Investment/Rental Properties - Megathread

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Palum

Palum

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Personally I think the only way this works is either slum lord it (multi-fam houses, multi-unit buildings, etc.) or go nuts and make it a full time job.

Most of the people I know who make money basically slum lord it. The ones who don't are largely just in it to gain equity and leverage unused credit to increase their retirement nest. I know several people who lived their life as primary +1 mortgage + renters in all prop owned outright. Market conditions, maintenance, loss of tenancy and the like means that part time you will be lucky to break even with expenses. Now, don't get me wrong for INVESTMENT that's actually a killer deal. But it isn't a path to consistent income unless you put so much in assets into it to begin with that the hassle makes no sense.

The commercial side is so much more chaotic. A good location with good tenants I'm sure could be worth a lot but the wrong areas are just sooo bad on commercial. Housing is always in demand (even if it goes up and down) while shitty commercial space is just worthless because it has to provide specific value to a business.
 
Palum

Palum

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Also, I'll say the most successful person I know who did this wasn't afraid to sell. He did sell I think 3/14 or whatever over the course of his career - with low unit numbers you cannot rely on statistics and averages, you have to get heuristic and just call it once you know the place isn't going to generate consistent revenue.
 
Big Phoenix

Big Phoenix

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From my poor persons perspective real restate always seemed like one of those things that was more about stroking egos than good investing. Buying stock seems like a much easier than the whole process of buying a house, listing it, vetting renters, responding to them when xyz breaks/leaks, possibly evicting them etc.

Though 5 houses sounds a lot, especially if you already have a full time job. You going to be handle that yourself or would let some rental agency place take care of it?
 
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Lyrical_sl said:
Really? Every white person I've interviewed in the last month had a history of drugs, or was on them at the time of the interview. One guy we called for a follow up interview, and his old lady said he was in rehab. One guy emailed us stating that he was in drug court, but needed a break.

Every businessperson that I know that is doing well at rental property looks for college educated as a renter, as well as credit rating and occupation.

edit: Actually, there was one white guy that had his head together. But he wanted to make more money a day that I pay myself.
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That was semi-sarcasm Lyrical, I'm sure I'll rent based on age/income/education/credit. Calm your tits.
 
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Big Phoenix_sl said:
From my poor persons perspective real restate always seemed like one of those things that was more about stroking egos than good investing. Buying stock seems like a much easier than the whole process of buying a house, listing it, vetting renters, responding to them when xyz breaks/leaks, possibly evicting them etc.

Though 5 houses sounds a lot, especially if you already have a full time job. You going to be handle that yourself or would let some rental agency place take care of it?
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Probably make the brother in law and wife do a lot of it.
 
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Picasso3

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Do you have a lot of acquaintances you can rent to? I think there is a sweet spot between stranger and family (friend of a friend type) to rent to where the have the burden of being vouched for without the closeness to ask for breaks..and having enough acquaintances so there's a steady recommendation for potential renters. I think it's a little mutually positive because it's tough to get involved with a terrible landlord too.

The tenants make or break it. You get an old woman tat keeps it immaculate for 10 years and you're golden. May have to take in a few shit renters until it works out because being vacant is terrible.
 
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Picasso_sl said:
Do you have a lot of acquaintances you can rent to? I think there is a sweet spot between stranger and family (friend of a friend type) to rent to where the have the burden of being vouched for without the closeness to ask for breaks..and having enough acquaintances so there's a steady recommendation for potential renters. I think it's a little mutually positive because it's tough to get involved with a terrible landlord too
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Uhh, I would never do that because when I have to evict their sorry asses or raise the rent or come yell at them for being wankers then I'd feel bad. When it's strangers I can get their ass thrown in the street and not care.
 
Khane

Khane

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Picasso_sl said:
Do you have a lot of acquaintances you can rent to? I think there is a sweet spot between stranger and family (friend of a friend type) to rent to where the have the burden of being vouched for without the closeness to ask for breaks..and having enough acquaintances so there's a steady recommendation for potential renters. I think it's a little mutually positive because it's tough to get involved with a terrible landlord too.

The tenants make or break it. You get an old woman tat keeps it immaculate for 10 years and you're golden. May have to take in a few shit renters until it works out because being vacant is terrible.
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Seems like a good idea on paper but almost never works out that way. This kind of thing can easily ruin your own relationships with whoever vouched for them if it doesn't work out. On the one hand you get more information about the person than you could through more traditional background and credit checks. On the other hand you never really know how someone lives until you've seen it so unless the people vouching for them have actually lived with them their opinion is kind of moot.
 
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Picasso3

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It's worked out fine for us thus far. It is a delicate dance and probably not for everyone. You have to evaluate the relationships involved but I prefer it to phoning and meeting complete strangers.
 
Shonuff

Shonuff

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Big Phoenix_sl said:
From my poor persons perspective real restate always seemed like one of those things that was more about stroking egos than good investing. Buying stock seems like a much easier than the whole process of buying a house, listing it, vetting renters, responding to them when xyz breaks/leaks, possibly evicting them etc.

Though 5 houses sounds a lot, especially if you already have a full time job. You going to be handle that yourself or would let some rental agency place take care of it?
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There are two types of landlords I've encountered. One type is the one that has lots of cash, and wants a passive income. The other type is the one that is willing to play the long game, and wait until the property is paid off before they make a profit. A customer of mine just bought a 100 apartment complex at the local college. He's not making a dime off of it right now. The hope is that when he retires, it will be paid off and provide him a nice income.

I've seen lots of people lose money in rentals, and I can think of easier ways to make some money. Now if I had a million in cash sitting, and wanted to diversify my income, ask me that question again. The guy who I bought my business from had lots of rental properties, and he had to get out of them. He was renting to trash that did more damage to the home, than what he collected the entire time of the lease. I'm going to say he had at least 20 rental properties, and he sold every last one of them off, so he didn't have to deal with the aggravation. And like I said, he was renting to anyone that had a pulse, and that's what did him in.
 
OU Ariakas

OU Ariakas

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Khane_sl said:
Yea but just know that's a lot easier said than done.
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A good property management company not only reduces the tenant variance, but they can use their economies of scale to lower maintenance costs on top of it. I know it seems logical but it took us a while to pull the trigger on using a prop management company and now we wouldn't go back to renting them out ourselves.
 
Khane

Khane

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Kinda 6 on one hand a half dozen on the other. I know a few people (my grandparents included) who got completely screwed by prop management companies who weren't doing anything other than collecting a paycheck. My grandparents company didn't even enforce their strict no pets rule. One of their tenants had 6 dogs in their apartment. Six!

So finding a good company is a lot like finding a good tenant but they can definitely take a lot of the stress out of the situation.
 
OU Ariakas

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OK, I just looked at the P&L statements for the 2 rentals that my wife and I have owned the longest. I will break them down below. The first house we thought we were going to pay off ASAP before we purchased another one which is why we put in a larger down payment. That has skewed our ROI on that house quite a bit. 2nd house had the worst renter in year 1 where it was purchased in April and we did not receive rent from Sep-Dec.

House 1: 3 Bed, 1 Bath
Purchase Price: $85,500
Down Payment: $31,500
2012 Net Income: $2,150 - 6.8% ROI
2013 Net Income: $2,300 - 7.3% ROI
2014 Net Income: $2,100 - 6.6% ROI
2015 Net Income: $3,600 - 11.4% ROI
Estimated profit if sold today: $45,000

House 2: 3 Bed, 1.5 Bath
Purchase Price: $82,000
Down Payment: $20,500
2012 Net Income: $322 - 1.5% ROI
2013 Net Income: $2,300 - 11.2% ROI
2014 Net Income: $2,100 - 10.2% ROI
2015 Net Income: $3,800 - 18.5% ROI
Estimated profit if sold today: $20,000
 
Jysin

Jysin

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Palum_sl said:
Personally I think the only way this works is either slum lord it (multi-fam houses, multi-unit buildings, etc.) or go nuts and make it a full time job...
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Never been in the business, but had a colleague of mine that did. His advice (learned the hard way) was to steer clear of the low end market. For starters, the cheaper the property, typically the shittier the tenants. Why have 10 cheap units with constant tenant and (possibly) maintenance issues when you can go with 2-3 more upscale properties in better condition and better prospective tenants.

Seems like a shit load of work for the ROI to me. I've made 12% and 9% in two separate short market investments this year alone. One was less than a day. Sure you can't always win, but it is a hell of a lot less work! Plus you've only got yourself to blame, not some chance a meth head literally torches your investment.
 
Palum

Palum

what Suineg set it to
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Jysin_sl said:
Never been in the business, but had a colleague of mine that did. His advice (learned the hard way) was to steer clear of the low end market. For starters, the cheaper the property, typically the shittier the tenants. Why have 10 cheap units with constant tenant and (possibly) maintenance issues when you can go with 2-3 more upscale properties in better condition and better prospective tenants.

Seems like a shit load of work for the ROI to me. I've made 12% and 9% in two separate short market investments this year alone. One was less than a day. Sure you can't always win, but it is a hell of a lot less work! Plus you've only got yourself to blame, not some chance a meth head literally torches your investment.
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Right, but it's a volume game. Higher price rentals may yield better renters but they also move slower on the rental market. Anyway, my point was more in the management style yielding ROI rather than strict tenancy guidelines.
 
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