get rich quick scheme - real estate

[97guns]

I currently have a place in Reno (just up the street from your places) where older folks from Calif come to retire.

i am very familar with the reno market, we make it up ther 6-8 times a year and i like to stay in tune with it. my first property was a triplex in LV but ive since sold because the long distance management was not working for me.

id like to live in reno one day, i am a gambler and like to play sports and poker.

nice to see "members" here cash flowin to retirement with real estate

 

[97guns]

I close on my 5th rental property next week and my 6th in 2 weeks. Arebelspy hit the nail on the head with actual realities/costs and the 50% rule. I self manage and am very close to 40% expenses on my estimations. If you have no vacancy and low repairs for the year you'll do better but I like to plan conservatively. I always plan for 5% vacancy and 1 months rent/year in repairs/maintenance. I also factor in an extra landlord insurance policy on each property ($100/yr) to give me $1M in liability insurance on each in addition to my umbrella policy and I factor in a budget for legal actions in case I need to do an eviction (which costs about $800 in MN).

I do find that even being conservative that it's pretty easy to find 9-10% cash on cash returns in this market and think it's a great way to build my own pipeline of retirement cash flow. I do like going to the bank each month to deposit checks!

i have also looked into the NM market particularly albuquerque, the numbers were pretty good when i was looking back in 1997, my plan was to build on the las vegas property. at that time i didnt care what market i was in as long as the numbers worked. good thing las vegas didnt work out because i could have a big headache right now with properties spread about, all my properties are within 60 miles of me now.

my cash sat in the bank from '97 to 2009 drawing 5% in CD's, when i saw the los banos numbers it was time to get in.

 

[Nords]

pure jealousy, i dont know what adroitly means, barely even graduated high school. never said theres no expenses or vacancies, reread my post, i said give or take 4 years.
for all the naysayers my RE portfolio of 4 properties has had 1 vacancy in 2 years, yes ive put 2 stoves in, did the floors on 2 units and have done numerous repairs but the fact is everything is tax deductable.

Perhaps you owe the Young Dreamers a more nuanced (!) assessment of the joys of landlording. Professional landlords don't put much faith in "give or take", and they're usually more concerned about their return relative to a CD or a REIT.

And, yes, I've been a landlord for nearly 15 of the last 18 years. There are many days when I wish I'd invested in a CD or a REIT, although right now we're looking pretty good compared to CD rates.

Comments like "everything is tax deductible" indicate that you might want to have an accountant give your Schedule E a scrub before the IRS helps you with that...

this place isn't very friendly, its a retirement forum and were suppose to talk about retirement, the few times i talked about my retirement it gets attacked like a pack of hungry dogs. am i coming off arrogant because im retired at 39? i thought everyone here is retired.

Here's the deal. If you're successful enough to retire at age 39 then you're probably a few life experiences ahead of those who are not yet ER'd. You could share the techniques that got you there and advise people on what to avoid. You don't have to defend yourself to anyone, and you have quite a bit to be proud of. It's your story and you get to tell it.

But if you're gonna be thin-skinned & sensitive about constructive comments on "give or take" analysis, then you're not going to be happy here. We spend a lot of time thoroughly analyzing the pros & cons of just about every asset class in order to make sure that we're not blissfully ignorant in depending on something that might not be cash-flowing quite as much as was originally advertised. We want to make sure what works for one ER is generally applicable to anyone else who follows the same general path. We also have the occasional [-]Honobob[/-] poster who misrepresents the financial aspects of asset classes in order to boost their own personal [-]self-esteem[/-] accomplishments.

I suspect that if you don't like the reception your RE analysis received here then you're not gonna be very happy about the reception it gets on any of Arebelspy's boards either. You're lucky that he didn't send you over to Mr. Money Mustache!

 

[arebelspy]

I suspect that if you don't like the reception your RE analysis received here then you're not gonna be very happy about the reception it gets on any of Arebelspy's boards either. You're lucky that he didn't send you over to Mr. Money Mustache!

you're never gonna let up on me on that one, are ya?

 

[Gatordoc50]

pure jealousy, i dont know what adroitly means, barely even graduated high school. never said theres no expenses or vacancies, reread my post, i said give or take 4 years.

and for the record i just glanced at the forum topic and did not see the "belongs in other", just saw the get rich quick.

for all the naysayers my RE portfolio of 4 properties has had 1 vacancy in 2 years, yes ive put 2 stoves in, did the floors on 2 units and have done numerous repairs but the fact is everything is tax deductable.

this place isn't very friendly, its a retirement forum and were suppose to talk about retirement, the few times i talked about my retirement it gets attacked like a pack of hungry dogs. am i coming off arrogant because im retired at 39? i thought everyone here is retired.

The mantra of this site is living below your means and investing to keep pace with inflation. I have invested in real estate and found it to be superior as a money maker if you know what you are doing but a whole lot of work. It's not a get rich quick scheme, although it can be if your lucky.

 

[Nords]

you're never gonna let up on me on that one, are ya?

I can't imagine how MMM's in it for the long term. It'll be one year in April, but we'll have to see how he's doing in 2014.

 

[Major Tom]

97guns - I found this forum quite a friendly place, but it's like any social group. If you introduce yourself, take a bit of time to get the feel of the place and the various personalities, maybe ask a few questions and seek advice from those already here before diving in, it makes for an easier start.

My rental real estate experience was limited to a period of just under 2 years. I bought 3 family homes in around 2002 in an area where I could put 10% down and still get a small positive cash flow. The original idea was to keep them for the long term but then the value of each shot up from about 150K to 250K each in about 18 months, so I sold them and added the money to my retirement stash. It was the right move for me.

I do think rental real estate can work well if you buy the right properties at the right time, and maintain and manage them well. I screen tenants for all of my landlord's properties and have had great success finding excellent tenants. He commented that in decades of owning properties, he has never had so many good tenants (he didn't screen his applicants). I've helped make his experience of owning properties a calmer one. He used to spend quite a bit of time chasing people for the rent and evicting them. He doesn't do that with the ones I found him though!

 

[jazz4cash]

......... I screen tenants for all of my landlord's properties and have had great success finding excellent tenants. He commented that in decades of owning properties, he has never had so many good tenants (he didn't screen his applicants). I've helped make his experience of owning properties a calmer one. He used to spend quite a bit of time chasing people for the rent and evicting them. He doesn't do that with the ones I found him though!

Major Tom
Care to share your techniques for screening tenents?

 

[97guns]

tenants are very tricky now a days. in my market most everyones credit is no good so we dont even bother running a credit report. we call their place of employment to verify his employment but the first call made my manager acts as a customer to their business to make sure the telephone # and business match. a potential tenant can easily give a bogus number and have his buddy answering for him.

when a potential tenant drives to the property my manager lets them look inside by themselves while he checks out their vehicle. cleanliness inside means they will live in your home cleanly, fast food garbage all over the floorboard is not a good sign. he also looks at the dmv tags to make sure they are current.

a few things my manager does, i'd like to hear of other techniques as well

 

[Major Tom]

Major Tom
Care to share your techniques for screening tenents?

Nothing fancy, but as the owner didn't screen his applicants at all before I came along, my basic approach is a big improvement.

On the craigslist ad, I mention how they will need to provide a copy of their full credit report, which they can get for free at www.annualcreditreport.com. I also emphasize that they must have excellent credit, and that we don't accept co-signers.

When they come to see the property, I ask questions and as much as possible, let them do the talking. It's usually pretty easy to get a read on a person. I don't give them an application unless they are seriously interested and if we both think they stand a good chance of qualifying. People with bad credit will either tell you, if you ask them how their credit is, or they'll start fudging (which is a giveaway). Common lines which set off bells in my head are "Well, times aren't easy" - that sort of thing.

If they make it this far, I send them away with an application and on receiving it back, go through it, call the references, check up on current and past employment etc. I approach this stage of the process by trying to find a reason not to accept them; the best applicants will make it through.

The two most important factors to me are:

1) My judgement of their personality, and
2) Their credit

This might sound a bit draconian, and it can be a tough saying no to people sometimes (especially the ones who are polite and understanding), but it's far easier to set the standards high and say no to a few people than to deal with errant tenants. It's easy to get someone in, but much harder to kick them out.

 

[HpRyder]

Care to share your techniques for screening tenents?

I've been doing rental real estate for close to 25 yrs now. Like Major Tom,
I phone screen applicants, asking lots of questions, before I'll show them the rental. I work 15 or so questions into the phone conversation to get the information I want. If they don't meet my criteria, I don't waste their time & mine by showing it to them. I tell them I charge each applicant, husband, wife, any over 18 kids & anyone else on the lease, what it costs me to run their credit report. I tell them before hand it includes credit report, bad checks, eviction check & criminal check. I don't allow them to provide the credit report. I get it directly from an agency so I know it has not been altered. I don't rent to felons, those who have been evicted or repeatedly passed bad check.

During the phone conversation, I market the rental units features.

If things seem OK, I'll set an appointment to show them the place. After showing it, if they want an application I give it to them. If they definitely want to rent the unit, we execute a prorated refundable holding fee agreement, good for a few days.

When they return the app., like Major Tom, I go thru it with a fine tooth comb verifying, by calling, employment, salary, identity & residences. After this is satisfactory, I run the credit report.

Its not an easy process, but then I'm loaning them perhaps a $500K asset for almost no money down, and I want to know a lot about them.

 

[brewer12345]

97guns, please do tell us more. I am curious as to how tightly you keep records on your properties, in addition to the nuts and bolts of managing properties.

As for the reception you initially got, be careful how you title your thread. "Get rich quick" sets off alarm bells big time.

I say do what you know and works for you. I tend to view rental real estate as something like a social disease, but then my background is working as a securities analyst and I would not have the slightest idea of how to maintain the properties myself. Different strokes, eh? I would imagine that you would not touch the stuff I have been buying lately (junk bonds and call options).

 

[arebelspy]

I can't imagine how MMM's in it for the long term. It'll be one year in April, but we'll have to see how he's doing in 2014.

Yeah, I wouldn't be too surprised.

He's having fun with it for now, but once it feels like w*rk...

 

[jazz4cash]

Thanks 97, Major T, and HpR.....very interesting.

My brothers all have rental properties and they each have thier own style of screening / marketing. One brother, for example only markets by word of mouth, referral of a current tenant, or sometimes a small sign in the window of his building thinking it will draw only folks with some connection to the neighborhood. His marketing technique is the first screen.

 

[arebelspy]

1) My judgement of their personality

Warning to landlords:
Make sure you have strict criteria and stick to it regardless of tenant. And then make sure you document exactly why you're renting to them or not.

The fair housing and discrimination laws can be brutal.

 

[Nords]

To the tenant screening tools, I'd add one more.

If you're near a military base then see if AHRN.com is available in your area. It's free for rental property owners & managers, but you only get to list your property and survey the competition.

People with a military ID (active duty, Reserve/Guard, and retiree) can search the entire database. You'll get far fewer calls than Craigslist, but you'll probably rent the place by the third showing. We've rented to three sets of tenants this way with minimal hassle and zero problems.

A friend had a little drama when he rented his 2BR apartment to a servicemember & spouse. The servicemember deployed to Iraq and she started entertaining male houseguests. However she was paying the rent so the landlord didn't object. Then the servicemember's mother came over to have a few words with her DIL, who abruptly terminated the lease. The landlord got to keep a month's rent and turned it around in two weeks, so he's still smiling when he tells the story.

We advertise our rental property as "pet friendly", and we explain that pet damage will be taken out of the security deposit. Tenants will sneak in pets whichever way they can, so this sidesteps the whole problem. Better yet, we get grateful pet owners who know how hard it is to find a pet-friendly rental. A friend of ours was even able to skip replacing her 10-year-old carpeting because the new tenant had a dog. They've been in the place for over two years and may go for longer.

 

[Wrirya]

I LOVE. Real estate! I find it to be a better investment over the past 12 years than anything else.

However there is one Major missing eliminate in this conversation and that is Property taxes. In some states property taxes will eat up over 30% of income. Where I invest, I plan on 10% repairs 10% taxes and insurance 10% vacancy. We have economies of scale so I have person full time that just does property management for me full time along with some other things. But does it my style. But if you did not have that would plan on. 10% mo for management. So I see about 40% in costs we run around 25% due to Low turn over and cheap repairs. Again the property taxes. We also never show properties to prospective tenants, there is a key box and they tour the property on there own time. Also we screen tenants like crazy and under rent properties to try and get a tenant to stay for 2 years.

All of that being said I find hard money lending on single family houses to be the best opportunity, I may be biased since that is also my so called day job. Based secured against real estate at low values collecting interest is not a bad way to go, especially given the double returns secured by real estate.

Sorry for typos I am on my iPad and I have to run get my little boy out of bed....

 

[rescueme]

"get rich quick scheme - real estate"

Sounds like "Rich Dad, Poor Dad" ...

Nope, NIML....

 

[Letj]

We have had a lot of success investing in rental properties in marginal neighborhoods. We minimize turnover by accepting section 8 vouchers. The downsize is that quite frequently the place gets thrashed and we don't bother to go after the tenants because often that would be a wasted effort. All that was factored into our investment strategy. We do not have any of our own money tied up (all leverage). Our expectations for returns are quite high so the net monthly rent would often pay for the properties after three years. I must caution that this is not for everyone. You need lots of patience, lots of stomach and the ability to not get rattled easily. If you do it the right way, it sure beats working for someone else. My husband does all of the repairs/renovations but he doesn't mind because of the flexibility it gives him.