gets paid, the taxes, garbage, sewer, insurance, and water bills all get covered; and there is a small amount left over for repairs. The equity goes up a tiny amount each month, and I gain Net Worth.
I have 13 rental houses 1 duplex and I don't raise the rent on good tenants. I may break my rule soon with property tax increases, however.
Some of my notes were 5 and 7 year bank and credit union loans (little to no documentation or appraisals needed) they were secured by putting up stock or other houses. Very simple, but killer payments. Now at 50 I have only 3 to pay off and in 3.5 years I will not have any more payments.
We did it (although never reached 10M). Saved up to 1/2 our income. Invested in a diversified portfolio. Used debt carefully and paid it off. Balanced our savings and debt payment each year. Used extra money to usually pay off debt.
Once out of debt for car and house, never went into debt again. Lived simply. Still we did a lot of foreign travel but usually carefully thought out. Got free tickets on Pan Am so we went to India. Used an adventure travel group for Egypt, etc.
Marry a frugal person and stay married. Dont try to live up to the advertisements in fact ignore them.
Learn how to fix and maintain what you have. Buy used when possible. We have never bought a new lawn mower.
Read The Millionaire Next Door, The Tightwad Gazette, and other simple living books. My favorite is Your Money or Your Life.
Great advice... I did it this way, but late in life. I divorced in 92..I was 52 years old. She got the house and I kept my business which was worth $180,000 at the time, but I had no debt. I retired 9 years later, but kept the business and have since been leasing it. Money and investments continued to grow until today my net worth is 1.7 million....None of my friends or neighbors have any idea because I live very modestly here at home, but when I travel that's another story.
We have a 30 year loan at 6%. From what I can tell, between putting $400/month into the mortgage vs putting it into a Roth IRA (our company does not match any of our 401(k)), I believe the Roth wins.
If you do not need the equity do you agree 30 year is better?
On the contrary refinancing even from 6% to 5.5% seemed to be worth it (missed that boat) with a fairly short payback (for us roughly 3 years). We do not make a lot of money so the tax (deductible mortgage interest) differences do are not worth the increased interest owed.
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