Do buying opprotunities exist in the USA still (tenants, 4%, investment)

[pittsflyer]

As in real estate that generates at least 9-12% ROR with a 200k buy in price? Or have the sales prices been so far inflated that the ror's have been eroded? or that the rents you have to charge are out of sight just to cover your mortgage and make a few bucks?

[Lovehound]

Buy in price has nothing to do with it except whether you are running with the big dogs or the puppies. I'm in the middle ground.

Even 9% ROR sounds like an excessive expectation to me. I'd be happy with 5% noting that money market savings accounts pay perhaps 0.1 to 0.25 percent APR.

I've been barely breaking even on my rental business and expect my real profit will be having my tenants pay my mortgages, and then coup my profits when my properties have appreciated enough that the sales price minus selling costs exceed my original investment.

I'm liquidating my first property in 2017Q1 and may have more to say after closing.

[aslowdodge]

Yes look in the midwest and south. I won't divulge where I invested, but I own multiple homes I paid all cash for and am in them from $30k to $65K each. My return is 13 to 14 percent cash on cash. I won't see much appreciation, but the cash flow is what I live on. I will say that after fixing them up the value went up about 20% over what I paid into each one, but I didn't factor that into my 13 to 14% roi.
If you are able to secure financing and put 20% down, your returns can easily be 30+ percent cash on cash.

[Lovehound]

I agree with the above provided you have the financial situation that you can afford to travel widely and the acumen to locate local contractors to take care of your repair/maintenance problems.

Do not underestimate the grueling cost on your personal life if you choose to go such a route. My rentals are 500 miles away and they are taking a terrible toll on me, partly because of the required business travel, and partly because of the handyman prices I pay for repair jobs I could do for myself except for the 1,000 mile round trip.

[aslowdodge]

Originally Posted by Lovehound

I agree with the above provided you have the financial situation that you can afford to travel widely and the acumen to locate local contractors to take care of your repair/maintenance problems.

Do not underestimate the grueling cost on your personal life if you choose to go such a route. My rentals are 500 miles away and they are taking a terrible toll on me, partly because of the required business travel, and partly because of the handyman prices I pay for repair jobs I could do for myself except for the 1,000 mile round trip.

I hear you. You are in the same boat as many others are. I hear it all the time. Still do.
Do you have a property manager? I assume not since you are doing your own repairs.
When you bought the property 500 miles away did you not consider that when something went wrong you were going to have to go there to solve it?
Did you not factor in repair and maintenance costs when you ran your numbers before buying?

It's amazing how much people will just blindly invest and hope others will take care of it. People do it with mutual funds all the time. Send in the money and forget it and in 30 years you can retire.
Real estate is a bit more hands on, but can payoff a lot more than mutual funds.
At least with Real estate you have some control whereas with stocks it's much more limited.

I am sorry you are under stress and it's not working out for you. I've been there in the past. But I learned my lessons and realized no one will take care of you money better than you so yes you need to travel and do your research. Before I invested I flew to those cities and drove through neighborhoods, talked with realtors, investors, property managers, etc. Ran my numbers and what if scenarios over and over.
One thing a property manager told me was they get a lot of out of town investors, but I am one of the few that actually came and looked for myself and picked his brain. He said a lot of people send thousand to him to buy and manage and have never set foot in his city.

Is everything perfect for me? No. Last month I had two roof repairs which wasn't cheap. But money was set aside in my spreadsheets for things like that.
I make enough where I retired early and more than I made when working. When I am not buying new properties and rehabbing, I honestly spend about 2 to 4 hours a month doing accounting and paying vendors and making sure my deposits came in. Sometimes I have a few extra hours if something comes up and at the end of the year I spend a few days preparing all my reports for my accountant to make sure I get all my write offs.
I could make more if I self managed like you, but I love having all my time off. Yes I pay my manager almost $20K a year, but I figure for that it's the cost of retiring early and enjoying life. I make enough to drive a few nice cars and travel anywhere I want at any time for the most part.

It was a hell of a lot of work and research, but worth it. If the properties drop in value, not a big deal as rents will still show up every month. I learned not to bank on appreciation. It's a nice perk if it happens, but if you are going to get crushed if it doesn't happen, you are really gambling.

Once again many people can and will lose money in Real estate. But those that really prepare can do well. I have three friends all in their 30's that retired early. One went back to work consulting because they got bored after a year of living off her rents, the other two are somewhere in Asia traveling and being bums living off their real estate proceeds.

[MikeJaquish]

Buyer financial resources are not relevant to market value and ROI.
Totally irrelevant.
Whether cash buyer or borrowing buyer, neither changes value or return on price. Those details merely help a buyer determine if they are able to play in the arena.
Needing to buy property that totes the note and provides income may just mean that the buyer is not qualified for the endeavor, but does not change the value.

There are many buying ops in most markets. And, there is tons of cash out there taking advantage of them.

[Lovehound]

Aslowdodge I live in a state with confiscatory property taxes (CA) and as near as I can tell there is no opportunity here to buy any property and then rent it out at a profit.

I have been barely breaking even on my out of state rental properties. Property management companies generally charge about 5% for their services, so if I hired one I would then be making a 5% loss on my investment.

Note that property management companies do not fix your maintenance issues. They charge their 5% PLUS any repair costs, to the owner. Hiring a PM company would not solve my repair problems.

There is no need to feel sorry for me. I knew what I was doing but did not realize the details, but that was my fault. I am liquidating my first property 2017Q1 and expect to shut down my business in an orderly and tax wise manner, I have a good Realtor and a great CPA and I still expect to recover not only my original investment but likely a profit if the market continues up.

Was it worth it? Probably not. Will I lose my behind? Probably not. Will I lose any money? Probably not. Will the entire endeavor turn a profit? Probably either not worth it, maybe okay, or if property values accelerate over the next 3 years (as I expect) then it will maybe at least pay off although still not worth the disruption in my life.

At best I will turn a profit that wasn't worth the cost of my time spent and the mental torture I went through being a landlord. But anyway you look at it I will be fully retired by 2020. You younger folks are welcome to the business.

[aslowdodge]

Originally Posted by Lovehound

Aslowdodge I live in a state with confiscatory property taxes (CA) and as near as I can tell there is no opportunity here to buy any property and then rent it out at a profit.

I have been barely breaking even on my out of state rental properties. Property management companies generally charge about 5% for their services, so if I hired one I would then be making a 5% loss on my investment.

Note that property management companies do not fix your maintenance issues. They charge their 5% PLUS any repair costs, to the owner. Hiring a PM company would not solve my repair problems.

There is no need to feel sorry for me. I knew what I was doing but did not realize the details, but that was my fault. I am liquidating my first property 2017Q1 and expect to shut down my business in an orderly and tax wise manner, I have a good Realtor and a great CPA and I still expect to recover not only my original investment but likely a profit if the market continues up.

Was it worth it? Probably not. Will I lose my behind? Probably not. Will I lose any money? Probably not. Will the entire endeavor turn a profit? Probably either not worth it, maybe okay, or if property values accelerate over the next 3 years (as I expect) then it will maybe at least pay off although still not worth the disruption in my life.

At best I will turn a profit that wasn't worth the cost of my time spent and the mental torture I went through being a landlord. But anyway you look at it I will be fully retired by 2020. You younger folks are welcome to the business.

Best of luck to you. I just left California, the Bay Area to be exact after being there all my life. I've been a landlord for over 30 years so I know exactly what owning real estate there is like. Cash flow is really hard. If you bought three years ago there were some great deals in concord that cash flowed well. 2/1.5 townhouses for 60k all day long getting $1300 rent. I bought a little 2/1 house on a short sale. Got 10% roi on it and sold it for well over double two years later. Crazy times we will never see again.

The property taxes aren't that high, but the cost of housing makes them seem high. I used to own property in Texas. Property taxes were triple the rate of ca.
Sounds like you bought in Las Vegas or Phoenix.
A property manager if they are good can make all the difference. They handle problems and have contacts for repair people. I always factor in the cost for this because I have no desire to go through what you did. Already did that many years ago. If the property can't cash flow well even with management and a repair allowance, I don't buy it.

[griffon652]

Originally Posted by aslowdodge

I could make more if I self managed like you, but I love having all my time off. Yes I pay my manager almost $20K a year, but I figure for that it's the cost of retiring early and enjoying life. I make enough to drive a few nice cars and travel anywhere I want at any time for the most part.

Congrats on your success! Where you are is exactly where I want to be in my mid 40's. Currently, I have 3 local properties. I would love to branch out and buy some properties out of my area but I have reservations about how stressful/profitable it will be. I read your posts and saw that you had experience with that. Based on your experience do you think its worth the hassle to own out of state rentals? Also, what's your average cash on cash return on out of state properties?

[aslowdodge]

If you live in an area where cash flow is hard like parts of California, out if state makes sense. Along with finding areas that meet your numbers the most important thing is finding a good property manager. That will make or break you. I chose areas that didn't cash flow as well as I liked on paper but felt better about the property manager.
I can't stress this enough. Also go to those areas you want to invest in.yes it is work and costs money, but you do it to protect your money.
I originally moved to Atlanta to buy a bunch of rental properties that cash flow. I suspected it would be a lot of work based on the number of houses I had intended to buy, but figured if the cash flow was enough that I would just spend my time managing the property as a full-time job? Think about it, if you can make six figures off rentals and spend 40 hours a week working on them you should be able to do a pretty good job of managing them. Depending on your needs making that much money as a full-time job it's not bad.
Plus you are dependent on your skill and not anyone else who could fire you or send your job out of the country.
My hope was that I could get everything dialed in as I did in California and actually get that down closer to 10 to 15 hours a week. To get six figures from that would be great.
In the end circumstances have been investing in other areas in the managers were so good that I did not need to move to those areas. The lower cost-of-living in Atlanta over California made this situation even more realistic.
Congratulations on owning three rental properties, you are so far ahead of many others. I think if you're making money off them and can expand to more rentals in your local area that is what I would do. I would only look out of state if the cash flow difference is a large amount. It is riskier and you really need to have a good handle in real estate to be able to work with the property manager successfully. If you can hit your goals locally that's what I would do. In my case I did a lot of planning and felt I could get to where I wanted to be if I move to an area and bought a lot of properties.

In California if you pay for a house cash and are in the bay area you will get about a 4% return. My returns on out-of-state properties because I paid cash and have no mortgage is running 13 to 14%. So you can see the difference it was well worth for me to make the move . When you're talking about investing 700,000 or $800,000, 10 percent is a huge difference maker.
I will say that my approach with a little bit different in that most people buy real estate and hope for the appreciation. I have learned that that is a highly speculative move and years ago I lost over $1 million in the big real estate crash banking on appreciation. Had I had sufficient cash flow I could've weathered the storm. Since I need the money now to live on cash flow is king for me and appreciation is just a lucky bonus if it happens.
I expect real estate to go flat and possibly even go down in value in the next couple of years. No one knows for sure, but this time it won't be as important to me because I Will still receive rent whether the properties I own go up or down in value.