Author Topic: 40K houses with $700/month rents?  (Read 12479 times)

Bearded Man

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40K houses with $700/month rents?
« on: June 20, 2014, 08:26:40 AM »
I have seen a couple threads like these now, but have a hard time believing it. Are these ghettos with run down properties and low life tenants? If not, where exactly are the markets for these? If these deals really exist, I will take 6 please.

arebelspy

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Re: 40K houses with $700/month rents?
« Reply #1 on: June 20, 2014, 08:47:31 AM »
Look in the Midwest.  Michigan, Indiana, Ohio all offer that or better.
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gimp

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Re: 40K houses with $700/month rents?
« Reply #2 on: June 20, 2014, 12:17:31 PM »
To add on to arebelspy:

http://www.nasa.gov/sites/default/files/images/712129main_8247975848_88635d38a1_o.jpg

See how the country almost seems split in half through the midwest? The eastern side has the reputation of "nobody lives there, it's just farms". Ever drive through Ohio? It's got a ton of people there. But low prices. Ditto Indiana, Illinois, Michigan, Wisconsin, etc etc etc.

Now look over at the rockies. See those bright white dots? Some of them are hot cities, where real estate is not going to be cheap. Many more just have a lot of people, but nothing more exciting about them - therefore the real estate isn't very expensive. Rent, however, is decently high in comparison.

Jane

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Re: 40K houses with $700/month rents?
« Reply #3 on: June 20, 2014, 03:31:17 PM »
We bought ours a few years ago, but it's a condo in a HCOL major metro area about 30 miles from the city. It actually rents for around $900. We have another townhouse with a similarly good return in the same city that we paid about $75K for and rent it for around $1400.

I suppose to some the area we bought in might be "ghetto" with "low life tenants", but I prefer to look at it as economically diverse with unique challenges ;)

It's really not the ghetto, though. Just a poorer neighborhood out in the 'burbs.

randymarsh

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Re: 40K houses with $700/month rents?
« Reply #4 on: June 20, 2014, 06:51:44 PM »
Here ya go: http://www.zillow.com/homes/for_sale/Springfield-OH/house,condo,apartment,duplex,townhouse_type/34103_rid/0-40000_price/0-154_mp/40.003818,-83.68166,39.866929,-83.891087_rect/11_zm/0_mmm/1_fr/

I suspect many of these will meet the 1% rule, at least based on list price. Some are in OK/ish neighborhoods but most are "economically diverse".

jmoney

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Re: 40K houses with $700/month rents?
« Reply #5 on: June 20, 2014, 09:15:24 PM »
I can do better in Ohio.....

Bought $6,500 rents $575
Bought $10 k rents $825
Bought $10 k (but $40 k repairs) rents $950
Bought $22 k rents $825
Bought $21 k rents $850
Bought $8700 rents $450 plus work on house for rent first year, after that $650 per month
Bought 31 k rents $1050 2 family separate utilities
Bought 38 k rents $1500 2 family separate utilities
Bought $2000 sold land contract $2000 down, $260 per month for 3 years

Need I say more? Just a small part of my portfolio. And these areas aren't the gheto either. They are in areas with 50/50 renters/owner occupants to mostly owner occupants. Put another way type 2 or 3 areas with 1 being a warzone and 5 being richest areas.

One other thing. About 20% of these came from California investors losing their shirt because they thought they couldn't invest in rental properties 2,000 miles away. Would not recommend investing on your own in Ohio from another state. If you want in the action, find a local Ohio investor and partner or private money lend with them. I see out of towners do lots of stupid things. Like buy condemned houses, "houses" site unseen that have just been demolished, empty lots (which are worthless for the most part here), etc. There are tricks of the trade in every market and the midwest is its own specialty.

expatartist

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Re: 40K houses with $700/month rents?
« Reply #6 on: June 20, 2014, 09:39:25 PM »
...California investors losing their shirt because they thought they couldn't invest in rental properties 2,000 miles away. Would not recommend investing on your own in Ohio from another state.

Was that meant to read 'could invest...2,000 miles away'?

Anyone doing remote investing would need a local team. Doesn't necessarily involve full partnership in the purchase.

arebelspy

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Re: 40K houses with $700/month rents?
« Reply #7 on: June 20, 2014, 09:42:51 PM »
...California investors losing their shirt because they thought they couldn't invest in rental properties 2,000 miles away. Would not recommend investing on your own in Ohio from another state.

Was that meant to read 'could invest...2,000 miles away'?

Anyone doing remote investing would need a local team. Doesn't necessarily involve full partnership in the purchase.

Yes, based on context that should be "thought they could."

Agree with the second sentence.
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Bearded Man

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Re: 40K houses with $700/month rents?
« Reply #8 on: June 22, 2014, 06:30:14 PM »
Did you do rehab on those Ohio properties? If so, at what cost?

Would contacting a reputable, highly regarded/well rated realtor on Zillow and telling him what I am looking to do and having him help build my team (lender in the area, inspector, etc.) be reasonable?

I mean dang, I could buy a handful of these, rent them out and retire to my dream mountain cabin NOW and just let my stock portfolio compound itself as I let it grow living off the rental income.

Thedudeabides

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Re: 40K houses with $700/month rents?
« Reply #9 on: June 22, 2014, 06:48:31 PM »

Did you do rehab on those Ohio properties? If so, at what cost?

Would contacting a reputable, highly regarded/well rated realtor on Zillow and telling him what I am looking to do and having him help build my team (lender in the area, inspector, etc.) be reasonable?

I mean dang, I could buy a handful of these, rent them out and retire to my dream mountain cabin NOW and just let my stock portfolio compound itself as I let it grow living off the rental income.

Same question. I'm really interested in hearing the experts' take.

Do banks loan on this low of an amount or is all cash best? It's amazing to me that with an all cash deal, assuming 50% expenses you could still have an 11% annual return. That is seriously incredible.

arebelspy

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Re: 40K houses with $700/month rents?
« Reply #10 on: June 22, 2014, 06:56:29 PM »
Banks generally don't want to lend on an amount < 50k.  Typically deals like jm describe are all cash (though there are exceptions).
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 two kids.
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waltworks

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Re: 40K houses with $700/month rents?
« Reply #11 on: June 22, 2014, 06:57:57 PM »
If it sounds too good to be true...

Seriously, I think the gobs of awesome rentals are gone. The time to get them was 2010-12 or so, really, when the banks finally started shedding their REO inventory and the big time investors hadn't decided to jump in too much yet. All-cash sales are down all over the place for a reason - the hot money showed up and vacuumed up most of the obvious deals.

There are still deals, but they are the kind that require the old-school finding-of-non-MLS deals under the radar kind, IMO.

-W

Did you do rehab on those Ohio properties? If so, at what cost?

Would contacting a reputable, highly regarded/well rated realtor on Zillow and telling him what I am looking to do and having him help build my team (lender in the area, inspector, etc.) be reasonable?

I mean dang, I could buy a handful of these, rent them out and retire to my dream mountain cabin NOW and just let my stock portfolio compound itself as I let it grow living off the rental income.

Bearded Man

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Re: 40K houses with $700/month rents?
« Reply #12 on: June 22, 2014, 07:29:51 PM »
Here ya go: http://www.zillow.com/homes/for_sale/Springfield-OH/house,condo,apartment,duplex,townhouse_type/34103_rid/0-40000_price/0-154_mp/40.003818,-83.68166,39.866929,-83.891087_rect/11_zm/0_mmm/1_fr/

I suspect many of these will meet the 1% rule, at least based on list price. Some are in OK/ish neighborhoods but most are "economically diverse".

A listing is worth a thousand words, thanks for the link. While the rents are not quite as high as the guy who owns a pocket full of them above, with three of these even after expenses I could retire just fine (1K a month is all I need). Between that, a paid off house and a few hundred grand in index funds compounding for decades untouched while you live off rental income, this sounds like a reasonable strategy that is worthy of more research and verification.

I did manage to buy a remodeled REO in 2010 in Tacoma, WA about 45 minutes south of Seattle for 60K and it cashflows about $800 a month. Not too shabby. It, like many of these properties is in a semi rough area, and economically diverse too. I suppose if I just find a way to squeeze a little more rent from it I could pull the same thing off with the one property as well. Decisions, decisions. Sure is nice to know about this option though, as those deals in Tacoma are long gone. A similar house in a REALLY bad part of the city is about 130K now.

jmoney

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Re: 40K houses with $700/month rents?
« Reply #13 on: June 23, 2014, 11:49:21 AM »
Well there are a few things you guys should know:

1) All cash is needed upfront. I've been able to get two cash out loans with hagling the bank after a two year rental history for more than my purchase price and repairs.

2) Average repairs are from 10-25 k. The most expensive I've done was 40 k. And these are with a mixture of unskilled and skilled hourly workers and me watching them as a general contractor and correcting them. I have a gopher/grunt laborer at 8 per hour, plumber and drywaller at 15 per hour. The gopher helps me run the electrical wire and I put in the breaker box and outlets. I sub out furnaces flat 2200. The gopher(s) do the roofs at 8-12 per hour. Your cost will be more if you try to do this out of state. I like the hourly workers because I can fire anyone at any time with no contract dispute. And if they don't show up another hourly worker takes their spot and beleives me that ticks them off when someone takes their work. Never do hourly far away. I do it because I want to fire easily and make sure things are done different than the normal standard so they last longer. I'm keeping all my properties for the long haul and the are various adjustments I make to have lower maintenace over time and therefore quicker turns. And things are much more hands off now that I am starting to get s better team.

3) Part of the reason the roi seems high to you is that you don't account for taxes, insurance, maintenance, vacancy, etc. These are good deals and high cashflow but taxes are 50-100 per month and insurance is 50 per month. Some of these houses are over 100 years old so things break. I fix them more durable in the first place for rental as they break so that costs more.

4) The realtor makes 3% of 20 k in some cases if there isn't a fixed commission. Don't expect much help from them.

rebel100

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Re: 40K houses with $700/month rents?
« Reply #14 on: June 23, 2014, 12:12:06 PM »
Would contacting a reputable, highly regarded/well rated realtor on Zillow and telling him what I am looking to do and having him help build my team (lender in the area, inspector, etc.) be reasonable?

I would urge great caution here.  While I have met a few old school realtors that understand this side of investing, the vast majority cater to the pre-approved first time buyer.  They are also paid based on the value of YOUR purchases, there isn't really much incentive to brutally negotiate cheap acquisitions on your behalf.  I also take every recommendation as possibly good, but potentially poor.   The realtor is going to turn you over to whatever title company they have used in the past for those pre-qualified buyers.  Your going to get a home inspector they likely met at the last deal, without any real regard for their capabilities.

Find a way to quarterback your own team.  Look for a local real estate investment club or other investors group.  A good realtor might be a part of your team...but that's not who I want controlling it.

arebelspy

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Re: 40K houses with $700/month rents?
« Reply #15 on: June 23, 2014, 12:17:04 PM »
Would contacting a reputable, highly regarded/well rated realtor on Zillow and telling him what I am looking to do and having him help build my team (lender in the area, inspector, etc.) be reasonable?

I would urge great caution here.  While I have met a few old school realtors that understand this side of investing, the vast majority cater to the pre-approved first time buyer.  They are also paid based on the value of YOUR purchases, there isn't really much incentive to brutally negotiate cheap acquisitions on your behalf.  I also take every recommendation as possibly good, but potentially poor.   The realtor is going to turn you over to whatever title company they have used in the past for those pre-qualified buyers.  Your going to get a home inspector they likely met at the last deal, without any real regard for their capabilities.

Find a way to quarterback your own team.  Look for a local real estate investment club or other investors group.  A good realtor might be a part of your team...but that's not who I want controlling it.

Great post, well said.  And the best way to find a good Realtor like you mention at first is by networking with those investors in the area and asking for their recommendations.
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 two kids.
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Northerly

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Re: 40K houses with $700/month rents?
« Reply #16 on: June 23, 2014, 12:29:36 PM »
Two of my brothers-in-law are currently working in Ohio as Landmen in the Marcellus and Utica Shale plays. Much of Ohio, northern WV, and western PA are hopping thanks to oil and gas, supplying a steady stream of tenants. It is boom time there, but investment and production are changing phase and the area doesn't seem to have the long-standing industrial infrastructure of Texas or Oklahoma.

My thoughts: Require a fast return on investment and have a good exit strategy.

rebel100

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Re: 40K houses with $700/month rents?
« Reply #17 on: June 23, 2014, 12:57:16 PM »
Great post, well said.  And the best way to find a good Realtor like you mention at first is by networking with those investors in the area and asking for their recommendations.

Dude, that feels like high praise...I actually pay close attention to the things YOU post and find that I agree with most of your assessments.  I recently looked back through your profile to read about your budding portfolio.  Your contributions here are greatly appreciated!

biffwhipster

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Re: 40K houses with $700/month rents?
« Reply #18 on: June 23, 2014, 01:12:20 PM »
As someone with no experience in real estate investing, what is the best way to network with local investors if I am looking to invest remotely?

arebelspy

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Re: 40K houses with $700/month rents?
« Reply #19 on: June 23, 2014, 01:16:33 PM »
As someone with no experience in real estate investing, what is the best way to network with local investors if I am looking to invest remotely?

Here's two easy ways to find active, local investors to an area you aren't located in:
1) Go to www.BiggerPockets.com and connect with people who invest in that area and start chatting with them.  (You can tell who's active based on their posts.)
2) Go to www.meetup.com and virtually "join" the various REIA groups in the area and start connecting with investors via email first, then phone. (You can tell who's active based on the meetings they're attending.)

Write a short introduction letter (that you'll email/private message) about yourself and what you're looking to do and learn.  You'll be surprised how many friendly, helpful people there are who just love to chat real estate.
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 two 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.
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biffwhipster

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Re: 40K houses with $700/month rents?
« Reply #20 on: June 23, 2014, 01:22:16 PM »
As someone with no experience in real estate investing, what is the best way to network with local investors if I am looking to invest remotely?

Here's two easy ways to find active, local investors to an area you aren't located in:
1) Go to www.BiggerPockets.com and connect with people who invest in that area and start chatting with them.  (You can tell who's active based on their posts.)
2) Go to www.meetup.com and virtually "join" the various REIA groups in the area and start connecting with investors via email first, then phone. (You can tell who's active based on the meetings they're attending.)

Write a short introduction letter (that you'll email/private message) about yourself and what you're looking to do and learn.  You'll be surprised how many friendly, helpful people there are who just love to chat real estate.
Thanks for the insight. While the idea of remote investing seems a little daunting, helpful people like you make it seem achievable.

dragoncar

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Re: 40K houses with $700/month rents?
« Reply #21 on: June 23, 2014, 09:22:19 PM »
I look forward to hiring RE Spy Team: Ohio for my future projects.

Seriously though, what market conditions cause people with that kind of money to blow on rental payments to keep renting instead of just buying the place?  Maybe it's the lack of mortgages per above?  Or high geographical mobility?  I guess the same question can be asked of high COL areas "what market conditions cause people to blow all that money on a house when they can just rent?"

arebelspy

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Re: 40K houses with $700/month rents?
« Reply #22 on: June 23, 2014, 09:54:21 PM »
I look forward to hiring RE Spy Team: Ohio for my future projects.

I've actually been working on an Ohio deal since last October, actually (a bulk deal for between 12 and 23 houses, depending on how it all works out).  Not sure if it'll pan out though, we'll see.

Seriously though, what market conditions cause people with that kind of money to blow on rental payments to keep renting instead of just buying the place?  Maybe it's the lack of mortgages per above?  Or high geographical mobility?

Yes, those, and more.  Tenants can scrape together a few grand to move in, no way they can get together 30k to buy.  If they had even half that, they'd be putting it down on a shiny new car. And the good ones who want to buy wouldn't be wanting to buy the 5-10k deals.

I guess the same question can be asked of high COL areas "what market conditions cause people to blow all that money on a house when they can just rent?"

That's an interesting observation, and probably accurate.  For many people, buying versus renting isn't a pure mathematical decision.
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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.
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Kriegsspiel

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Re: 40K houses with $700/month rents?
« Reply #23 on: June 24, 2014, 06:28:43 AM »
Two of my brothers-in-law are currently working in Ohio as Landmen in the Marcellus and Utica Shale plays. Much of Ohio, northern WV, and western PA are hopping thanks to oil and gas, supplying a steady stream of tenants. It is boom time there, but investment and production are changing phase and the area doesn't seem to have the long-standing industrial infrastructure of Texas or Oklahoma.

My thoughts: Require a fast return on investment and have a good exit strategy.

Coincidentally, I'm heading up there to get into that line of work too. I am looking to get into the rental game in the area also, which is looking good.

mooreprop

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Re: 40K houses with $700/month rents?
« Reply #24 on: June 24, 2014, 09:12:28 AM »
I can confirm the reports that these properties do still exist in the Midwest.  However, they are getting harder to find.  This month, I purchased 2 houses in Indiana (where I live).  One was purchased at auction for $23,500 and is a 3 bedroom with 2 car detached garage and will rent for $650.  The other was listed with a realtor and  is a 3 bedroom  for $36,000.  It will rent for $650 or $700 per month depending on whether we decide to upgrade the kitchen.  Both are in great neighborhoods in the "desirable" school district.  I could rent these for $800 per month, but this would lead to high turnover since the tenants would be able to find cheaper rent in the area.  At $650 to $700, these houses typically stay rented to the same tenants for 3-5 years or longer.  Bearded Man, if you are interested in a partnership I am willing to discuss options.  I was managing some properties for a Texas investor, but he passed away this winter and his executor is selling them one at a time as they become vacant.  This frees up some time for managing some extra houses.   Does this forum allow sharing of contact information?  I am getting tired of paying the bank big bucks for the ability to get financing on these properties and would be willing to work with an investor or partner instead to get the money.  Yes, you can get financing on lower amounts than $50,000 but you are more easily able to do this via local banks and they like to charge fees to do this.  Face it, in Indiana lots of homes can be purchased for under $50,000 so local banks cater to that market.  Large national banks - not so much!

dragoncar

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Re: 40K houses with $700/month rents?
« Reply #25 on: June 24, 2014, 09:26:51 AM »
I can confirm the reports that these properties do still exist in the Midwest.  However, they are getting harder to find.  This month, I purchased 2 houses in Indiana (where I live).  One was purchased at auction for $23,500 and is a 3 bedroom with 2 car detached garage and will rent for $650.  The other was listed with a realtor and  is a 3 bedroom  for $36,000.  It will rent for $650 or $700 per month depending on whether we decide to upgrade the kitchen.  Both are in great neighborhoods in the "desirable" school district.  I could rent these for $800 per month, but this would lead to high turnover since the tenants would be able to find cheaper rent in the area.  At $650 to $700, these houses typically stay rented to the same tenants for 3-5 years or longer.  Bearded Man, if you are interested in a partnership I am willing to discuss options.  I was managing some properties for a Texas investor, but he passed away this winter and his executor is selling them one at a time as they become vacant.  This frees up some time for managing some extra houses.   Does this forum allow sharing of contact information?  I am getting tired of paying the bank big bucks for the ability to get financing on these properties and would be willing to work with an investor or partner instead to get the money.  Yes, you can get financing on lower amounts than $50,000 but you are more easily able to do this via local banks and they like to charge fees to do this.  Face it, in Indiana lots of homes can be purchased for under $50,000 so local banks cater to that market.  Large national banks - not so much!

There's a pm system that will allow contact info afaik, but I'd caution interested parties to consider the history of this user (short, that's not necessarily a deal breaker, but throws a couple red flags for me)

waltworks

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Re: 40K houses with $700/month rents?
« Reply #26 on: June 24, 2014, 09:35:37 AM »
Yes, I would read Mooreprop's previous posts and consider quite carefully before any money changes hands. Some interesting stuff there.

-Walt

arebelspy

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Re: 40K houses with $700/month rents?
« Reply #27 on: June 24, 2014, 09:52:07 AM »
I am getting tired of paying the bank big bucks for the ability to get financing on these properties and would be willing to work with an investor or partner instead to get the money.

Hahaha, sure, who wouldn't?

I'm also willing to take on private money for someone who wants to loan against real estate.  ;)

(See this thread, where we figured I could pay 9% to someone and it'd save me money over paying 5.5% to the bank:
http://forum.mrmoneymustache.com/real-estate-and-landlording/comparing-mortgage-options/)

I highly suggest anyone investing with someone else due their due diligence on the property and investor, and not just invest with some random guy who posts on a forum that he's getting great returns (myself included).  :)
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 two 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.

dragoncar

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Re: 40K houses with $700/month rents?
« Reply #28 on: June 24, 2014, 10:08:16 AM »
I am getting tired of paying the bank big bucks for the ability to get financing on these properties and would be willing to work with an investor or partner instead to get the money.

Hahaha, sure, who wouldn't?

I'm also willing to take on private money for someone who wants to loan against real estate.  ;)

(See this thread, where we figured I could pay 9% to someone and it'd save me money over paying 5.5% to the bank:
http://forum.mrmoneymustache.com/real-estate-and-landlording/comparing-mortgage-options/)

I highly suggest anyone investing with someone else due their due diligence on the property and investor, and not just invest with some random guy who posts on a forum that he's getting great returns (myself included).  :)

I'm pretty sure moreprop is Rebs' wife.  Magic 8-ball confirms my suspicions.

p.s. send me your prospectus
« Last Edit: June 24, 2014, 10:13:50 AM by dragoncar »

arebelspy

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Re: 40K houses with $700/month rents?
« Reply #29 on: June 24, 2014, 10:19:44 AM »
I am getting tired of paying the bank big bucks for the ability to get financing on these properties and would be willing to work with an investor or partner instead to get the money.

Hahaha, sure, who wouldn't?

I'm also willing to take on private money for someone who wants to loan against real estate.  ;)

(See this thread, where we figured I could pay 9% to someone and it'd save me money over paying 5.5% to the bank:
http://forum.mrmoneymustache.com/real-estate-and-landlording/comparing-mortgage-options/)

I highly suggest anyone investing with someone else due their due diligence on the property and investor, and not just invest with some random guy who posts on a forum that he's getting great returns (myself included).  :)

I'm pretty sure moreprop is Rebs' wife.  Magic 8-ball confirms my suspicions.

lol.  You got me.



(For real though.)
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 two 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.

jmoney

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Re: 40K houses with $700/month rents?
« Reply #30 on: June 25, 2014, 12:05:59 AM »
Yes the rentals in Ohio are drying up with these low purchase prices and high yields. I can still find more than I can buy though. There is some concern with rents going down in the midwest because they have gone up so aggressively recently and there is concern tenants may not be able to afford the rents when the next economic downturn comes. Depending on who you ask this may come soon. I see a lot of foolish business tactics back again that didn't work in 2007/2008. Overbuilding retail when there is lots of vacant retail nearby. Overbuilding new homes. Taco Bell trying to sell breakfast :-P

Two things about private money to be aware of:

1) Most states and the Feds require you to report that you took a private loan from someone to the Feds and state SEC. Usually no big deal if you're doing a few small loans, but they will watch you closer if take more $$$ and more rules apply. Depending on the state that the investor operates out of and the state the lender is from, different rules apply and it can get tricky. It's worth asking a local attorney about this since there can be harsh penalties if you get caught. For most little guys just filing the Form D with the Feds and an equivalent local form with the state is enough but different states may have different rules and the burden is on the investor who takes the money to make sure its done correctly. Some states are tougher than others on this. Barely anyone I know follows the rules correctly but the SEC usually makes an example out of someone when they catch them.

2) I have a couple loans from each of three sources - sellers, banks, and private lenders. Each have their own advantages. Even though you pay the bank their outrageous fees upfront and jump through their hoops, they will never ask for their money back early on their 30 year note. Good luck getting a 30 year loan from a private lender at 4% or even 8% and having them never ask for an early pay back for 30 years. Sure its possible, but unlikely. Both of the private lenders I have asked for the cash back early because of uncertainty with their jobs. I only had it for about a year. Then again, if you're strategy is quick flip private lenders are probably the way to go. Banks are almost a necessity for long term rental financing unless you have some other strategy to get private lenders not to ask for an early payback or have a strategy to generate cash big chunks of cash to pay them back. I had a 3 year fully amortized loan with these two lenders at 6% interest and they still wanted an early payback. They only had to wait another two years. The mortgage said it was clearly for 3 years and they knew this going in but its never good to have anyone unhappy so I pulled together the cash to pay them back.

mooreprop

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Re: 40K houses with $700/month rents?
« Reply #31 on: June 25, 2014, 06:31:37 AM »
You guys are funny!  My husband spends his time working on the properties and has never even read Mr. Money Mustache despite my encouragement:)  Not sure about "red flags"?  Thanks for the heads up about reporting requirements for accepting private money.  I am a teacher by day, landlord by night; I am still able to get traditional financing but have reached my maximum number of loans and will only be able to get the in-house loans now at the local bank.  These have higher interest rates and fees, and I cannot get the fixed rates that I prefer.  Not looking to take advantage of anyone, but was interested in saving money.  (Who isn't?)  It sounds like I should stick with the bank if I want to stay legal, since hiring someone to meet these requirements would eat up any savings over bank costs.

Good advice not to give money to anyone you run across online.  However, I would add that you should not give money to anyone that you know either.  I have learned this the hard way!  (The only time you need a partner is when you are getting ready to eat a bucket of @#%#.)  Therefore, my preference would be to be paid a percent of rents collected.  This is what I did for the friend in Texas before he passed away.

Scandium

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Re: 40K houses with $700/month rents?
« Reply #32 on: June 25, 2014, 07:23:31 AM »
Pah I wish I could find some of those. Only thing even approaching the 1% rule, nevermind 2%! around here are some awful dumps in the worst parts of Baltimore. Where I would only go with armed guards. And I can't even image the maintenance.. Since I don't really fancy my luck at being a slum lord I'm pretty much decided real estate isn't for me. I keep looking every now and then but more and more I think unleverage investing will have to do. Props to those who make it work, but it just seems like too much

dragoncar

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Re: 40K houses with $700/month rents?
« Reply #33 on: June 25, 2014, 09:36:02 AM »
I see a lot of foolish business tactics back again that didn't work in 2007/2008. Overbuilding retail when there is lots of vacant retail nearby. Overbuilding new homes. Taco Bell trying to sell breakfast :-P


Lol... Dogs and cats living together!

babysteps

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Re: 40K houses with $700/month rents?
« Reply #34 on: June 25, 2014, 03:04:01 PM »
What I've noticed after 3 years in a low COL area that had peak population in 1950: minimum wage and/or public rental assistance seems to puts a floor on rental prices.  This "floor" isn't so obvious in expensive areas, but where asset prices are low (due to shrinking population, lack of national bank activity, low employment, or whatever reason) this "floor" makes being a landlord more attractive on paper. 

Where we are (western NY State near the PA border), there are $500/mo 2br rentals but they tend to be pretty run down.  In decent shape, $700/mo for a 2 bedroom is very do-able.  Decent, not fancy.  Median house price is around $75,000 for our county, so plenty of sub-$40,000 properties that are habitable on MLS.  This *is* a two-edged sword, as property taxes tend to be higher in lower-asset-value areas, at least as a % of house value (often can be similar on a per-capita basis).  Don't forget to include/adjust for taxes when running rental math!

I have seen some areas of the country with much lower rental rates (where no "floor" seems to apply), these areas tend to be seasonal or have few lower-income folks (yes, that seems counter-intuitive).  In our area, some "nicer" neighborhood rentals are actually less expensive than rentals in lower income neighborhoods, since the "nicer" areas are less walkable and folks assume they must have a car (even if MMM folks know better).  Does suggest that folks are being rational in calculating total out of pocket expenses ;)

Imo it is critical to be local yourself or have a trusted partner who is.  Some localities require a local agent/manager if the owner doesn't live nearby.
« Last Edit: June 25, 2014, 03:13:32 PM by babysteps »

arebelspy

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Re: 40K houses with $700/month rents?
« Reply #35 on: June 25, 2014, 07:35:07 PM »
minimum wage and/or public rental assistance seems to puts a floor on rental prices.

Yeah.  I agree with your premise.

I'm not to familiar with a lot of the programs, but I do have multiple tenants that utilize Section 8 (at any given time around 20% of my tenants are Section 8) and it's quite nice, as a landlord, to have guaranteed government rent at decent rates.
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 two 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.

greentea

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Re: 40K houses with $700/month rents?
« Reply #36 on: June 29, 2014, 09:28:23 AM »
This thread makes makes so excited by these properties that are less than US$50k.  You can't even get a bathroom for that price here in Singapore!

clarkfan1979

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Re: 40K houses with $700/month rents?
« Reply #37 on: July 03, 2014, 08:55:51 PM »
Small 3 bed/2 bath houses (1000 sq. ft.) in my neighborhood in FL were selling for 60K about 3 years ago. Today they rent for about $1100/month. Now that housing is on the upswing many people want to "get the good deals" Well, the good deals happen when the sky is falling. When the sky is falling not that many people want to buy.   

Rural

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Re: 40K houses with $700/month rents?
« Reply #38 on: July 04, 2014, 09:59:50 AM »
$40k house at $700 rent isn't doable here because $700 is well above the rental range here, but 25k house and $500 rent is easily doable.... Actually, come to think of it, you could spend $40k to get $800-900 rent in a duplex.


I think our time is approaching.

Thedudeabides

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Re: 40K houses with $700/month rents?
« Reply #39 on: July 04, 2014, 10:02:52 AM »

$40k house at $700 rent isn't doable here because $700 is well above the rental range here, but 25k house and $500 rent is easily doable.... Actually, come to think of it, you could spend $40k to get $800-900 rent in a duplex.


I think our time is approaching.

Where are you located it you don't mind me asking?