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Posted: 2/13/2017 3:06:28 PM EDT
[#1]
Be interested in the video
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Posted: 2/13/2017 4:42:33 PM EDT
[#2]
Make sure you go over of what not to do.
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Posted: 2/13/2017 5:23:27 PM EDT
[#3]
How to deal with renters that abuse the property.
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Posted: 2/13/2017 5:26:14 PM EDT
[#4]
What percentage of rent should be assumed to be used for expenses.
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Posted: 2/13/2017 8:25:53 PM EDT
[#5]
Curious how many years it took you to get to 50. We're just starting this year and already bought 2. We'll buy a couple more when they pop up later in the year. We pretty much only look at foreclosures or short sales, that way they start off with decent cash flow.
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Posted: 2/13/2017 8:35:45 PM EDT
[#6]
1. What items are critical to include in the lease agreement and how you handle the initial walk-through/documentation with the tenant before handing over the keys.
2. Property management: on-sight staff, self-managed, or other third party? 3. What is a deal-breaker when looking at potential properties to purchase/renovate (ie: old roof, foundation issues, mold, tec...)? |
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Posted: 2/14/2017 4:20:44 AM EDT
[#7]
Do you pay cash vs getting a loan?
How do you split up your rent money going back into the business vs what you pocket? How to take advantage of depreciation? |
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Posted: 2/14/2017 8:57:39 AM EDT
[#8]
Quote HistoryQuoted:
Curious how many years it took you to get to 50. We're just starting this year and already bought 2. We'll buy a couple more when they pop up later in the year. We pretty much only look at foreclosures or short sales, that way they start off with decent cash flow. For both you and the OP: How do you select properties? I assume they need to be cheap (foreclosures or short sales like you say), yet still in a decent part of town to command a decent rent and not have scumbag tenants. Do you look for properties that are ready to rent immediately, or ones that need a good cleaning and a couple improvements? How do you handle liability for the properties? Does each property have its own LLC, are they under one business, or is there some other structure you use? How did you get started and grow quickly? Did you put in a lot of cash up front? At what point do you cash out equity in one property to buy the next one? What percentage of the rent do you set aside each month for maintenance? How do you screen tenants? Do you have a lawyer on retainer to handle lawsuits, evictions, lease agreements, and anything else that comes up? |
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Posted: 2/14/2017 9:07:50 AM EDT
[#9]
Lots of good info here... Tagged
What are some easy mistakes to avoid? |
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Posted: 2/14/2017 11:06:32 AM EDT
[#10]
Quote HistoryQuoted:
For both you and the OP: How do you select properties? I assume they need to be cheap (foreclosures or short sales like you say), yet still in a decent part of town to command a decent rent and not have scumbag tenants. Do you look for properties that are ready to rent immediately, or ones that need a good cleaning and a couple improvements? How do you handle liability for the properties? Does each property have its own LLC, are they under one business, or is there some other structure you use? How did you get started and grow quickly? Did you put in a lot of cash up front? At what point do you cash out equity in one property to buy the next one? What percentage of the rent do you set aside each month for maintenance? How do you screen tenants? Do you have a lawyer on retainer to handle lawsuits, evictions, lease agreements, and anything else that comes up? I'll give my input, I have 24 but do things differently than OP I think. I look for properties that have the return I want, mostly multi family units. Duplex, 4plex, etc. Don't need to be cheap, the market sets the rent. A cheap unit may cost half as much but will have half the rents. By going cheap i've got the deal with double the humans for the same revenue. That's a time suck for me. I don't buy properties that need fixed up most of the time. I'm a contractor, so to me, rentals and construction are 2 separate things. If I want to make money in construction, there are more profitable ways than rehabbing rentals. I always hear "well you better do all the repairs yourself or it's not worth it". Well, if repairs are the only way it's worth it, then start a handyman business. Less risk and obviously the same money for those folks. I put a lot of cash and my house up to get started. Invest my extra income every month and use my equity/profit as I get it. I use any equity the bank will let me use. I'm a fan of leverage or else the return on cash (in my area) is too low and i'd be better off buying some mutual funds. Maintenance and upgrades is 20% for me. Credit and background check. I have a lawyer that I use, I don't give him a retainer unless I have a case for him to handle. No one sits on my money. The whole "legal retainer" thing is against every business principle and cash flow management technique that I believe in. It KILLS me to give a lawyer a blank check. I see why they do it but I pay my bills. I shouldn't have to pay upfront for a non specific amount. Cashflow and debt management is what separates the profitable rental investors from the average joes with horror stories about how they couldn't manage them and lost money. |
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Posted: 2/14/2017 5:09:06 PM EDT
[#11]
Im actually looking at getting into rental properties. The questions I have are.
1) Should you take out a loan or save up and buy the place in full with cash. 2) Should I look at trailers, small homes, larger homes, etc... 3) Should I deal with renters directly or hire a company to handle the day to day upkeep, collecting of rent, etc.. 4) Is it possible to manage one or more rentals while working a full time 40+ hour a week job? 5) How much profit can you make on a single small rental? |
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Posted: 2/14/2017 6:11:01 PM EDT
[#12]
Quote HistoryQuoted:
Im actually looking at getting into rental properties. The questions I have are. 1) Should you take out a loan or save up and buy the place in full with cash. 2) Should I look at trailers, small homes, larger homes, etc... 3) Should I deal with renters directly or hire a company to handle the day to day upkeep, collecting of rent, etc.. 4) Is it possible to manage one or more rentals while working a full time 40+ hour a week job? 5) How much profit can you make on a single small rental? 1-3 All of these things should be addressed by your business plan, what does your plan show based on your market? If you can't assemble one then you should keep your job and save money in a retirement account or other passive investment. 4. An average renter will require .5 to 2 manhours of labor per month to manage. As you scale that trends closer to .5. Figure from there how many you feel you can manage. I know people that struggle to manage 3 on top of their job, all the way to an exceptional one that manages 180 on top of his job. 5. Refer to your business plan. We would have no way of knowing. |
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Posted: 2/14/2017 6:14:21 PM EDT
[#13]
Quote HistoryQuoted:
For both you and the OP: How do you select properties? I assume they need to be cheap (foreclosures or short sales like you say), yet still in a decent part of town to command a decent rent and not have scumbag tenants. Do you look for properties that are ready to rent immediately, or ones that need a good cleaning and a couple improvements? How do you handle liability for the properties? Does each property have its own LLC, are they under one business, or is there some other structure you use? How did you get started and grow quickly? Did you put in a lot of cash up front? At what point do you cash out equity in one property to buy the next one? What percentage of the rent do you set aside each month for maintenance? How do you screen tenants? Do you have a lawyer on retainer to handle lawsuits, evictions, lease agreements, and anything else that comes up? I'm just getting started with the rentals, so can't answer some of those. I was a contractor for 10 years, then quit that to start flipping. Rentals are the next logical step. Getting started was cash, and a heloc. Also started working with a bank, and now am at a point I can buy any property that pops up. Property selection for rentals are price and return vs all the other crap (is it in a crappy location, am I going to have to deal with lowlifes, does it need work, ect). It doesn't matter to me if it needs a ton of work, or if it is move in ready, as long as the numbers work at the end. Since I flip now, rehabbing a rental is no big deal. LLC for flips, another LLC for rentals. I make my money on flips so I plan on not even touching the rental income. I'm just going to put any extras at the end of the year towards one mortgage, or use it to buy another. I bought the first one in cash just to get a jumpstart, but from now on, will just put down 25%. I'm going to run credit and background check, and handle court stuff on my own. I know a little about the process from being a contractor, the rest I will learn. I'm a fast learner when some shithead is living in my place without paying. I also try to buy properties that will get me immediate equity (properties that are underpriced). That way, if all I'm getting at that property are shit tenants, I can just dump it and still make money. I only have 2. The one bought with cash was 75K, needs 10k in repairs, and ARV is about 125K. Rent is 1100-1200. The other one is a duplex with tenants already. Bought 85k (20% down), needs nothing right now, worth 110k or so, and total rent is 1300. I have no idea if those numbers are good or bad though. Once i get to 24 or 52 rentals, i expect some of that to change though. |
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Posted: 2/14/2017 6:44:32 PM EDT
[#14]
Quote HistoryQuoted:
Curious how many years it took you to get to 50. We're just starting this year and already bought 2. We'll buy a couple more when they pop up later in the year. We pretty much only look at foreclosures or short sales, that way they start off with decent cash flow. Since July 2013 |
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Posted: 2/14/2017 6:57:10 PM EDT
[#15]
Quote HistoryQuoted:
Since July 2013 Thats fast! |
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Posted: 2/14/2017 7:03:21 PM EDT
[#16]
Quote HistoryQuoted:
Be interested in the video +1 I'm interested in the entire process. I'd like to get in to owning some rentals. |
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Posted: 2/14/2017 8:29:12 PM EDT
[#17]
Quote HistoryQuoted:
Thats fast! I aim to impress! |
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Posted: 2/15/2017 3:13:42 AM EDT
[#18]
Are you paying all out of pocket or taking out mortgage? Stupid question I'm sure but I've pondered doing this on much smaller scale myself...just don't have the up front money.
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Posted: 2/16/2017 12:26:40 AM EDT
[#19]
Interested.
OP, in your opinion is it possible to buy and rent homes or other properties without being hands on? I have no interest in fixing toilets or dealing with whiny tenets but I do have money and could put up capital for properties. Would an end to end management contract eat up too much of the profits to make it worth while? I am willing to give up a sizeable/reasonable amount of my potential income in exchange for a situation where I buy a property, hand the keys to a competent manager and just let it turn into passive income. Is this possible or realistic? I've been wanting to diversify and add property to my wealth portfolio but my time is valuable and I don't want to get caught up in day to day bullshit. |
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Posted: 2/16/2017 2:36:30 AM EDT
[#20]
Quote HistoryQuoted:
Interested. OP, in your opinion is it possible to buy and rent homes or other properties without being hands on? I have no interest in fixing toilets or dealing with whiny tenets but I do have money and could put up capital for properties. Would an end to end management contract eat up too much of the profits to make it worth while? I am willing to give up a sizeable/reasonable amount of my potential income in exchange for a situation where I buy a property, hand the keys to a competent manager and just let it turn into passive income. Is this possible or realistic? I've been wanting to diversify and add property to my wealth portfolio but my time is valuable and I don't want to get caught up in day to day bullshit. Thats impossible to answer without numbers and knowing the market in your area. What do the numbers show? Your question is like asking "will my business make money" and no giving any other details. |
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Posted: 2/16/2017 3:19:19 AM EDT
[#21]
Finding tenants, showing apartments, putting together contracts and doing inspections is the hard part.
Fixing toilets and paying mortgages is the easy part. |
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Posted: 2/16/2017 8:39:36 AM EDT
[#22]
Quote HistoryQuoted:
Thats impossible to answer without numbers and knowing the market in your area. What do the numbers show? Your question is like asking "will my business make money" and no giving any other details. Quote HistoryQuoted:
Quoted:
Interested. OP, in your opinion is it possible to buy and rent homes or other properties without being hands on? I have no interest in fixing toilets or dealing with whiny tenets but I do have money and could put up capital for properties. Would an end to end management contract eat up too much of the profits to make it worth while? I am willing to give up a sizeable/reasonable amount of my potential income in exchange for a situation where I buy a property, hand the keys to a competent manager and just let it turn into passive income. Is this possible or realistic? I've been wanting to diversify and add property to my wealth portfolio but my time is valuable and I don't want to get caught up in day to day bullshit. Thats impossible to answer without numbers and knowing the market in your area. What do the numbers show? Your question is like asking "will my business make money" and no giving any other details. Like Fella said, we have no idea where you are in NE and what that market is like. It also depends on what you buy. If you buy at market price, your profit margin will be slimmer than if you buy foreclosures and short sales that are in good shape. That said, the general average seems to be about 10% of the monthly rent for a property management company to handle all of the tenant placement/screening, paperwork, and management. They'll charge you an extra fee every time they have to send a maintenance technician as maintenance is not part of the 10% management fee. |
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Posted: 2/16/2017 10:54:34 AM EDT
[#23]
My first unit was a duplex in a B- to C grade area of town.
My mis-calculation, was that 99% of the people that inquire, are going through an eviction, or have had one in the past three years. I paid $63k for the place, $24K in renovations, and now trying to find decent tenants. What did I learn? Believe no one, not the seller, not the agents. Do your own due diligence. Just because an ad says each side rents for $650, doesn't mean the people have been paying for the last four months. When you call their current landlords to see if they are good tenants, don't necessarily believe what they say. There's a good chance they're saying they are good tenants just to get them the hell out of their property. |
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Posted: 2/16/2017 5:39:54 PM EDT
[#24]
Updated the first post with the video I just posted , #1 question response was "Where are you finding cheap houses" So I've posted pics/info on 49 of my rental units.
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Posted: 2/16/2017 5:47:09 PM EDT
[#25]
This is great, can't wait to watch them tonight. If I remember, you're in Northern OH, I'm down in Central.
My only complaint so far, get a little nicer camera, and a cheap lapel mic. |
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Posted: 2/16/2017 8:24:32 PM EDT
[#26]
So it seems after all these years i'll finally have to get on facebook so people can send me deals.
Its crazy to me how cheap some of those houses were. |
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Posted: 2/16/2017 9:31:32 PM EDT
[#27]
Quote HistoryQuoted:
This is great, can't wait to watch them tonight. If I remember, you're in Northern OH, I'm down in Central. My only complaint so far, get a little nicer camera, and a cheap lapel mic. Just a few miles south of Columbus. |
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Posted: 2/16/2017 10:54:36 PM EDT
[#28]
Just finished watching.
I think you're missing a bio video. Who are you, why did you get into this, how many people told you that you're an idiot for buying these "dumps." |
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Posted: 2/17/2017 9:12:42 AM EDT
[#29]
Quote HistoryQuoted:
Updated the first post with the video I just posted , #1 question response was "Where are you finding cheap houses" So I've posted pics/info on 49 of my rental units. So pretty much every one of those looked like a dump, but I guess that's how you make money in rentals. After watching that video, I'm guessing the average price of your first 50 homes is like $20k. That's a million dollars in value. How did you get that rolling? Did you start with a large sum of money, a great relationship with a bank, loans, or something else? The rate at which you're buying houses is faster than you can cash equity out of the current properties. I'm curious how you're able to buy so many so quick. |
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Posted: 2/17/2017 11:00:12 AM EDT
[#30]
Quote HistoryQuoted:
So pretty much every one of those looked like a dump, but I guess that's how you make money in rentals. After watching that video, I'm guessing the average price of your first 50 homes is like $20k. That's a million dollars in value. How did you get that rolling? Did you start with a large sum of money, a great relationship with a bank, loans, or something else? The rate at which you're buying houses is faster than you can cash equity out of the current properties. I'm curious how you're able to buy so many so quick. Private money, instead of putting $$$ into buying a house and refinancing it, which looking back would have been a terrible idea, I hired a lawyer instead to help me learn to write loans/mortgages directly with private investors and have them loan me money. The process to buy a house with a bank is convoluted, the process on private investment is : Pick up the phone, tell someone how much I need and why they should give it to me, and wait for it to hit my account. I pay much higher interest rates, but if local banks want 4% and will loan $100k/yr , or I could get private money at say 10% and I could get $5m/yr of it, all the while buying houses that earn 20%, I'd kind of be stupid not to at least try and buy em. My median purchase I think is in the neighborhood of $35k, average rehab of $7k or so, average appraised market value (By a 3rd party firm, not the county or whatnot) I think averages on $80k or so for my properties. So, I've been able to double my equity in them all the while collecting some great cashflow. |
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Posted: 2/17/2017 11:15:06 AM EDT
[#31]
Quote HistoryQuoted:
Private money, instead of putting $$ into buying a house and refinancing it, which looking back would have been a terrible idea, I hired a lawyer instead to help me learn to write loans/mortgages directly with private investors and have them loan me money. The process to buy a house with a bank is convoluted, the process on private investment is : Pick up the phone, tell someone how much I need and why they should give it to me, and wait for it to hit my account. I pay much higher interest rates, but if local banks want 4% and will loan $100k/yr , or I could get private money at say 10% and I could get $5m/yr of it, all the while buying houses that earn 20%, I'd kind of be stupid not to at least try and buy em. My median purchase I think is in the neighborhood of $35k, average rehab of $7k or so, average appraised market value (By a 3rd party firm, not the county or whatnot) I think averages on $80k or so for my properties. So, I've been able to double my equity in them all the while collecting some great cashflow. How did you find private investors and what are the typical terms of the loan? |
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Posted: 2/17/2017 5:03:11 PM EDT
[#32]
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How did you find private investors and what are the typical terms of the loan? How to find them is a long answer. Terms are usually 8%-10% with some performance bonuses to to the investor based on some things that can happen over the process of the property. |
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Posted: 2/17/2017 5:06:02 PM EDT
[#33]
Quote HistoryQuoted:
How to find them is a long answer. Terms are usually 8%-10% with some performance bonuses to to the investor based on some things that can happen over the process of the property. What about the length of the loan? |
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Posted: 2/17/2017 5:15:08 PM EDT
[#34]
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What about the length of the loan? For me it's 3 year minimum and if I refinance them out I'm required to pay whatever their loss would be. The goal is to use them for a while then refinance out once i can access commercial rates + portfolio products of 4%-5%, once I do that my profitability will be sky high. The big thing I've offered partners is backside equity even after a refinance to keep a relationship open with them post-refinance. Maybe I'm doing this all the wrong way, but once you secure private money and develop a good relationship with investors/partners it's significantly nice compared to dealing with banks. I've had banking lenders lie to me multiple times about what they offered, terms, approvals and whatnot. So far investors haven't lied to me a single time, never misrepresented themselves and been very, very easy to work with. That comes at the expense of having to bring some major experience to the table to make them comfortable to partner with me on buying stuff. |
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Posted: 2/18/2017 2:14:43 AM EDT
[#35]
Good videos. I guess this is what you do full time?
I have three rental houses I just fool with in addition to my full time job and I am thinking kind of like Fella mentioned that the less human interaction the better. Theoretically five 50k houses and one 250k should give you similar rent per month with the same amount of investment. Having 5 houses diversifies the risk vs one but it is hard to put a price on your time. My rent houses average about 60k in value. Instead of buying a fourth 60k house I am considering selling the three I have, adding 60k to it and buying one 240k rent house. I would only have one person to deal with instead of four. Also I know it is stereotypical and not 100% correct all the time but in my experience the cheaper the rent the more likely you will have issues with nonpayment. |
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Posted: 2/18/2017 9:46:21 AM EDT
[#36]
Quote HistoryQuoted:
Good videos. I guess this is what you do full time? I have three rental houses I just fool with in addition to my full time job and I am thinking kind of like Fella mentioned that the less human interaction the better. Theoretically five 50k houses and one 250k should give you similar rent per month with the same amount of investment. Having 5 houses diversifies the risk vs one but it is hard to put a price on your time. My rent houses average about 60k in value. Instead of buying a fourth 60k house I am considering selling the three I have, adding 60k to it and buying one 240k rent house. I would only have one person to deal with instead of four. Also I know it is stereotypical and not 100% correct all the time but in my experience the cheaper the rent the more likely you will have issues with nonpayment. I've been curious about this, as I've considered renting my current home when we move. How difficult is it to find renters at higher rent cost? Finding a renter to pay $600-800/month should be pretty easy but I would expect it would be more difficult to find someone to pay $1600-2000/month. Do people rent at those higher rents, it seems they could just buy a house if they wanted. |
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Posted: 2/18/2017 10:09:17 AM EDT
[#37]
I have a few rentals myself and am always interested in learning new ways to do business.
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Posted: 2/18/2017 10:24:39 AM EDT
[#38]
Quote HistoryQuoted:
I've been curious about this, as I've considered renting my current home when we move. How difficult is it to find renters at higher rent cost? Finding a renter to pay $600-800/month should be pretty easy but I would expect it would be more difficult to find someone to pay $1600-2000/month. Do people rent at those higher rents, it seems they could just buy a house if they wanted. I rented my previous house for 1750, which was the top price point for the area. It didnt take long to find a tenant at all. They have been there for 7 yrs. I would think the majority of people renting at that price/ type of house, cant get a mortgage. Previous foreclosure, terrible credit, no money to put down, ect. |
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Posted: 2/18/2017 10:31:06 AM EDT
[#39]
Quote HistoryQuoted:
I rented my previous house for 1750, which was the top price point for the area. It didnt take long to find a tenant at all. They have been there for 7 yrs. I would think the majority of people renting at that price/ type of house, cant get a mortgage. Previous foreclosure, terrible credit, no money to put down, ect. If you screen with a background/credit check wouldn't that be a red flag to not have them as a renter? |
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Posted: 2/18/2017 10:48:50 AM EDT
[#40]
Quote HistoryQuoted:
I rented my previous house for 1750, which was the top price point for the area. It didnt take long to find a tenant at all. They have been there for 7 yrs. I would think the majority of people renting at that price/ type of house, cant get a mortgage. Previous foreclosure, terrible credit, no money to put down, ect. Don't assume that everyone wants the same things. We've got tenants that make $10,000/mo in passive income and are paying $2,500/mo of that in rent for a luxury house on 22 acres. They don't want to have to lift a finger for maintenance. Which is fine. |
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Posted: 2/18/2017 10:49:03 AM EDT
[#41]
Quote HistoryQuoted:
Good videos. I guess this is what you do full time? I have three rental houses I just fool with in addition to my full time job and I am thinking kind of like Fella mentioned that the less human interaction the better. Theoretically five 50k houses and one 250k should give you similar rent per month with the same amount of investment. Having 5 houses diversifies the risk vs one but it is hard to put a price on your time. My rent houses average about 60k in value. Instead of buying a fourth 60k house I am considering selling the three I have, adding 60k to it and buying one 240k rent house. I would only have one person to deal with instead of four. Also I know it is stereotypical and not 100% correct all the time but in my experience the cheaper the rent the more likely you will have issues with nonpayment. Keep in mind you still want diversification. No way I would sell all of 3 investments to buy 1. That's asking for bankruptcy. One of the great things about having more units is the renovation and vacancy costs don't hit you any more. Every time I have vacancy or remodeling, it doesn't hurt cash flow at all because I have others paying out every month. If you have one home and it goes vacant, you are cash flow negative until it rents. Not a place I want to be. For me, to lessen human interaction, I plan on selling some duplexes and buying more 4 and 6 plexes or small apt complexes so I can have an onsite manager. Just my 2 cents. Think of it like stocks, you wouldn't sell all of your stocks to short apple on margin and hope it falls big before they make a margin call. Sure, you might make it big but you might be telling your wife that it's bologna and off brand cereal for the next 2 years while you work off the losses. Little Johnny is going to have crooked teeth bc daddy didn't diversify. |
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Posted: 2/18/2017 11:08:31 AM EDT
[#42]
Cash flow isn't an issue for me. We only buy houses with cash. No payments to worry about. A house sitting empty for a while doesn't bother me too much as long as it is not excessive.
I get the stock comparison and diversification aspect but wether you own one stock or one hundred it really isn't any more work. Every rental house you have takes time. For me that becomes a problem as I often work 80-90 hour weeks at my job. As to renting higher end houses I asked a realtor friend about it and there is a lot of demand for them. Depending on where you live there may be a lot of higher income people that come and go. We have a University and major Hospitals here. Professional type people are often sent here for 2-3 years and then transferred. It does not make sense for them to buy no longer than they will be here. Also you would be surprised there are plenty of people with high incomes that are horrible at money management. Just because someone could afford a $2,500 a month mortgage doesn't mean they can save up enough for a down payment or haver the credit to get a mortgage. |
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Posted: 2/18/2017 11:22:24 AM EDT
[#43]
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If you screen with a background/credit check wouldn't that be a red flag to not have them as a renter? That was my first one, and i used a realtor to find them. They were foreclosed on, but there were other things for me to consider. 5 person family, with kids in the local school, so they needed to be in the area. Had pets, which nobody would allow. I got lucky, they are great, and hopefully will stay forever. Sometimes you just need to look at the entire story, and not always eliminate on one issue. This was after the crash, when lots of people ran unto trouble. |
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Posted: 2/18/2017 11:31:01 AM EDT
[#44]
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Cash flow isn't an issue for me. We only buy houses with cash. No payments to worry about. A house sitting empty for a while doesn't bother me too much as long as it is not excessive. Vacancy is the enemy and it must be avoided. And unless your strategy is focused on short term net worth paying cash for houses and not refinancing them is bizarre. |
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Posted: 2/18/2017 12:45:42 PM EDT
[#45]
Quote HistoryQuoted:
I've been curious about this, as I've considered renting my current home when we move. How difficult is it to find renters at higher rent cost? Finding a renter to pay $600-800/month should be pretty easy but I would expect it would be more difficult to find someone to pay $1600-2000/month. Do people rent at those higher rents, it seems they could just buy a house if they wanted. Cant speak for everyone but my highest rent house (#1 in the video, $60k into it, $110k market value and $1,000 a month) has by far been my most consistent money maker. No headaches and I can sell it at a great price if I ever so desire. |
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Posted: 2/18/2017 12:56:56 PM EDT
[#46]
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Cant speak for everyone but my highest rent house (#1 in the video, $60k into it, $110k market value and $1,000 a month) has by far been my most consistent money maker. No headaches and I can sell it at a great price if I ever so desire. We are renting nine houses and eight apartments. The houses go from $1100 to $2500. The apartments are at $660. The apartments print money. The houses break even. |
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Posted: 2/18/2017 1:18:47 PM EDT
[#47]
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Vacancy is the enemy and it must be avoided. And unless your strategy is focused on short term net worth paying cash for houses and not refinancing them is bizarre. Again I am no expert I only have 3 houses but have been doing this about 9 years. I have found rushing into selecting a subpar tenant will cost you way more in the long run than a place sitting empty for a month or two while you wait for the right one. If you are leveraged to the hilt you tend to freak out when you are having to make payments on place and not taking in rent on it so you are likely to rent to the first person with $$ because you are worried about cash flow. I know I am not making money when the places sit empty but I would rather wait until I find the right tenant than rush into something and having the houses paid for reduces the stress to do that. I hate debt and don't believe in it personally or for my businesses. Many people do and are successful. I used to try and convince people to see things my way but I don't want to waste my time. It is ultimately a personal decision and neither is right or wrong and it really boils down to risk tolerance. I know I could probably own 10 houses with debt using the equity I have in my paid for houses and if everything went right I could make a lot more money but if things went wrong I could go bankrupt. For me the want of the extra gain isn't worth the risk. For others it is. |
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Posted: 2/18/2017 2:40:15 PM EDT
[#48]
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Vacancy is the enemy and it must be avoided. And unless your strategy is focused on short term net worth paying cash for houses and not refinancing them is bizarre. Quote HistoryQuoted:
Quoted:
Cash flow isn't an issue for me. We only buy houses with cash. No payments to worry about. A house sitting empty for a while doesn't bother me too much as long as it is not excessive. Vacancy is the enemy and it must be avoided. And unless your strategy is focused on short term net worth paying cash for houses and not refinancing them is bizarre. I don't even see a point if you manage them like that. It is a decent tax shelter but i'd just as soon buy mutual funds and forget it. I'm sure there might be one but i've never seen a market where you can pay cash and come out ahead vs just putting the money in a mutual fund. I guess I could see it if you were older and wanted to do it as a way to avoid taxes and have enough monthly money to live on without market fluctuations like a mutual fund. I don't care how much you earn, how much you have. Want to scale and make money, vacancy will bankrupt you. Period. Everything has a cost. I make a lot of money and I can't float a business model like that nor would I want to. |
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Posted: 2/18/2017 11:09:44 PM EDT
[#49]
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I don't even see a point if you manage them like that. It is a decent tax shelter but i'd just as soon buy mutual funds and forget it. I'm sure there might be one but i've never seen a market where you can pay cash and come out ahead vs just putting the money in a mutual fund. I guess I could see it if you were older and wanted to do it as a way to avoid taxes and have enough monthly money to live on without market fluctuations like a mutual fund. I don't care how much you earn, how much you have. Want to scale and make money, vacancy will bankrupt you. Period. Everything has a cost. I make a lot of money and I can't float a business model like that nor would I want to. If your net ROI on a rental is ~35% , 3 months of vacancy (And I know people that budget for it) knocks you down to 26.25% cash ROI. Have someone do all the work for you, and I think alot of people would settle for +25% on a return. Not saying that's what he gets, but some people have insane numbers. Take for instance property #3 in that video. I got it for $69k and put $3k in it. It brings in $1,550/mo of income, I have almost no vacancy to it, only had 1.5 months worth of total vacancy in 3 years while we spent time rehabbing 2 units after move-outs. My cost basis is about 25% of gross rents, debt service since it's actually leveraged ends up at me getting around $800/mo after it's all said and done and I've met my internal rehab escrow for the month. Now, pre-debt income is in the neighborhood of $1200/mo ($400 in debt per month) - $1,200 * 12mo = $14,400 / $72k invested = 20% net ROI in my pocket each month, add on the fact I refinanced it at around $60k, and my ROI is actually $9,600 cash return on the remaining $12,000 I put into the effective down payment + rehab, that's a 90% ROI. Now, is 90% crazy? Yes. Now consider this - The guy I got it off of, who gave up on being a landlord bought this exact same 3 unit deal back in 2009 after it was foreclosed on for $32,000. He put MAYBE $15k in it at best. If he had my business model, that would put him at $14.4k cash return on only $47k invested, 30.6% cash return on a property in a very solid neighborhood with good growth. And the thing is, going back on a historical search on the MLS from 2009-2012, there's easily 100 properties in my local neighborhood that sold that would have made awesome numbers too. |
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Posted: 2/18/2017 11:28:10 PM EDT
[#50]
Those numbers are not achievable in my area. I'm amazed.
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