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real estate investment primer ???
Old 04-19-2016, 07:43 AM   #1
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real estate investment primer ???

Long shot here but urgently I'm Looking online for a real estate primer - maybe a dozen or two of slides, on the basic concepts of finding and then buying and managing rental real estate. Including risks and pitfalls. Not looking for the get rich quick type of stuff. Just some basic advice and what one goes through for rental real estate. - to buy , manage tenants, maintain, pay taxes, eventually sell etc.

Not looking for the advanced version, just some basics to use for educational purposes for beginners / newbie investors

Can anyone recommend any web sites or other that cover the basics ?
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Old 04-19-2016, 07:51 AM   #2
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There is a LOT to it.

The way most people do it is this.
  • Find a realtor
  • Buy an over-priced property on the MLS that generates a great commission for the realtor and gives you nothing back
  • Find a property manager that gets another commission and gets in the first tenant as they have no 'skin in the game'.
  • The tenant causes $10K+ worth of damages when you include vacancy expenses, lost rent, legal expenses, fix up costs, etc.
  • The landlord vows 'never again' and licks their wounds and sells.

Or you can go the investor route
  • Join an RE investor club
  • An investor will find non-MLS properties, or understand how to look for great deals, maybe buying the property situation above after the tenant leaves. At a 40%+ doscount.
  • They buy with a 15%+ ROI expected
  • They understand how to screen tenants, BEFORE they have a bad one
  • They make money, lots of it

Attend every free webinar you can find
Talk to other successful people doing it
Understand it is more difficult to do it today, than in 2008-2012
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real estate investment primer ???
Old 04-19-2016, 09:39 AM   #3
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real estate investment primer ???

More to it than books, slides, etc. your best bet is to go in as partners with someone who knows what they're doing. I did that and learned a lot.


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Old 04-19-2016, 09:46 AM   #4
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Beginner-level ability is very risky, especially in the current market, which is nearing a top. Having said that, there's a useful Ultimate Beginner's Guide to Real Estate Investing found here:
https://www.biggerpockets.com/real-estate-investing
Look under Education -> Guides.

Even if you buy a property below market value and have good cash flow, high tenant turnover will eat your lunch. You must be familiar with the laws in your state and be good at managing people and events to keep your tenants in place. I found excellent information in the books offered by Nolo Press:
Landlords, Rental Property & Property Management - Nolo.com
When we once had to evict a tenant, the court clerk complimented us on our preparation and process.
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Old 04-19-2016, 10:35 AM   #5
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I may have a biased opinion being from the SF Bay Area, but it isn't all that complicated. Find the best property you can in your price range, purchase and rent.

I would never go into the Rental business with a negative cash flow and put your efforts into choosing good tenants. If you have good tenants and a good property, managing real estate isn't that difficult. If something breaks, fix it.

Where I'm at there is no such thing as a 15% ROI, usually 5% to 10% is pretty good.
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Old 04-19-2016, 12:27 PM   #6
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Originally Posted by jkern View Post
I may have a biased opinion being from the SF Bay Area, but it isn't all that complicated. Find the best property you can in your price range, purchase and rent.

I would never go into the Rental business with a negative cash flow and put your efforts into choosing good tenants. If you have good tenants and a good property, managing real estate isn't that difficult. If something breaks, fix it.

Where I'm at there is no such thing as a 15% ROI, usually 5% to 10% is pretty good.
Many people seem to think 5% is enough. When they factor in 10% of rents for property management, 5% for vacancy and another 10% for maintenance and capital improvements, the cash flow becomes negative. Most people forget about those 'hidden' expenses.

In order to get a 15% ROI, you need to buy right. Before a property hits the MLS. A property that needs some work. Maybe 10% of properties out there will likely qualify as investment potential.

My properties return 10-15%+, based on the equity I have in them. Many are already paid off. If I only use my original investment, and assume my subsequent mortgage payoffs were just buying a bond, then it's closer to 15-20% returns overall. Some have a 35-40% return. Combined, they are well into the 6-figures of net income.
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Old 04-19-2016, 02:46 PM   #7
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Quote:
Originally Posted by Senator View Post
Many people seem to think 5% is enough. When they factor in 10% of rents for property management, 5% for vacancy and another 10% for maintenance and capital improvements, the cash flow becomes negative. Most people forget about those 'hidden' expenses.

In order to get a 15% ROI, you need to buy right. Before a property hits the MLS. A property that needs some work. Maybe 10% of properties out there will likely qualify as investment potential.

My properties return 10-15%+, based on the equity I have in them. Many are already paid off. If I only use my original investment, and assume my subsequent mortgage payoffs were just buying a bond, then it's closer to 15-20% returns overall. Some have a 35-40% return. Combined, they are well into the 6-figures of net income.
I always appreciate your candid insight on real estate investing, Senator. How does your strategy and insight differ from when you first started investing in real estate? Are there any key words of advice that you would go back to those beginning days and tell yourself to save both the time and money learning the hard way? Once you are invested and more involved with other investors, does the MLS become a non-factor or do you still reference it for anything (e.g. trends, etc)?

My DW and I own our home and a condo, and I've wanted to expand our real estate holdings but the math never adds up to be reasonable when going the MLS route. Thanks in advance for your insight.
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Old 04-19-2016, 05:55 PM   #8
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Have a friend who rolled his 401k to a self directed IRA. With a third party and reputable bank - he set up a real estate company with himself as the sole director.
- Then transferred IRA assets into the RE company and bought houses for cash from bank foreclosures with a 50% discount. At this point he has a free title with no closing fees and no mortgage.
- From the same IRA - he upgrades new homes for $10-20k.
- Rents home - profits go to IRA.
- (House appreciation may be capital gain - forgot to ask).
- Claims %15 annual income from original investment with IRA.
- Regulations stipulate that you cannot rent to yourself or relatives - minor inconvenience.

I think the man is a bleeding genius.
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Old 04-19-2016, 08:10 PM   #9
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I was able to start real estate investment during market crash and while I was in college and scooped up some beat up properties for cheap and rent it out. My key to success is to have a reliable contractor(my dad) a realtor who can do offers for you and you have to do ur own research on what you are looking for, my realtor was just my tool to make offers since I can't do it myself at the time. The key advice being, reliable contractor, and do ur own research! Do not buy in markets that you have no background info on. Read up on how to be a good landlord and know some of the laws. It is a continuing learning process for me on how to be a landlord. Prepare to work and do some work on ur own to if you want to save money! Sweat equity is a key thing in real estate.


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Old 04-19-2016, 08:25 PM   #10
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Originally Posted by mistershankly View Post
I always appreciate your candid insight on real estate investing, Senator. How does your strategy and insight differ from when you first started investing in real estate? Are there any key words of advice that you would go back to those beginning days and tell yourself to save both the time and money learning the hard way? Once you are invested and more involved with other investors, does the MLS become a non-factor or do you still reference it for anything (e.g. trends, etc)?
When I started, I was a Section 8 landlord. How can you go wrong with guaranteed payments? Easy, tenants that trash an apartment without even realizing they are doing it. People that think theft is an activity that everyone does, etc. People that can from a place and lived in squalor and do not even realize when they turn your place into squalor.

I did a lot of research on credit score distributions, talked to other landlords, etc. Now I have a base credit score that I never go under. I charge a deposit higher than a month's rent. I require that people pay no more than 30% of their income in rent.


The MLS is generally a non-factor. Finding deals is more difficult. You can always low-ball MLA properties that have been on the market a while, but that is not as good either. Find properties in foreclosure, contact the owners, and attempt to get them at the Auction of prior to redemption. I write about all my properties on my own blog.
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Old 04-19-2016, 08:46 PM   #11
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Thanks all. Background for my question is that I teach a personal finance course to MBA students and the course does not specifically cover real estate as currently written. I want to add that in, because many millennials are more comfortable investing in hard assets than stocks and there is class interest to cover real estate. I've been a (mostly successful) landlord but we had mostly exited investment real estate before FIRE ...

I share my own experience but a primer on best practices would be helpful for a 1 hour lecture on real estate investing as a means to financial independence.

Thanks all. Great inputs. You will be acknowledged in class ( rightfully so, senator is soon to be rock star status I predict)
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Old 04-20-2016, 10:36 AM   #12
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Quote:
Originally Posted by Senator View Post
Many people seem to think 5% is enough. When they factor in 10% of rents for property management, 5% for vacancy and another 10% for maintenance and capital improvements, the cash flow becomes negative. Most people forget about those 'hidden' expenses.

In order to get a 15% ROI, you need to buy right. Before a property hits the MLS. A property that needs some work. Maybe 10% of properties out there will likely qualify as investment potential.

My properties return 10-15%+, based on the equity I have in them. Many are already paid off. If I only use my original investment, and assume my subsequent mortgage payoffs were just buying a bond, then it's closer to 15-20% returns overall. Some have a 35-40% return. Combined, they are well into the 6-figures of net income.
Some of these numbers can vary greatly depending on the property and location. I understand many people across the country get higher returns and may have different expenses.

For me, I manage my own properties, Property Management = 0. The vacancy rate for 25 years = less than 1 week (added 3 properties together). Maintenance and capitol improvements = 1% (for 25 years worth of renting). I was also referring to a 5% to 10% ROI after expenses.
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Old 04-21-2016, 07:01 AM   #13
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Originally Posted by Bruceski44 View Post
Beginner-level ability is very risky, especially in the current market, which is nearing a top. Having said that, there's a useful Ultimate Beginner's Guide to Real Estate Investing found here:
https://www.biggerpockets.com/real-estate-investing
Look under Education -> Guides.

Even if you buy a property below market value and have good cash flow, high tenant turnover will eat your lunch. You must be familiar with the laws in your state and be good at managing people and events to keep your tenants in place. I found excellent information in the books offered by Nolo Press:
Landlords, Rental Property & Property Management - Nolo.com
When we once had to evict a tenant, the court clerk complimented us on our preparation and process.

Big Thanks. This was excellent and concise and exactly what I was looking for.
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Old 04-21-2016, 10:38 PM   #14
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You're welcome!
Sharing useful resources is a simple pleasure.
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