Out-to-Lunch
Thinks s/he gets paid by the post
Well, I will have to disagree with you. I note that James Madison agreed with you that only landowners should be able to vote; however, I sure as heck don't think that would be for the best.
Good post on real estate investing
- Thread starter kevink
- Start date
jkern
Full time employment: Posting here.
By manage I mean everything. Adding any bookkeeping to my normal monthly spreadsheets adds about 1 minute. Completing all repairs and maintenance. Two of the five units didn't require anything last year. One unit required 1 phone call and 1 visit (2 hours total). Two other units required multiple phone calls and no visits (4 hours total). Three units are 135 miles away and I do almost everything remotely. I arrange contractors/vendors to meet the tenant for repairs and maintenance. Even during turnover, my tenants will show the unit for me. I will drive there when necessary or when I think it's worth it. I don't have turnover very often. Two units: never. One unit: once. One unit: Twice. One unit: three times. I've had to paint and carpet only once. I bought newer units that were freshly painted with new carpet. Now it's mostly just touch-up during turn-over.
Some of my rentals I spend ~hour a year on. Good tenants, no repairs, pay on time, no turnover. Largely just checking in with tenant to see if they want to renew lease at x price or go month to month or whatever
Rentals with 1-2 minor repairs I spend about 3-4 hours a year on - no turnover
Rentals with 1-2 larger repairs ~10 hours a year
Rentals with turnover ~10 hours
Renovation project (not often) - ~20-50 hours
Bingo
When you say this, did you ever go back and compare your returns to what would have happened had you invested money in RE?
The problem is that 3.5% in VTI is not residential real estate, which is significantly more stable than office REITs, hotel REITs, healthcare REITs, etc. Two thirds of the real estate value in the US is residential real estate but its less than 2% of VNQ. Additionally, public REITs are significantly over-indexed to huge urban cores.
Easiest way to cut out issues with rentals is to require a strong credit score (700+) and 3x+ income. If you can't get that in the places you are looking at, you aren't looking in the right area IMO.
I'll be somewhat the contrarian on this I guess. OP was asking about experience in using RE to "diversify"...but didn't say diversify what. income streams? portfolio performance (that is, lower standard deviation)? net worth? RE has several aspects that can set it apart & investors have different objectives. So, an particular investment may emphasize one advantage over another; thus meeting objective for some investors, but not others.
I found the article a bit sketchy -- some in vague terms, others in what was left out. I would have structured it differently as well. Personally, I don't consider debt investments to be "real estate" investments. So that strikes some. I also wouldn't go with a private reit or syndication. Considering the lack of liquidity, transparency, control....worst of the options. I wouldn't rule out a business partnership with some investors I personally know; but he seemed to leave that out.
So, that leaves ownership positions that have some level of liquidity, transparency and/or control. I find a lot of misunderstanding about reits -- which means inefficient markets & thus opportunity. I don't follow most of the stated objections in other posts. But, might indicate my objectives/needs are different from poster.
The discussion of "raw land" was odd to me. He talked about flipping, but left out some options that many use -- timberland, farms, etc. Various ways to buy these that don't fall into his buckets.
As a side note, I find it interesting how different investors will evaluate different types of investments using different criteria. What seems hugely important in one discussion is glossed over in another. Recency & familarity bias can be hard to moderate
I found the article a bit sketchy -- some in vague terms, others in what was left out. I would have structured it differently as well. Personally, I don't consider debt investments to be "real estate" investments. So that strikes some. I also wouldn't go with a private reit or syndication. Considering the lack of liquidity, transparency, control....worst of the options. I wouldn't rule out a business partnership with some investors I personally know; but he seemed to leave that out.
So, that leaves ownership positions that have some level of liquidity, transparency and/or control. I find a lot of misunderstanding about reits -- which means inefficient markets & thus opportunity. I don't follow most of the stated objections in other posts. But, might indicate my objectives/needs are different from poster.
The discussion of "raw land" was odd to me. He talked about flipping, but left out some options that many use -- timberland, farms, etc. Various ways to buy these that don't fall into his buckets.
As a side note, I find it interesting how different investors will evaluate different types of investments using different criteria. What seems hugely important in one discussion is glossed over in another. Recency & familarity bias can be hard to moderate
Iggysmom
Dryer sheet aficionado
We own a seven unit property and live in a 4plex. We bought about 10 years ago, and the rentals cover our housing expenses now, plus some extra income. We've found, contrary to some of the posters here, that small, lower cost units are the easiest to manage. Huge demand for them in our HCOL area, and tenants don't turn over much. Costs, however, can be unpredictable, as we always upgrade the units a bit when tenants move out, and major repairs, such as replacing a roof, can hurt cash flow. Overall, good as a long term investment, but unpredictable in the short run. Also, need extra cash on hand just in case.
clifp
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Oct 27, 2006
- Messages
- 7,733
Do you have a property manager? Without a property manager, obviously you have to spend a lot more time. Since my properties are 2,500 to 4,000 miles away, I don't have a choice. But, I'd probably have one even I had local properties, because I'm not at all handy, so fixing anything is out of the question. I will say the first 4 months of being a landlord, were a nightmare and consumed a lot of time since she couldn't find a tenant. I fire my first property manager, the 2nd was better but not good. Stable tenants and a good property manager really cut back on the time. But it is not easy finding a good PM.
Had one, fired 6 months ago. I spent a lot of time trying to research that decision a few years ago. Over time, they got lazy and just didn't see to it that things were maintained. (and yes, I'm paying for each repair and made a choice early on not to argue about those bills) They also placed tenants that didn't meet our agreed standards. If their fees are broken down into some per hour figure, what they charge is close to obscene.
I have one vacant home, I'm heading over to shovel the driveway, swap the central air's filter in the crawlspace, reattach a door threshold, and do a quick job of snaking the shower and sink drains. Yesterday was replacing light bulbs and hanging a vertical blind. Looks like I'll have a new tenant starting moving into it in two days.
With 6 homes, I'm replacing (not me personally) appliances about once every 3 months. That's if I'm including garbage disposals, which are one of those things that eventually fails, and of course failures in a rental situation are far more common than in our residences. In the last 12 months 1 fridge, 2 dryers, and one washing machine have all been replaced.
That's all TMI as I'm venting! I'd be happy to have a Property Manager, but I want to feel like it's good value and they're doing a good job.
ncbill
Thinks s/he gets paid by the post
One the last couple of decades I've found it's hard enough to find an honest property manager for our HOA...i.e. responds promptly, no (obvious) kickbacks from vendors.
So I still find it hard to believe someone owning one or just a few SFRs can have positive cashflow while paying 6+% to a property manager...if you have multi-family buildings maybe paying a property manager works.
Those who don't have positive cash-flow after properly accounting for reserves, are not investing but speculating (on price appreciation) instead.
So I still find it hard to believe someone owning one or just a few SFRs can have positive cashflow while paying 6+% to a property manager...if you have multi-family buildings maybe paying a property manager works.
Those who don't have positive cash-flow after properly accounting for reserves, are not investing but speculating (on price appreciation) instead.
SonofCohoes
Recycles dryer sheets
- Joined
- Sep 5, 2016
- Messages
- 150
We own a few rentals that we bought a few years ago that provide some income. I don’t know how anyone can make money in todays market buying decent properties. Seems like you’re competing against an endless amount of folks that will spend anything to get a place. We bid on a place yesterday 6 hrs after it hit the market. There were 10 offers by 8pm.
MrsHaloFIRE
Full time employment: Posting here.
- Joined
- Jun 18, 2018
- Messages
- 929
Until it becomes landlords are evil, erase rent, yada-yada-yada. The owner of the property should have a couple more rights than a renter that comes and goes with low friction. In some cities you can t evict during covid, can't evict during the school year for anyone with kids, is a teacher/cafeteria worker/bus driver and on and on until there are only about 45 days annually you can evict for nonpayment. Everyone cant live free. Someone has to pay. And the city councils set these rules. Check out Seattle's eviction rules. Started march 2020 and still marches on. https://www.king5.com/article/news/...rium/281-0127095a-5c40-46c4-81f2-bc0012249167
Break break
We own 1 rental, not intentionally. We get stiffed on rent maybe 1 month every couple years. We get prob 2 offers a week from an investor wanting to buy it for a fraction of its value. We are lucky to not get stiffed more than we do. I finally got extremely firm with the rental MGMT company (best in town and still not amazing) about what i want in rent. They won't change their credit score or income requirements for my property but atleast this lease they are pricing how I want it priced. I think they want it cheap so its easy to qualify and easy to fill so less work for them. Higher the rent, fewer prospective tenants. I dont mind if it takes 2 weeks longer to rent. It will rent
Last edited:
Out-to-Lunch
Thinks s/he gets paid by the post
I don't disagree. Nothing in my posts should be miscontrued as advocating for a tyranny of the majority, nor for abrogating the rights of property owners. The rights of the majority and the minority must be taken into account.
ExFlyBoy5
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Invested as in how? Holding VTI means we have RE holdings. We also own a plot of vacant land adjacent to the home. So, in regards to being diversified, we have plenty of $$$ invested in RE.
I also know that had we taken a mortgage on our current home (purchased late 2018 for cash) and parked that cash in VTI the returns would have far exceeded the appreciation of the home.
Again, my DW is in the RE rental business. Has been doing it for a long time and IMHO she is an expert in that field. She has shared plenty of stories where even high end properties (with "fantastic renters!!!") have had significant issues/damage. No thanks.
Last edited:
Thanks for responding. When I asked the question I wasn't trying to be specific about how you or anybody might have invested in RE. I don't know what your asset allocation is and there isn't any need for you to say. I was just reacting to your certainty that you had regarding stock market investments vs RE. If another poster here is correct, VTI is 3% RE so that's not very much.
And I'm with you 100% on the downsides of rental RE - that mainly being tenants who damage things. I'm living that reality but consider it as just part of the business. (Obviously I do the things to minimize that, but it still happens)
ExFlyBoy5
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Oh, no worries. The 3% is good for DW and me as this is in addition to our land and our residence. Of course, we don't really count the primary home as an investment per se but we do consider it when figuring out where to allocate our money. It's kinda like my military pension...there is no lump sum value, but it's still used in calculations.
We have my M-I-L in our home currently. She has parkinsons, dementia, feeding tube and bad arthritis -- requires a lot of care, which we are handling with some care takers supplementing. We've priced nursing homes and looking for creative solutions due to the high cost.
Our friends next door are moving and selling their house. We have expressed interest and are thinking we could get nursing students to live there rent free and handle some of the basic care for MIL (bathroom mostly) and we could be next door and handle feeding tube and visits. It would give us some major relief.
One day, post-MIL, we could then rent the house...(good rental area) - having two houses next to each other seems like a major +
Again, most real estate folks don't have nearly the restrictions I do for residential. Until the pandemic, apartments were frequently running one month free, no or very limited security deposit and anyone over 580 credit score was A-OK, and 50%+ income going to rent. I've always required 1 month+ security deposit, 700+ credit score and a minimum 3x income (and usually target 5x+). I have a lot of real estate experience both personally (owned ~15 rentals over the last 12 years, still own 9) and professionally (nationwide extended stay hotel company, ~200 store grocery retail where I did all the underwriting for new sites) plus took several RE classes in my MBA during electives. The requirements I have don't guarantee you'll never have any issues, but it reduces it massively (similar to the pareto rule) plus you have a fairly good size security deposit to cover a lot of the issues in the event they do have damages. (lastly, stick to investing in non-crazy tenant rule states)
And again, your VTI is only 3.5% real estate, of which less than 2% of that is residential real estate. And Blackstone is buying one of the few public apartment REITs (~40% premium) taking even less residential off the public markets, which once again highlights the private markets (98% of US Real estate value) are a much, much better representation for RE than the public markets (~2%).
https://therealdeal.com/2022/02/16/blackstone-buying-multifamily-reit-in-5-8b-deal/
Last edited:
Similar threads
