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Old 11-15-2009, 06:26 PM   #61
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Most of the replies seem to focus on multiple properties and all the headaches they can be. I plan to use rental income as part of my ER, but I've done it in a small and manageable way. I own a 2 family and rent out the downstairs apartment for $1500 a month. I live upstairs so I can keep an eye on things, but I've always had super tenants. Also I'm only ever dealing with one person or a couple. Maintenance is minimal and after taxes and insurance I get $10k a year from the place. If I was to move downstairs and rent out where I live now I'd get $2500 a month.
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Old 11-15-2009, 11:11 PM   #62
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I'm actually finding the rental market to be great right now...got a good tenant within 10 days of advertising our most recent rehab...im hearing the opposite in other parts of the country
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Old 11-16-2009, 12:03 AM   #63
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OP.

I am retired, have 2 rentals. Great income. Units paid off now.

Tips:

1. Find a mentor. Not the local Realtor. ( ie. retired person, who is a landlord, and listen.)

2. Location of unit. Never forget this rule. " location, location, location"
ie. great schools, jobs. Makes it much easier to rent
and you will get better tenants.


3. Do your own repairs. If you cannot. Do not be a Landlord. In the begin
ing, your cash flow is to small.

4. As mentioned earlier. It will be very difficult to find a unit with cash
flow. But if you search you may find one.

In my case, many years ago, I knew the area I wanted buy in. Great location. I knew in advance, the selling prices of units. I also knew what the rents were, and I could estimate the insurance and property taxes.

I found a unit for sale, by owner, did an FHA assumtion, and purchased the unit about 10-15K below market. Reason, the owner had already moved out and bought a house. They wanted to sell, the realtor they used gave them a bad time......etc...

So, deals are out there, but you have to do your homework and know what you are doing.

If you are "lazy", don't want to get your hands dirty, want the R.E. person manage your unit....forget being a landlord.

Just my 2 cents.
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Old 11-16-2009, 08:11 AM   #64
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A typical deal is usually a $20K or $30K property that i put $5 K - $15K into and rent for around $800 per month.
Those are "no-brainers" ... not finding them in my hood. Did walk thru an REO I used to own. Funny tale: I bought it for $8.5k in the early 90's; flipped to a tenant within weeks for 40k (carrying the note for him); he holds the place for 12 years (renting it out for a couple years); sells at the peak for 243K !! New owner foreclosed on; now offered at a short sale for 68k. Bank has refused to budge (3 investor offers regected).

So I walk into the unit ... the carpet is same stuff I put into it 15+ years ago! Easily needs 15k worth of work. Then it rents for 1k/mo. Numbers are a little tight for me, so I let it go. A betting person will doll the place up then try flipping it for 110-120k.
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Old 11-16-2009, 10:31 AM   #65
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I'm a total rookie considering renting out my city house, while I stay in my country place.

Honestly, it started from realizing I only spent 20% of my time there, and it seemed like a waste. It didn't start from needing or caring about the money. I am considering selling it too, but that doesn't seem likely. It just feels wrong to leave it empty.

My thinking is I may pour any rental income back into the house, like replace the 100 year old cedar shake siding with new cedar shake siding, and replace the ugly white kitchen cabinets. Just give myself a lovely new house after/through it all.

Might even consider renting out one or the other place, for a couple years at a time, with time off in between.

I like the flexibility. No mortgage on either.
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Old 11-16-2009, 10:32 AM   #66
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OP.


If you are "lazy", don't want to get your hands dirty, want the R.E. person manage your unit....forget being a landlord.

Just my 2 cents.
I think it's good to be handy around the house if you want to be a landlord, but if you do what I did and just buy a duplex or two family home and live in one half and rent the other it isn't hard work at all. There's very little worry and the rent goes a long way to paying the mortgage. Once that is paid off you start taking income free and clear. Also I like be diversified in my investments so I didn't want to sink a lot of money into real estate. Now I'm in a nice situation that I'll be getting $18k a year in rent with minimal worry.
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Old 11-16-2009, 03:07 PM   #67
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OK I’ll kick in my experience. I’ve been a landlord for 10 or so years now with SFRs. They cash flow about 40K/yr. When they’re rented I’ve had very few unusual problems. Most problems are figuring out what rent will attract an acceptable tenant from the local rental pool, collecting the rents from the one or two late payers without alienating them and the sudden expensive repairs (a new AC & furnace just after a 95 F day in an SFR rented as having AC). I’ve got an inexpensive handyman to do all the small repairs, so all I do is tell him what to do, where and when. Right now, I’m using the cash flow as part of living expenses.
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Old 11-17-2009, 07:27 PM   #68
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Thanks for the update, OP's!

I think a good measure for whether you should landlord or not is how flexible you can be in an any given instant. Do you have the ability to cover those large repairs, do you have the time and job flexibility (if emplyed) to deal with vacancies that take days on end to get ready for the next tenant? Do you have a support system (someone to bounce your game plan off of when your tenants misbehave and you want to wring their necks haha)? Are you willing to landlord longer than you desire if the real estate markets are not playing nice?

Also, a sidebar topic for this real estate mess is Section 8. Anyone do this? These days Section 8 is HOT. They don't even take names for waiting lists. Recipients know they have a good thing, and a landlord can use that as leverage (ie; behave or I will report you, which would be devastating to your living arrangement). I have one Section 8 unit. I was fearful of giving it a shot, primarily because of the "inspection" part, but in hindsight, that is no big deal. An annual nuisance, but not a big deal. I have a somewhat unique situation in that my unit is the only one in the community that is Section 8 (not a typical Section 8 suburb, but the unit is very small so my rents fall within their payment ranges). When this unit goes vacant and I advertise as Section 8, I get 10's and 10's of calls. It will never stay vacant long. I get my checks on time every month, and my Section 8 tenant has minimal complaints. The only downside is that Section 8 tenants are hard on the property. Not a judgement, I'm just sayin that's my experience. I have lots of clauses in the lease, but sure enough, they will make that one bad move that I didn't think of (yet) to spell out in my lease. Example: I now have to add a clause that says "no standing on the bathtub soapdish" (that actually happened, it broke, giant hole in the wall into which water spewed until I learned of it much later...).

One added benefit to landlording....nothing shocks me anymore, no amount of "firedrills" can cause me to panic. That's actually a lesson that spills over into all aspects of life.

I am rambling...
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Old 11-18-2009, 07:37 AM   #69
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We used to have a building with a couple of disabled section 8 tenants on SSI. They were both long term and neither was hard on the property. Rent came directly from the county. We bought the building with the tenants already there, and we sold the place a number of years ago. One of those tenants still lives there, probably has for 25 years. The inspections were never an issue. In our community all rental properties are supposed to be inspected every three years (they are now behind due to budget cuts). I liked the inspections. It helps you know that you are keeping things safe and up to date.
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Old 11-18-2009, 08:36 AM   #70
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Our section 8 housing gets inspected annually. Seems that every time I got a rent increase the inspector wanted a "large" repair (new flooring, vanity, or counter top ...). But this year the increase was rejected due to budget constraints and the inspection was almost nothing. Fair enough.
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Old 11-18-2010, 03:07 PM   #71
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I am 45 and have embarked myself. I have 11 buildings totaling 35 units. I separate out cash flow from the managment fee (8%) that I pay myself. the cash flow is hwat i get for putting my money into it, the mgmt. fee is what I get for putting my TIME into it. (and if I want to fix things myself, I'd make or save more there too, but I make $50-$70 per man hour doing web design and running my lawn care busienss, so paying others to do the maintenance makes snese for me personally) -- our plan in a nutshell is to "debt snowball" the mortgages one at a time, lowest balance to highest starting with $1,000 extra per month, then increasing by the amount of the "FIRE'd" mortgage amount. Right now, cash flow and mgmt. income is around 50k and will increase steadily. I bought the buildings at a decent discount, so I use 2% per year appreciation to account for any possible appreaciation as well as fudge for the discount-to-value. So far it's an adventure, but I do appreciate owning MANY units vs. a few, because you can have a couple vacancies here or there and it won't kill your cash flow, whereas one 4 unit with 1 vacancy is 25% empty and probably not going to do much more than break even.
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Old 11-20-2010, 04:38 AM   #72
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I've owned rental properties for 7 years and have been satisfied with the results.I'm not the landlord type so I pay 10% to a local company to handle this for me.Their service is priceless.....To this day,I've always received payments on time and the homes have been well taken care of,for the most part.Tenants are often intimidated by property managers and know they mean business.

I do an occasional drive by,but I keep personal contact to a minimum.I'll send them each a Christmas card with a $50 gift card,just as a way of saying thanks.

Location,location,location!I target homes in quiet family neighborhoods,with good schools.They may not cash flow as well on paper,compared to multi family homes,or those in less desirable areas,but in the long run should have less wear and tear,vacancies and headaches.

Good luck!
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Great response!
Old 11-20-2010, 04:52 AM   #73
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Great response!

LiveItUp,
It was great to read this post! It rung very true for me, especially the location vs. cash flow. I have enough buildings that I "experimented" a bit with some lower income areas and have found that there are alot of "hidden" qualities and limitations that simple COC return don't illustrate:

1. 3 out of 4 people you show it to won't live in the lower income / undesirable area
2. The properties are less marketable and can hinder your "exit" plan
3. Psychologically, for an uptight anal retentive like me, I don't like being in those neighborhoods!
4. Despite the fact that it's prudent to include an 8% vacany rate across the board when analyzing properties, the truth is, lower quality will turn around more.

This is why I have this "idealistic idea" that multi family properties in certain areas, purchased at a discount, will deliver 75% of the cash flow and return for 50% of the aggravation (as lower quality). People tend to look at cash flow in a vacuum, without looking at the number of phone calls, late rent payments, and other headaches each $ of cash flow comes bundled with.

I appreciate the Christmas card and gift card comment. I haven't done this yet, as my wife warns me about getting too personal with the tenants, but the truth is, I'm grateful for them, so I'd like to express that gratitude.

I did an analysis, by the way, of the actual return on money invested, assuming ZERO (neutral) cash flow, no increase in income and ZERO appreciation. Simply putting 25% down payment on a property and having tenant pay it off over 20 years, as long as there is no negative cash flow, yields 7% return on money invested. (i.e. you buy a 100k property, put 25k down, 20 years you have 100k free and clear property) -- doesn't account for buying and selling costs, but I think these can be overlooked given the "no appreciation" factor.

Thanks for your post. It was great to hear a positive spin on RE investing.
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Old 11-20-2010, 04:56 AM   #74
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I have quite a few sec. 8 and so far so good. I have "shown up well" in town, taking good care of my tenants and units, and inspections, really, are quite innocuous, at least in Waterville, Maine. I think it behooves to spread it around a bit, and not have TOO many eggs in one basket, though, becuase budget cuts, law changes, etc. could affect that income.
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Old 11-20-2010, 09:13 AM   #75
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Clicked on the calendar and hey! Happy Birthday Eyerishgold! And tommorow is Citrine's - where is that girl?

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Sheesh - 2 1/4 years already? Just turned 60 and with 51 units we have exactly one vacancy - a house we've had empty and on the market for one complete year. Apartments get filled within about 5 days of move out, normally less. The biggest limiting factor is how fast cleaning and or paint or other repairs take. Looking back at our rent schedule for August 2007 rents at the 16 unit were $390, now $435. The 7 unit rents were $400, now $445. The old 9 unit student apartments were about $400, now about $415. A house was $850, now $915. Our expenses have gone up for various utilities and repairs - a frig that cost $315 is now $380, a water heater that was $235 is now over $350, but the biggest increase in our costs is paying someone 10% of the fees, rents, and laundry collection to take on the vast majority of all the management and repairs I used to do. So rental profits for us are down, but rental stress is way way down.

We haven't bought anything since the last post, but have been looking at maybe a winter place. Much property looks cheap right now, but we really don't need any more income property. Our rental property wouldn't sell for as much - or as quickly! - as back when, but if the income stays in place and the stress is gone holding on to it doesn't hurt bad at all. Looking at the stock prices from the last post vs. now I have to say that owning rental property feels pretty good right now.

Been about another year - our managment guy is doing ok - he doesn't get the places filled as fast as I would, and he has a different management style, but there is something to be said for just going to his account and transferring thousands of dollars into ours. We haven't bought any more rentals, but did just buy a winter home in La Quinta California. Now is the time to be hunting owner-carry-contract places. May make a small effort to sell a couple places this summer and carry contract on them. I expect inflation to stabilize and start bringing home prices back up. Prices we've been paying don't convince me that we have had negative CPI.
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Old 11-20-2010, 09:26 AM   #76
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And tommorow is Citrine's - where is that girl?
Rumor has it she was hired by the TSA to teach massage therapy to the pat-down agents...
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owner carry
Old 11-20-2010, 10:58 AM   #77
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owner carry

My understanding is that Jan 1, 2011 it will no longer be legal to do owner financing withouth being licensed as a mortgage ORIGINATOR (not just broker). Still unclear on the details, but my Realtor is clear enough on them to tell me he has to remove my offer of owner financing on a home I have listed with him as of 1-1-2011. Seems outrageous to me, but it appears, at first glance, to be true. (S.A.F.E Act)
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Old 11-20-2010, 12:29 PM   #78
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My understanding is that Jan 1, 2011 it will no longer be legal to do owner financing withouth being licensed as a mortgage ORIGINATOR (not just broker). Still unclear on the details, but my Realtor is clear enough on them to tell me he has to remove my offer of owner financing on a home I have listed with him as of 1-1-2011. Seems outrageous to me, but it appears, at first glance, to be true. (S.A.F.E Act)
Not at all sure your realtor has it right:

http://noteinvestor.com/notes-101/sa...ler-financing/

Looks to me like you could do 3 owner carrys/year, however, no balloons, fully amortizing, can only adjust after 5 years, other stuff...

frickin' great. that should pretty much force bank lending only, which would be good if the banks were lending - and what about the great inventory of properties the banks don't feel like lending on?
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Congrats Hotwire
Old 11-20-2010, 02:39 PM   #79
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Congrats Hotwire

I definitely have positive things to say about real estate

But can well understand that landlording is not the primary desire for many people who are ERed.

I am not that experienced, but view successful Real Estate investment to lie on a spectrum between lots of cashflow to lots of capital appreciation. We are still accumulating so sweet spot for now, is initial high leverage, where the property provides at least some cashflow above mortgage and taxes.... then basically, the tenant is buying me a house... which you also expect to have some appreciation.

I view it as kinda like a tax deferred component of asset allocation - I am not sure what it will return over the next 10+ years (expect less than 10% cash on cash of last decade)... but likewise I don't know the future return for small caps or large value.

Wishing you all the best.
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Old 11-20-2010, 03:44 PM   #80
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which would be good if the banks were lending
Isn't that the truth ... wanted funding for a HUD home. Offered up a few free-n-clear rentals with long history of positive cashflow. "send me your W-2 for the last year" they said; "don't have a W-2" I said; "sorry" they said.

750 credit score and they won't loan money for a first position 20-30% loan to value. Amazing.
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