Dynamics of Real Estate Investments

[Senator]

Quote:

Originally Posted by heeyy_joe I'll stick with RWX and it's 4.5% yield.

Stock ticker 'O' is also a decent REIT.

Another option for a real estate investor is investing in mortgage notes.

Or syndicated apartment deals. Generally the apartment partners can get 8%+. In a recent one I was offered it was a 'guaranteed' 8% return on a $50K investment. That is, your 8% came off the top of the profits, and accumulated to future years as a preferred partner.

[wolf]

Quote:

Originally Posted by clifp Calmloki has a lot of experience in the field and gave me some wise counsel, when I started out. If you have interest in it and some aptitude, e.g. DIY skills, an eye for real estate, or background in RE finance, than I really think it can be a good investment. I agree completely with calmloki, for many people it is a far less emotional than the stock market and that is good thing!

+1

[SVHoper]

Hi,

You have had lots of great replies... there are very experienced and wildly successful real estate investors on this forum. IMHO real estate investing in good times (vs 2009) is more a personal preference, you pretty much gotta have some interest :-)

Sorry if I missed someone else mentioning these random suggestions:

• Make sure you allocate enough for reserves. Non-investors think mortgage, property tax and insurance then can freely allocate the rest of the rent... but general wisdom is to allocate 40-50% of gross rents to expenses (excluding interest). This ensures sufficient reserves for long-term, large ticket maintenance items and issues. Even condos can have large ticket items (special levy) if sufficient reserves are not held by the Home Owners Association.
• Visit a local investor group. Biggerpockets.com might be helpful. Beware, lots of groups are organized by someone trying to sell you something, not necessarily bad so long as you are aware of the value.
• Make a good chunk of your return when you buy. Difficult to cashflow by paying retail on MLS. Not surprisingly, I am finding it vastly more difficult to buy well than in 2009-2012. Last purchase was a toss up whether I would be better in the market (as I don't plan for a lot of leverage)... answer is yet to be determined.
• May want to juice your return with something extra... fixer upper; short-term rental; off-market purchase; multi-family rent increase.
• IMHO leverage combined with the other points you mentioned, is what helps to give better than 60/40 stock/bond return. Also can hurt if prices drop and you are forced to sell. Many very, very experienced investors were hurt in 2008-9 - perfect storm of issues.
• You cannot know too much about the house/street/neighborhood. If you plan to buy and hold then you also need to know your location in the future :-)
• Just FYI IMHO 1031 exchanges have pretty limiting time restrictions, so not so easy to exchange into a good deal.

Be very, very informed, have fun and wishing all the best.

[emi guy]

Great post! I own a four-plex that will be one of the pillars of my retirement plan. I've owned it for ten years now and will be paying it off in the next few years, after I retire and I sell my current principal residence. Once that happens, the rental income will represent about 25% of my retirement income. One of the facts that I like about owning the rental is the flexibility it offers. It can be used strictly as a stream of income or I may decide to move into one of the units at some time. My units are small and efficient; great for my needs.
As someone else mentioned, hopefully any investment property is one that you could "see yourself" living it, if need be. If that is the case, you've solved the "location" issue and over all property condition issue.
I currently outsource all of the maintenance except the very, very minor stuff. I select the contractors and supervise the work but don't do the labor. I also do the new tenant selection. I believe that no property manager will select a new tenant with the same zeal as I will. I've always feared that a manager might just pick a warm body to fill vacancies, increasing the chance of putting a problem tenant in one of my units. Plus, their commissions are astronomical.
I'm in a small town in New England. Appreciation has been very slow but it and rent increases help keep up with inflation. So far I enjoy the experience. I strive to give my tenants a nice, clean place to live at market rates. My taking pride in the place seems to translate into quality tenants. I've had a few problems but more good than bad. Good luck with your situation.
EmiGuy

[Senator]

Quote:

Originally Posted by emi guy I believe that no property manager will select a new tenant with the same zeal as I will. I've always feared that a manager might just pick a warm body to fill vacancies, increasing the chance of putting a problem tenant in one of my units.

This is the number one secret to residential investment properties. Getting great tenants. It is not hard to attract them, it is not hard to recognize them, it is not hard to rent to them

The issue most landlords have is waiting for them. Price right, market effectively, have a solid rental, and you can have a great tenant in just a few weeks - or less. If not, you have to look in the mirror for your problems.