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Old 02-01-2011, 02:58 AM   #101
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Ooer, my head is hurting just reading this thread.

As a relative newcomer and one of the less frequent contributors, I feel a bit under-qualified to say this, but wouldn't it be nice if we could ensure that all newcomers spent time reading as many of the posts on the board as possible before beginning to post themselves?

It's what I've done with all the forums I've been on in the past and by the time I've finished reading all the posts, I don't feel the need to come barging onto a board like a bull in a china shop.

On the other hand, when people do, there is a certain entertainment value.

My story - I was in real estate for a few years and made some money. Then I decided I didn't want to own houses any more, so sold them and put the cash with the rest of my investments in a mixture of equity and bond funds. I'm happier with my money in stocks and bonds for the long term than in real estate, but everyone has different preferred ways of reaching their goals. So I used both RE and stocks/bonds, and they both worked to my advantage.
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Old 02-01-2011, 10:19 AM   #102
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Originally Posted by srlimoges View Post
...
I'm now 30, own 3 investment properties that net a combined $1000 per month, and am on pace to 'retire' by 34.

Back to the post beginning, how come the popular retire methods preach stock/mutual fund investing over real estate for retiring early?
...
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Originally Posted by srlimoges View Post
Just a status - I just purchased a fourth investment property, and now cashflow $1050 per month from real estate using rent-to-own. One more investment property will cover the expenses of living (minus healthcare, which my corporate employer pays for).

I hope to purchase a fifth investment property in late spring.
Glad to read you are moving ahead on becoming a land baron. Latest purchase only seems to have added $50/month to your cash flow - is there some other compelling reason that drove the purchase? Anticipated serious rent bump?
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Old 02-01-2011, 10:34 AM   #103
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Glad to read you are moving ahead on becoming a land baron. Latest purchase only seems to have added $50/month to your cash flow - is there some other compelling reason that drove the purchase? Anticipated serious rent bump?
I live in one of the properties, and had a roommate that paid $400 a month. I counted that income as cashflow from the properties. Now he no longer lives with me.

This is the property income per month:

house 1 - $250
house 2 - $350
house 3 - I live in
house 4 - $550

I plan to buy house 5 as an owner occupant, and rent-to-own the house I live in now for approximately $450 cash flow.
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Old 02-01-2011, 11:07 AM   #104
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nice work, way to stick with your plan what region are you in again?
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Old 02-01-2011, 11:23 AM   #105
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In my opinion the worst real estate investment strategy is buying for appreciation only.
Congratulations on your success, your plan is working for you. Small point, you may benefit from not being so quick to dismiss alternatives where you have no experience... but I guess it is one way to get the thread going :-)

Example 1: Property $222k - cashflows $700 per month
Example 2: Property $170k - fixed and sold for $45k profit
Example 3: Property $365k - sold for $565k 10 years later

All ways of making $, but IMHO (1) is not necessarily better than (3) - although certainly different risk/reward.
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Old 02-01-2011, 01:22 PM   #106
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nice work, way to stick with your plan what region are you in again?
Thank you Titus. I live and invest in the north Denver metro area.
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Old 02-01-2011, 01:27 PM   #107
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Congratulations on your success, your plan is working for you. Small point, you may benefit from not being so quick to dismiss alternatives where you have no experience... but I guess it is one way to get the thread going :-)

Example 1: Property $222k - cashflows $700 per month
Example 2: Property $170k - fixed and sold for $45k profit
Example 3: Property $365k - sold for $565k 10 years later

All ways of making $, but IMHO (1) is not necessarily better than (3) - although certainly different risk/reward.
Thank you. I agree with your point too.

The figures in your examples are close to the returns I expect in the Denver area. Where are you from SVHoper?
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Old 02-12-2011, 11:37 AM   #108
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I have always been a little in awe of multiple RE owners. Mainly I think it is fear of the downside. I know you can limit your risk by type of legal ownership and carrying massive umbrella insurance, but I have always been afraid to own more than one extra RE holding at a time knowing I could make that payment if tenants split unexpectedly.

Also ty for the spell checker. I used to have the google one but it died for some reason and heaven knows I really need one. : )

Some one once wrote about there being all sorts of investment vehicles. So just as a trip can utilize walking, a car, an airplane, and a ship to reach a destination so can a financial journey to acquire passive assets that exceed your expenses.

I have books and courses by some of the no money down folk and could never pull the trigger for multiple holdings. Indeed when playing the cash flow game by the Rich Dad Poor Dad guy, even then I avoid buying much RE to win the game. I prefer capital gains to pay off debts and make the passive income needed less, then I get passive income from companies, fixed income, and maybe a massive RE big deal that is managed for me.

In real life I do a variety of things including REITs. They limit my upside, but also limit the downside. Am curious to learn more here, but want to contribute as able.
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Old 02-12-2011, 11:42 AM   #109
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Indeed when playing the cash flow game by the Rich Dad Poor Dad guy, even then I avoid buying much RE to win the game.
I'm impressed, since the game is so skewed toward real-estate investing. Still a lot of fun and educational.
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Old 02-12-2011, 06:23 PM   #110
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As of yesterday I'm unofficially under contract with the fifth property (I agreed to the sellers contract, and it's listed in the MLS as under contract, but the seller/bank has not signed it yet and hopefully will Monday).

I agree about the risk of real estate as I'm beginning to actually accumulate lots of debt and have lots of financial responsibility. If/when I close this deal I will have about $700,000 of mortgage debt. If for some reason a few tenents decided to not pay rent a couple months I would be hit hard. I've been trying to save six months of reserves for each property in case something happened, but I still wouldn't feel 100% safe (I think I 'm saying these things because the fifth property is a larger house and carries more risk - and possibly more reward - and I'm beginning to use more leverage). I do have large liability insurance policies on each property so I'm less concerned about that, but I probably shouldn't be.

Anyways, if I rent this new property my cash flow will be $2,000 per month and more than enough to cover basic expenses (for a single guy in the midwest). Here's the cashflow breakdown:

Property 1 - $250
Property 2 - $350
Property 3 - $550
Property 4 - $450
Property 5 - $400 (being conservative)

Total cash flow $2,000
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Old 02-13-2011, 09:29 AM   #111
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Just looking at those numbers made me think what I might do if suddenly I had inherited this situation to cut down on my risk over time. I came up with three scenarios.
1. I might use all the cash flow just to build reserves for a while.
2. I might use most of the cash flow to pay off the cheapest property (sort of dave ramsey approach on debt reduction) and then next consecutive lowest untill debt free.
3. I might build this house of cards up for a few more homes untill it was 50% more than I needed and use a combination of paying off the cheapest and some capital appreciation liquidation to pay off the rest.
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Old 02-14-2011, 04:38 PM   #112
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If/when I close this deal I will have about $700,000 of mortgage debt. If for some reason a few tenents decided to not pay rent a couple months I would be hit hard. I've been trying to save six months of reserves for each property in case something happened, but I still wouldn't feel 100% safe (I think I 'm saying these things because the fifth property is a larger house and carries more risk - and possibly more reward - and I'm beginning to use more leverage). I do have large liability insurance policies on each property so I'm less concerned about that, but I probably shouldn't be.
Anyways, if I rent this new property my cash flow will be $2,000 per month and more than enough to cover basic expenses (for a single guy in the midwest). Here's the cashflow breakdown:
I think the words you're seeking are "leverage" and "wishful thinking".

How will you screen your tenants to minimize the inevitable? Are you near a military base that can help you get tenants through AHRN.com? Are you running credit checks on each tenant? References from the 2nd previous landlord (who can feel free to tell the truth) and not just the previous landlord? Turning down anyone who shows evidence of foreclosure or eviction?

Or will you just wish to sleep good at night?

Have you had the landlord's first "dumb tenant" experience with pressurized water or electricity yet?

It's a shame that this board doesn't hear more from landlords who've had multiple tenant failures. It'd be very educational, but the survivor bias of such an occupation pretty much ensures that the failures stop posting while the successes are all we know.
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Old 02-14-2011, 04:48 PM   #113
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I was gonna post this earlier but forgot. biggerpockets.com is a good forum for real estate/landlord investors specifically and many of those guys won't make an investment unless the mortgage is less than half the expected rent. There are other rules of thumb and they have great principles, but it's hard to find investments that fit their criteria (which is probalby why many of them do very well).

for the first time in 15 years I'm seeing houses that I could rent out for more than a mortgage payment in my area.
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Old 02-14-2011, 06:27 PM   #114
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You want stories of current real life tenant interactions & landlord responses see
bbs2 mrlandlord com and go to your state of interest. Its a very active site to discuss / vent about rental problems.
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Old 02-17-2011, 09:16 PM   #115
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I've read many RE books and taken real estate 'classes', but the most educational of them all is through personal experience. I've already learned to do thorough tenent checks (background, credit, rental history, employment verification, bank account reservers), which came as a result from a bad tenent experience, and I was lucky..it could have been a lot worst. I now have a logical formula to buy properties (minimum 10% cap rate, 7.5% annual loan constant given zero money down, and after repaired value of 20% discount from fair market value) where in the beginning I was winging it and fortunately didn't get burned (see that each deal got better in above post). So I've learned many lessons with the consequense of only a hand slap that could of been a lot worst and crippled me.

I've been investing for a couple years now but I feel I'm really beginning now as I understand how to do deals and choose tenents better. I also now understand the risk that I'm taking and know that it's high, in comparison to two years ago when I didn't think there was much risk and I didn't know what I was doing...very dangerous. I've been lucky to surround myself with the right/ethical people to help with the loans, RE purchases, and finding the right tenents. How does it go - if I knew then what I know now.

Fortunately, I feel that even with my mistakes and 'wasted' time and money I still am on track to semi-retire by 35. I just need to be even more savy in the deals by making smarter decisions and being more patient.
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Old 02-17-2011, 09:33 PM   #116
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It's a shame that this board doesn't hear more from landlords who've had multiple tenant failures. It'd be very educational, but the survivor bias of such an occupation pretty much ensures that the failures stop posting while the successes are all we know.
Count me in the first camp. twenty years ago, I owned several single family homes, they were marginally cash positive, but dealing with tenants was such a PITA that I decided I'd rather invest my money elsewhere, the depreciation tax advantages notwithstanding. It just wasn't worth it, IMO. So, I became an amateur RE investor instead of an incompetent landlord.
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Old 02-17-2011, 09:59 PM   #117
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We own three SFR rentals. It was always DH's dream to 'have rentals'. He now sees what a pain that business is so he's agreed to sell as the leases expire. We'll end up with a good profit on them but only because we bought them closer to wholesale than retail.

Would I buy rentals again? Not a chance. I'd rather have our money in index funds.
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Old 02-18-2011, 08:55 AM   #118
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Landlording. It's a personal thing. For me, never again. Never, ever again.
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Old 02-18-2011, 11:10 AM   #119
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I've got several rentals. Only sharp infrequent peaks of focused attention to solve irritating tenant challenges. Already the income seems to a retirement stool leg. If dealing with tenant problems to minimize their effect on you causes too much aggravation, then landlording is not for you.
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Old 02-18-2011, 03:44 PM   #120
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Landlording. It's a personal thing. For me, never again. Never, ever again.
We, DW and I, keep going back and forth on this topic. I'm with you, no way do I want the hassle, etc of rentals but DW sees RE as something solid as opposed to equity and bond investments (guess she watches too many of those white collar crime shows on CNBC.... )

Any suggestions as to how I can resolve this difference of opinion...just curious!

thx
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