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Old 04-22-2014, 06:07 AM   #21
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OK, head-bonk! from reading your posts, I should have realized it is a multi-family property, so the buyers aren't looking to live there themselves. What a pretty property, though.


Originally Posted by calmloki View Post

One of the problems with selling a mature rental is it is mostly depreciated out on the value from decades ago and the tax man wants his cut on the current value, which can be almost all profit after the depreciation. Means taxes sting, and your $100,000 rental property nets you maybe $75,000 after taxes. Now you have to make the $75k work harder than the $100k did before to earn the same amount, so it's not just a matter of finding an investment that does as well - it has to do better.

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Old 04-22-2014, 03:58 PM   #22
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I retired exclusively on rental income at 45 ... scaled back from 23 units to 7 SF; mostly - but not all - free n clear. Felt like a jjjob when I had 3 vacancies two years ago. Been "easy"since. Screening hard is the key. Even if means holding a vacancy (which is easier to do if there is no mortgage).

Just to play, I do a flip when the numbers work .... focus has always been bank owned. Everything I own was a foreclosure and/or auction property (except the lake house which rents as a vacation rental).

FIRE'd since 2005
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Old 04-22-2014, 06:57 PM   #23
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Originally Posted by Meadbh View Post
I own a few rental properties, suites in apartment buildings in different locations, not where I live. They are professionally managed, which makes it easy to manage but reduces net returns. Currently they are cash flow neutral but when the mortgages are paid off in a few years they will generate a significant income stream. The principal benefit is diversification to a sector that does not correlate with the equity market. During 2008-09 this was the only part of my portfolio that was rock steady and I was very grateful for it!

The good news for me is rentals aren't correlated with the market, but I really think not being a hands on property really hurts returns.

My longest term (still only 2.5 years) tenant recently vacated a condo in Vegas
Rent is $700
Condo fees $195 (includes water/sewer)
Property tax $40
Insurance $35
Property Management 8% $56
Gross profit of $374= $4,488 for the year
Repairs $408 while tenant was in the place
Leaving a Net profit = $4,080 which I guess is respectable for a property worth ~$80K. Plus I am getting appreciation and depreciation.

But what is killing me is the vacancies.
When the tenant moved out my property manager wanted to charge me $2,400 for paint, repairs, and cleaning the place. Luckily I have a crew that would do the job for $1,400 so after the tenant deposit of $700 it is going to cost me $700. Next tenant I'll have to replace the carpet not just clean it.

The property will be vacant for at least 2 months and likely 3 months and my Property manager charges me one month rent to find a new tenant. I'll raise the rent to $750 but still I'm out $2,250 to $3,000 which pretty much wipes out my profit.

I can see how rental are good investment, if you do your own screening and find tenants that stick around for 3 to 15 years. But man without that I don't get it how absentee landlord makes money.
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Old 04-22-2014, 08:43 PM   #24
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Nope Never owned investment real estate and have no interest in such. Too much of a PITA.
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Old 04-22-2014, 09:53 PM   #25
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Yes I do have and have been renting these properties for the last 10 years. Never had any vacancies, always rent. The properties are in expensive area so I've always get good tenants, mostly executives, so no problem whatsoever. I have a property management for these properties so I can travel. Cash flow positive so it's no problem, no headache.
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Old 04-23-2014, 01:01 AM   #26
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Also, have rentals. No mortgage. In good areas. Very nice income. Manage them my self. After being a landlord for so many years, have figured out how to keep good tenants. (one's who stay for years).

Also, learned how to keep visits to rentals at a minimum. ie. When something breaks, I just tell the Tenants who to call for repairs.

If an appliance breaks, I just go out and make the purchase. Then have the
Tenant arrange for the time and day for delivery and installation. (I do not have to be at the rental).

Most, repairs can be done over the phone. (this is what R.E. management firms do.).

Yep, the income is very good, and follows inflation.
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Old 04-23-2014, 10:02 AM   #27
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Three rental condos provide about 40% of my total income needed. They are all less than 10 years old, so maintenance has been easy even though they are located 135 miles away.

Unexpected return: they have doubled in value over the last three years.
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Old 04-23-2014, 10:36 AM   #28
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Yes, I do use rental income for FIRE. It's part of my 4-legged stool strategy (interests, dividends, rents, SS). Though I use a property manager to ease the pain, I can't see myself being a landlord forever. The plan is to eventually sell and probably use the money to buy a SPIA, when it makes more sense age-wise to make such a purchase.
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Old 04-23-2014, 11:23 AM   #29
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Originally Posted by rb35 View Post
I'm curious how many of you are using rental properties as a meaningful part of your FIRE strategy.

1. How has your experience been?

2. Has it been worthwhile from a money vs hassle factor perspective?

3. Any surprises (good or bad) you had not expected?

4. Does it limit your ability to travel and/or live far away from your rentals?

I've been acquiring single family houses to rent out over the past two years and get around $60k / year in net income. It's not enough for us to live off of exclusively, but it's a meaningful part of our FIRE strategy.
I am 56 and planning to FIRE in 2014. Along with a partner, we have rentals in the form of 500+ storage units and a commercial/retail building. We have a full time site manager who handles bookings, site maintenance, etc, and my wife does the rent rolls, pays bills, etc. Takes about 10 hours per week average for her. When I FIRE, if we need an extended time away for travel, etc., we will have DD handle the books while we are gone.

It has been a great long term investment and a big part of our FIRE program. Relatively minor hassles nowadays as the site manager handles those, and yes it has overall been a good experience. I suspect the next big event will be structuring a sale at some point, but we are in no hurry as it poses no majopr headaches and produces a healthy NI.
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Old 04-23-2014, 06:54 PM   #30
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I should have clarified a bit. I have 24 rental apartments, 5 four plexes, and 2 duplexes. the duplexes and one 4-plex is paid off. Plus my home is paid off.

Between all of them, they generate 110K+ in net income. Add another $20K for managing them myself. Plus my full-time job. But you need to manage them closely.

It really is not difficult if you get great tenants. The secret to great tenants is knowing how to attract them, keep them and recognize them from their application. Anyone can do it. I have written a ton of posts on how I do it on my blog.
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