Rental Income

[yelnad]

Wzd was looking for rental rates vs prices.

We bring in $1600 a month in rent on a 3 unit we paid $82k for 6-7 years ago. We pay heat, water, sewer. Tenants pay everything else.

We bring in $280 a month on a single family we paid $1700 for this past year. (Yes - you read that correctly. Admittedly, the place is sort of a dump.). We pay water & sewer.

 

[John Galt]

Those are both quite good rental streams vs. investment. Did you notice the $1700.00 folks?
I know it can be done because I used to do it.
Takes work to find these though. Another good trick
is to get the seller to take something (could be anything)
you own as a down payment, and/or get seller financing
which makes it a no-brainer (use your imagination).
One reason I like real estate is that with some creativity
the possibilities are endless.

John Galt

 

[sgeeeee]

. . . In short, don't become a landlord unless you have a heart of stone, the patience of a saint, and an extremely high tolerance for pain.

I've never been a landlord, but this is kinda what I always thought. And I know that the person you just described isn't me. I envy those of you who are skilled at this and can create such a nice income stream. I would rather go for a root canal.

 

[yelnad]

". . . In short, don't become a landlord unless you have a heart of stone, the patience of a saint, and an extremely high tolerance for pain. "

We use bait and switch. I'm all nicey nice. We both show the place, but I answer the questions. Reel them in. Then the hubby plays bad ass when they mess up.

The hubby and I are all about sheriff and tax sales. That's how we got the $1700 property. We paid $6000 for our last house, lived in it for 18 months, fixed it up and sold it for $89k. We also bought 77 acres for $1200. You just have to know how to do your homework.

 

[Adventuregirl]

My goodness Yelnad! How do you go about finding things like that? That is a realm I've never ventured into, I wouldn't know where to start....but I'm intrigued...

Adventuregirl

 

[John Galt]

I just want to say again that yelnad's experience is
not all that unique. Big money is possible, but it is work
which is why I no longer do it.

John Galt

 

[yelnad]

Adventure - I don't know a ton about it. My husband has a degree in real estate and works in the mortgage industry. I think a lot of it is knowing the state laws and the right people. It takes constant research to cover our butts.

And John is right. The PITA factor is VERY high, which in turn often increases the stress factor on the marriage. (We had a hum-dinger of an argument last night about our newest property). This is nothing I would choose to do myself. I married into it and am careful about how I get involved.

It's really hard to buy a house at tax sale and then have to evict the prior owner, especially when she's a little old lady...then again, she had a really nice car and a 60" television, so I can't feel that bad.

 

[John Galt]

I have a thousand real estate stories, a lot of them about "near misses". Here is just one. There was
an old hospital in Michigan that had been converted to apartments. I think
it had 14 units and good cash flow. I made the owner a low ball offer. While he was contemplating this he happened to mention it to a co-worker at the power
company where he worked. The co-worker said,
"Hell, I'll buy it at that price!" and that's exactly what happened.

John Galt

 

[Adventuregirl]

Yelnad - I hear ya about the PITA factor, I'm probably not cut out for that type of challenge although my SO has no problem with confrontation....
I'm always intrigued, with all the different ways people are working their way towards ER....you and John Galt sound like you'd have some interesting stories to tell about "Adventures in Real Estate".... 8)

Adventuregirl

 

[John Galt]

I don't know about yelnad (is that danley backwards?),
but I could write a book or maybe 2. In fact, just today
I was thinking about maybe my oddest experience
ever in real estate. Too long for this forum I fear.
I'll put it in the book

John Galt

 

[yelnad]

Yup, you guessed it. It's my maiden name.

My husband could probably write a book, but he wouldn't because he'd think he was sharing all his secrets.

 

[wzd]

yelnaD and John are describing a different, but important aspect of real estate investing. Buying and operating rental real estate at market prices is profitible, in general. Finding deals is another realm, is a lot more work on the digging side, and is much more profitible. Unfortunatly I haven't found those yet.

So, yelnad's rents and prices are not market rates. I was wondering about single family market rates - and I believe from memory and cases I have seen that rent is between .6 and .7% of the purchase price per month (but I have no current data to back that up). Multi family (>5 units) tends to be around 1% of the purchase price per month (and I have lots of examples in Denver for that). This simply was to illustrate the difference between single and multi family for rentals for cash flow.

I'm sure it is possible to find deals. In fact my sister recently found a good one. Someday I may stumble on to one, but not because of extensive looking. My sister follows all the auction notices in her small town. She saw one for a house she had her eye on (for a home for our mom), and tried to go to the auction. It got postponed 3 times before it finally was held. One other person showed up, and stormed out when she bid it up to about 60% or 70% of value! She walked into a setup sweetheart deal, and got it for herself. So it can be done, but note that it took some legwork to track down the rescheduled auctions.