Quote:
Originally Posted by Pete
I only have one problem with this. P+I on 80K (at 6.5% ?) is only 500 per month. What is wrong with a person who can buy for 500 per month and is paying you a 1000 in rent instead?
Probably not the kind of people I want to deal with.
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There are also taxes, maintenance and vacancies. These are the people you deal with every day. They live in all the apartments and many of the houses around you. There are many reasons people don't or can't buy a house. We have a new plant being built here creating a demand for upper end rentals to house the managers for two year stints; they don't want to buy. I have a 10+ year renter who is a bank manager (single lady), another who manages a Sports equipment retail store.
Quote:
Originally Posted by Pete
The only other problem for me is that I live in Calif, and there is no such scenario here.
If I did like owning real estate I would borrow out of my home and put the money in the Vanguard Reit which has a 12 year record of over 13%. If I borrowed 100k out of my house at 6.5% my payment would be 632. My return in Vanguard would be 1167, for a nice monthly profit of 535. Did I mention these REIT funds have nice dividends too?
The best part is no renter headaches and I can be out of the investment this afternoon. If I was smart enough to average into the REIT over the years in my Roth there would be no taxes on the profit, and I could write off the interest on the loan.
Capital gains and recup of depreciation stuck me good on the rentals I sold. Not to mention points, the real estate agent, etc.
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R/E is local, but the ratios will still be close regardless of location. If price, term and rental rates aren't favorable don't buy. Properties can be exchanged to avoid capital gains.
To overcome and offset most of the the costs of buying and selling my wife became a part time agent and ended up going full time. She is now making many times what she had been in working for someone else. Sales are still fine in the South (not Florida). Although prices went a little high, we never had a bubble.
I also own REITS, stocks and funds but they will never make the kind of money I've made owning property.
As others have pointed out, there is no one best way for everyone, but people should understand the long term potential from owning rentals.