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Old 01-18-2021, 11:53 PM   #41
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I



Until now, earning a rather realistic 4-5% annual return by renting out homes was a key part of my nest-egg-management plan.






Is it really that low? Seems high risk- low reward. Iíve got an itch to do some real estate investing but that stat along with the pandemic restrictions has scared me off for now.
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Old 01-19-2021, 06:47 AM   #42
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4-5% is very conservative. But it all depends on your local market and what type of property you are buying.
My town was great for duplexes or triplexes 3-5 years ago, now they are very expensive, to the point of cash flow issues with an investment property rate loan.

It also depends on how much of your money you have invested. If you can fix things up and then finance you might end up with not much of your own money invested.

The worst property we have is 8% return on investment.
The best one we have is 300% on investment.

The interesting tidbit is that they both cash flow about the same amount ~$6-7k, after long term capex and expenses that are not happening in this year are set aside and after the mortgage has been paid.

The difference is that one was purchased and rented as is (with 25% down) whereas the other one was financed after fixing and has $2k of my cash locked in it.

A SFR your equation is different. You have access to conventional loans and non-inflated interest rates, ~3%?down, fewer utility expenses and appreciation in line with local real estate.

Duplexes donít necessarily follow the same market ups and downs. The market was flat for the first two years we started investing. You could count on buying a property for about $100k/unit. Three years later the prices are up 50%, but rent is up about 10%.

Purchase price matters, a lot.

The benefits i see is that most of our properties we get a premium because they are nicer than average, so we get a premium.
Our financing is fixed rate, yet our rents are increasing annually.

But it is not for everyone.
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Old 01-19-2021, 06:58 AM   #43
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The pandemic is not a risk.

It's the gov't making illegal evictions, so today all tenants could simply live rent free.
Correct. It is one thing tenant can't pay and tenant/landlord figure out a mutual arrangement on their own or let the market drive the price. But it is completely another matter when government is forcing their will to cause an undue hardship on one group of people. My 2 cents.
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Old 01-19-2021, 07:00 AM   #44
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Thanks for the detailed description. Iím sure the numbers vary a ton from region to region. I think being a landlord is the worst part about investing in real estate, and that was before all the issues brought on by a pandemic. It makes stock market returns look like easy money.
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Old 01-19-2021, 07:09 AM   #45
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Years before the pandemic I heard too many horror stories from friends about the trials of renting. Too much trouble and work to make it worth the aggravation and my time. Now with being retired and with the additional problems resulting from the pandemic I would never consider renting to anyone and use even a minute of my retirement. Don't need any more complications to spoil these later years.



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Old 01-19-2021, 07:23 AM   #46
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Not a landlord, but DW was for a while. Some good tenants, but the last one was eventually a deadbeat and DW decided to sell because of the eviction hassle. The tenant drove a late model car, had a nice 80" tv, furniture, etc... and a job with a local union. Turned out he had racked up a couple of DUIs and was paying a lawyer to get him out of things instead of rent.

It would be nice if tenants had to prove to an independent 3rd party authority that they can't afford their rent.
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Old 01-19-2021, 08:06 AM   #47
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Years before the pandemic I heard too many horror stories from friends about the trials of renting. Too much trouble and work to make it worth the aggravation and my time. Now with being retired and with the additional problems resulting from the pandemic I would never consider renting to anyone and use even a minute of my retirement. Don't need any more complications to spoil these later years.
I agree. I think you have to be born with a gene , or at least have a certain type of personality, that sees the issues of renting as a welcome challenge and risk instead of a problem. My Dad was a landlord for a while, and seeing it up close and personal as part of his "maintenance/collection" staff as a child , he was not a good landlord because he was too nice to his tenants and accepted their excuses. I applaud those who can, I could not.

The view of landlords is being driven by the view of income inequality. Landlords are are 'haves", renters are the 'have nots". My guess is that the typical renter looks on their landlord as at least a millionaire, to whom missing a couple of months rent should not be a big deal. When was the last time you saw an extended new report/documentary on the trials and tribulations of being a landlord with problem tenants, vs one sympathetic to someone about to or being evicted (and saying little about the eviction reasons)?

As as was stated earlier, there are more renters than landlords, so more votes, so politicians tend to take a similar view.

A precedent has been set with this, one that can be expected to be exercised more frequently in the future.
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Old 01-19-2021, 08:10 AM   #48
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A good friend with 21 units rented out is $15k behind in rent from his various tenants.

No evictions in Minnesota and in North Dakota, you just have to fill out a form and you can't be evicted.

He sounded very fed up. It is not risk free, hands off or easy money.

All he can do is wait until people can be evicted again and then get judgements against each tenant. Costly and unlikely to return any of the lost money. Sad times.
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Old 01-19-2021, 09:01 AM   #49
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I agree. I think you have to be born with a gene , or at least have a certain type of personality, that sees the issues of renting as a welcome challenge and risk instead of a problem. My Dad was a landlord for a while, and seeing it up close and personal as part of his "maintenance/collection" staff as a child , he was not a good landlord because he was too nice to his tenants and accepted their excuses. I applaud those who can, I could not. ...
+1 My dad had an apartment building for about 10 years and finally threw in the towel and sold it. I think I would be similar and would likely be too sympathetic to tenants tales of woe so I long ago decided that I wasn't interested in rental real estate. While I manage my mom's single tenant commercial property and it goes well I might consider buying that from her at some point.

I wonder what impact this eviction moratoriam will have on the value of residental rental real property, but it make my interest in it even lower than it was before.
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Old 01-19-2021, 09:24 AM   #50
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As a retired commercial real estate appraiser I should also note that income properties are valued on their INCOME (duh huh!). When income is down for any reason it affects the value of the property exponentially. So, in theory at least, landlords face a double whammy. They lose income to non-paying tenants, and then love value on the building because it generates less income.
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Old 01-19-2021, 09:32 AM   #51
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Wasnít there some features of the TCJA that benefitted landlords? Were they temporary? Iíve seen family members experience a wide range of results as landlords. Only one is still active. He doesnít seem to be suffering much more than usual due to pandemic. I think he luckily got rid of several non payers before the moratorium.
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Old 01-19-2021, 10:23 AM   #52
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I have 3 rental properties and my wife has 1. So far all tenants are paid in full. The risk to being a landlord has increased exponentially. With the war on landlords there is a reasonable chance I'll be liquidating in the future.
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Old 01-19-2021, 10:29 AM   #53
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Out of our 27 remaining units we have one tenant that hasn't been paying - of course right off the top that means about 4% less income but no corresponding reduction in expenses. Not really that bad though - one expects a certain amount of vacancy and other tenants are currently more "sticky" - nobody wants to be out apartment hunting in the pandemic, so they tend to stay put longer, which means a lower than normal vacancy rate. Place that do go vacant are slower to fill - painters and cleaners want about 3 days vacancy before entering - and showing/renting is scarier. Don't want to be in an enclosed area passing paper and pens and swapping air. But the scarcity and difficulty means rents are up for vacant units. We opted not to do our normal rent raises last year - we can easily afford it and we rent to a lot of lower income service workers who have a plenty tough enough time right now.
We did sell a 9-unit in a college town toward the end of summer last year. 25% down and carrying the contract at 4.75%. Hope the buyer makes it - he's using a management company and I don't see him putting any upgrade money in but do see a jacked up rent apartment that has been vacant for about 6 months. Rentals take care and seem to reward that care..

Our stock market investments are different - we put money in VTI and sometimes it is really high and we feel great. Sometimes it is selling for way less, like last March, and we have no idea why. Selling or buying is sure easy and fast though, and there is no shortage of people explaining why it is high or low today. They sure are smart. We are divesting of the rentals, slowly. Hard to do; I'm just not wired for the idea that money can do the work instead of me, even though we scoop up bank, contract and credit card bonus spiffs and interest.
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Old 01-19-2021, 12:38 PM   #54
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The thread is timely for me since I recently fell down the real estate flippers rabbit hole on YouTube. Everything is sunshine and roses in those videos. Plus Iíve been trying to convince my big brother to phase out of active management. He has 20+ rentals. The general notion of increased risk certainly fits my observations.
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Old 01-19-2021, 12:58 PM   #55
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Oregon landlord here. Our eviction freeze is a bit more rigorous than the Feds. We are lucky to own all our property, so no mortgages, and mostly are in small apartments as rentals. However. We have a tenant who is working but has paid two half months worth of rent from May through now, so 8 months of missing rent currently. Can't evict her till June 30, and that assumes the Oregon eviction moratorium isn't extended again. Probably will be a pretty good backlog in the court system then, so add some more months..
We do need to keep up the property tax payments, fire and liability insurance, water and sewer bills, outside lighting and maintenance.
Know what though? I wouldn't want to trade places with my tenant, and when I think of the businesses that are forced to close or the employees who are trying to make it on a whole bunch of nothing I feel very very fortunate.
You said sheís workin? Iím confused as to why no rent payments? Gaming the system?
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Old 01-19-2021, 01:02 PM   #56
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I have 3 rental properties and my wife has 1. So far all tenants are paid in full. The risk to being a landlord has increased exponentially. With the war on landlords there is a reasonable chance I'll be liquidating in the future.
As mine vacate they go on the market. Things change much too quickly. One day youíre a good guy for providing housing the next youíre a wicked loathsome individual for making a modest profit from a tenant. If things change this quickly Iíd rather be liquid.
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Old 01-19-2021, 01:09 PM   #57
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Yup. Kind of like support animals getting a pass in Oregon or asserting that your taxes are true and correct. Except the IRS can make you prove your assertion and landlords need to accept statements as true. The vast majority of our tenants do their very best to meet the terms of our contract. This tenant just isn't paying and the state believes most in that position simply can't and that it would be wrong to have them sleeping on the sidewalk vs. having a landlord be a bit lower income.
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Old 01-19-2021, 01:13 PM   #58
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Iíve had lots of rentals in the past. But when the deck is stacked by the government (as it is currently), the risk is extreme, and unmanageable by me. I leave games like that until conditions improve. They get to live free in my real estate, and I get the right to pay loans, taxes, insurance, maintenance, and utilities? No thanks. If I owned rental real estate right now (I donít), I would short-term rental it (think airbnb, vrbo, etc) for no more than a month at a time. In my area, the short term rentals have exploded driving normal rental real estate out of existence. But thatís another debate.
Yes but there are city ordinances against such rentals in a lot of places. Also if condos are in your portfolio many limit leases to a minimum of 1 year.
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Old 01-19-2021, 01:22 PM   #59
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Yup. Kind of like support animals getting a pass in Oregon or asserting that your taxes are true and correct. Except the IRS can make you prove your assertion and landlords need to accept statements as true. The vast majority of our tenants do their very best to meet the terms of our contract. This tenant just isn't paying and the state believes most in that position simply can't and that it would be wrong to have them sleeping on the sidewalk vs. having a landlord be a bit lower income.
I guess they figure 100% of landlord/owners are heartless and 100% of tenants are completely honest//

Just curious would you feel better or more inclined to work with a tenant that was in dire straits. From reading your posts here, I feel like you are a pretty understanding person. But some state governments paints all landlords with the same dirty brush.
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Old 01-19-2021, 01:39 PM   #60
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To be clear on the current eviction moratorium - tenants do have to sign a single page legal document and submit it to the landlord/property manager.

eg
https://www.cdc.gov/coronavirus/2019...ation-form.pdf

They are legally stating they are unable to pay because of covid and have tried everything including applying for any support.

If this is not submitted they are not protected against eviction (but no courts are processing right now). Also if they are later taken to court and found it was untrue then they have the criminal side to deal with as well as eviction and debt potentially.

So things are going to get very ugly at some point.
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