Author Topic: Using the "buy one, rent one" system  (Read 4823 times)

S0VERE1GN

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Using the "buy one, rent one" system
« on: May 05, 2014, 06:26:25 AM »
Good morning all,

So Ive just recently finished this book: http://www.amazon.com/Building-Wealth-One-House-Time/dp/0071448357

per this forum's recommendation, and I was wondering if anyone else has actually done the buy one, rent one house per year system as he proposes.

My mother is getting ready to regular retirement with little assets and I'm planning on buying her a home  to rent from me for a small profit as my "first" property next year (2015) if this goes well and it helps our tax situation I'll probably buy another in a different demographic.

anyone else done this? how has it worked? has it gotten you out of your job yearly/gotten you closer to early retirement?

arebelspy

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Re: Using the "buy one, rent one" system
« Reply #1 on: May 05, 2014, 07:08:21 AM »
That pace is too slow for me, but the basic idea of buying houses and renting them is my primary vehicle to FI, yes.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
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S0VERE1GN

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Re: Using the "buy one, rent one" system
« Reply #2 on: May 05, 2014, 07:11:23 AM »
What the goal for you? sell off properties to finance a portfolio of stocks, or keep them and work the income stream forever? I'ts pretty flexible either way, but is there a specific one you prefer? any reason why?

arebelspy

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Re: Using the "buy one, rent one" system
« Reply #3 on: May 05, 2014, 07:14:24 AM »
What the goal for you? sell off properties to finance a portfolio of stocks, or keep them and work the income stream forever? I'ts pretty flexible either way, but is there a specific one you prefer? any reason why?

Yes, any and all of those.  It's good to have multiple exit strategies.

Also a third one you didn't mention: sell them owner financing and keep the paper.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

S0VERE1GN

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Re: Using the "buy one, rent one" system
« Reply #4 on: May 05, 2014, 02:52:41 PM »
If you don't mind me asking, how many properties do you own and rent?

arebelspy

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Re: Using the "buy one, rent one" system
« Reply #5 on: May 05, 2014, 03:00:17 PM »
If you don't mind me asking, how many properties do you own and rent?

15/10.  I plan to FIRE with around 20 rentals.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

GrayGhost

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Re: Using the "buy one, rent one" system
« Reply #6 on: May 05, 2014, 07:14:26 PM »
I know some guys that have done/are doing this. It might be too slow for arebelspy, but that's just him. Real estate is a tried and true way to wealth, if you're smart about it and you do your due diligence.

SFHs tend to have lower pre-expense profit margins than multifamilies and apartment buildings, but on the other hand, they tend to be less trouble. They're also cheaper and easier to buy on average. YMMV.

One older couple I know has a couple of SFHs that they rent out. Each house nets them about $200 a month, and while that's not a lot on its own, once you have a couple of houses, you start to make real money, and once they start to get paid off, then your income spikes.

Anyway, it's good that you're enthusiastic about this field, and yes, your plan has a strong chance of working. But be sure to do your due diligence on each and every property you buy, and if there are no good deals in a given year, then don't buy an "okay" deal just to fulfill some arbitrary quota. Also, be sure to have teams in place--for cleaning, maintenance, repairs, and other things you won't take care of by yourself--BEFORE you get the ball rolling. It'll save you a Hell of a lot of money and stress when there are hang-ups.

S0VERE1GN

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Re: Using the "buy one, rent one" system
« Reply #7 on: May 06, 2014, 05:53:44 AM »
Great points! thanks!

I'm planning on at least STARTING with single family rentals..too many of my land lords when i lived in apartments seemed like miserable folk.

It'll also be nice to start by renting to mother dearest. takes a level of uncertainty out of the deal as well.

arebelspy

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Re: Using the "buy one, rent one" system
« Reply #8 on: May 06, 2014, 07:14:54 AM »
I know some guys that have done/are doing this. It might be too slow for arebelspy, but that's just him. Real estate is a tried and true way to wealth, if you're smart about it and you do your due diligence.

SFHs tend to have lower pre-expense profit margins than multifamilies and apartment buildings, but on the other hand, they tend to be less trouble. They're also cheaper and easier to buy on average. YMMV.

I agree with all of that.  Remeber, I'm the one that recommended the book.  ;)  It's the one house/year part that's too slow for me.  There's no reason a Mustachian can't do it faster than that - the book is targeted at "normal" people, so it includes a "normal" speed plan.  Why not 2 a year?  (Or some other level that you're comfortable with.)
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

soccerluvof4

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Re: Using the "buy one, rent one" system
« Reply #9 on: May 06, 2014, 07:47:31 AM »
^+1. I read the book on Arebelspy's recommendation and I would agree with his assesessment as well on doing more if you can/want.  I would like to do at least 2 a year but finding the numbers to work is the harder part for me so far. I realize i can stretch out but for the first one I would like to be as local as possible. No rush I will find it. But great book! and in the meantime reading more!

S0VERE1GN

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Re: Using the "buy one, rent one" system
« Reply #10 on: May 06, 2014, 10:24:03 AM »
I know some guys that have done/are doing this. It might be too slow for arebelspy, but that's just him. Real estate is a tried and true way to wealth, if you're smart about it and you do your due diligence.

SFHs tend to have lower pre-expense profit margins than multifamilies and apartment buildings, but on the other hand, they tend to be less trouble. They're also cheaper and easier to buy on average. YMMV.

I agree with all of that.  Remeber, I'm the one that recommended the book.  ;)  It's the one house/year part that's too slow for me.  There's no reason a Mustachian can't do it faster than that - the book is targeted at "normal" people, so it includes a "normal" speed plan.  Why not 2 a year?  (Or some other level that you're comfortable with.)

Starting at one a year at least for the first few years as the Stache (liquid) is still quite small. as it grows and my wife enjoys the idea of growing wealth with real estate, I might ramp it up. However i think a solid mix of liquid investments and real estate will be a great way to get to FI.

arebelspy

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Re: Using the "buy one, rent one" system
« Reply #11 on: May 06, 2014, 11:25:17 AM »
Definitely start slow.  You don't want to bite off more than you can chew, and owning rental properties isn't for everyone.

But by year 4 or 5 or so you may start to accelerate that plan, and purchase more than one that year.  ;)
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

GrayGhost

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Re: Using the "buy one, rent one" system
« Reply #12 on: May 06, 2014, 06:49:13 PM »
Also, do your math and preparations for worst case scenarios. The saying, "hope for the best, but prepare for the worst" is a great thing to live by, because when bad things do happen, you won't be caught with your trousers down, and in good months/years, you'll be surprised by how well things are going.

S0VERE1GN

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Re: Using the "buy one, rent one" system
« Reply #13 on: May 07, 2014, 08:06:15 AM »
Definitely. Essentially my savings plan is to save and invest directly in the DJIA in an individual brokerage account.  All the while, I'll look for homes that can be had at a good deal, with a projected cap rate of 10% or higher (including equity build from loan payoff, not including appreciation as its too volatile) If such an opportunity presents itself I'll liquidate some assets and purchase it.

Makes Sense to me.

GrayGhost

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Re: Using the "buy one, rent one" system
« Reply #14 on: May 07, 2014, 09:35:04 AM »
I prefer looking at cash-on-cash return, because real estate is so illiquid and unstable that who knows if you've built up as much equity as you think you have from your loan payoff? In other words, if I think appreciation is a good way to cheat yourself into doing bad math, why shouldn't I think the same about equity building?

The equity building seems like a very abstract thing to me, whereas money into your bank account is a far more concrete and immediate reward. Equity, appreciation, et cetera, are just things I think about as nice bonuses on top of monthly cashflow.

Also, you should strongly consider asset allocation. DJIA is a great way to make money in the long run, but if you might need to cash out soon, you'll want to mix in some bonds and perhaps some other asset classes. MMM has a great article on the topic here.