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That being said, I ask again, how do private landlords do this for a living? Seems like you'd have to own at least 20 houses to make a high middle class salary. And if they have so much money that they can buy 20 houses, then why should they bother with it?
Do they have such good credit that they can take out mortgage loan after mortgage loan, in which they'd need to own a lot more than 20 houses to make this work?
What exactly am I missing here?
Nothing, except that they didn't pour a cup of coffee one morning, look at their 7 figure bank balance, and decide to start buying rental properties.
The ones I know started with one property, while working full time at something else. Then they found a second, then a third.
Almost all of them looked for deals in one way or another. One looks for rougher condition properties she thinks she can get habitable for reasonable money, or alternatively "Houses that people want to rent but don't want to buy." The latter usually means a location in a desirable part of town on an undesirable lot or with an undesirable floor plan.
Quote:
Originally Posted by oregonwoodsmoke
No one is supported by the rental income from one unit. It is a supplemental part time job. That's right, a job. It is not money for doing nothing.
^^That's the key. People use the term "Investing in rental property" and they equate it to investing in a mutual fund. It bears very little resemblance. It's a lot more like "Buying a business."
Unless I am mistaken, most will use 1031 Exchange to avoid paying taxes. But that also means the profit you make can only be invest in a like-kind exchanges.
Normally we would have done a 1031, but we closed early in the pandemic and weren't sure what was going to happen or whether we could find a suitable exchange property in time. The stock market had started moving up (VTI was back around 140 from a low of around 115), so we decided to skip the 1031 and invest in the stock market. We paid our taxes out of a line of credit (under 2% interest rate) in order to keep the funds invested, and it ended up working out pretty well.
Borrow against the equity to buy more rentals. If the numbers crunch out the bank will loan the money. As they increase in value borrow against that and grow the base.
Soon you'll have several properties that're mostly financed with OPM and then just keep scaling.
This does take a high level of ambition but a million people have done this to build wealth.
LOL only a real landlord knows about tolerance for the worst in humanity.
I've had a tenant that left the place full of dog poop and pee. Like a solid layer of dog poop on the floor in their own bedroom with an outline of where the mattress was. At first, I thought they just left the place like that to "stick it up to the man". But my plumber swore up and down that the couple times he went there to fix clogs it was like that. They literally lived in that condition.
You make more money AirBnB than renting out a regularly to tenants. I average about $2-3k/month in the summer months using my property for Aibnb. I only took in $1200 this month but in the winter or holidays I would probably get $3-4k depending on what festivities around NYC area.
Quote:
Originally Posted by tommy64
Borrow against the equity to buy more rentals. If the numbers crunch out the bank will loan the money. As they increase in value borrow against that and grow the base.
Soon you'll have several properties that're mostly financed with OPM and then just keep scaling.
This does take a high level of ambition but a million people have done this to build wealth.
This strategy only works if you didn't over leverage on an expensive property that doesn't rent enough to pay off the expenses. A lot of people are getting screwed in big cities where the tenants are becoming squatters. Not paying any rent, owing thousands in back rent and evictions are being stalled by liberal mayors and governors. There will be a lot of battles going on when the evictions starts again.
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