Author Topic: Does Landlording have to be this complicated?  (Read 5779 times)

Louisville

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Does Landlording have to be this complicated?
« on: September 24, 2015, 11:17:11 AM »
 I have no real estate experience of any kind other than buying my own houses (with agents).

I'm reading "Bulding Wealth One House at a Time" by Schaub. Although it's really poorly written, it's informative, and it has me thinking about a lot of things.
In the book, Schaub spends a lot of time on alternative/creative financing, finding bargain prices via non-standard channels, negotiating tricks, lease options, etc.
Is all of this really necessary to get started owning and renting houses? I understand that I'd want to do things as efficiently as possible, and that all of these little ins and outs are going to help, BUT is it not possible that I can be a successful landlord just buying a house the "regular" way like most other schlubs?

iamlindoro

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Re: Does Landlording have to be this complicated?
« Reply #1 on: September 24, 2015, 11:33:15 AM »
No, it is not all really necessary.  It is possible, in the right market and under the right conditions, to purchase a property at or near retail, finance it traditionally, and get excellent cash flow.  It requires that you be selective and flexible, but it's possible.  Being willing to finance non-traditionally, pursue distressed or off-market properties (or other means of getting properties for less than retail), and other tricks discussed in REI books will make more properties potentially viable, or make already-viable properties more profitable.  You just have to recognize that you are trading your time and effort for those gains.

Ricky

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Re: Does Landlording have to be this complicated?
« Reply #2 on: September 24, 2015, 11:43:49 AM »
Just depends. Where there's a will, there's a way. Creative financing is only necessary if you don't have the means for traditional financing. Being super selective on deals is only necessary if you aren't in a market that lends (no pun intended) itself to easy cash flow.

The best advice I think is to just run the numbers and start making offers. Find the number that will work for you with a particular house. You'll get a yes or a no. It's not that complicated at all.

clarkfan1979

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Re: Does Landlording have to be this complicated?
« Reply #3 on: September 24, 2015, 11:49:55 AM »
It's not that complicated, but you do need to do your homework on your local market. You need to familiarize yourself with what houses are worth. When you spot a good deal, you pull the trigger. You do not wait.

zephyr911

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Re: Does Landlording have to be this complicated?
« Reply #4 on: September 24, 2015, 12:36:33 PM »
No, it's not. It can increase your total returns over time, but you can start simple.
I got my start by renting out rooms in a house I lived in. Then I moved out and managed from across town - kept learning.
After that, I co-founded an LLC and we put 20% down on an average-condition, fully occupied duplex. Learned more about management practices. Established cash flow, bought another one, kept learning.
Now, with some decent baseline income and a growing body of knowledge on repairs and renovations, we're looking more at rehabs and creative solutions. Chances are, we won't get into anything really nontraditional until I leave my full-time job. They're more work but they do pay off if you pick the right ones.

Papa bear

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Re: Does Landlording have to be this complicated?
« Reply #5 on: September 24, 2015, 12:50:22 PM »
No one would buy or read a book like:

Chapter one: locating a house. Look at MLS.

Chapter 2: financing.
Call a bank.

Chapter 3: renting a house.
Post ad on Craigslist

Chapter 4: collecting rent
Deposit check.




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zinethstache

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Re: Does Landlording have to be this complicated?
« Reply #6 on: September 24, 2015, 01:34:42 PM »
I used slightly creative financing, but it was all my own money so we qualified for conventional financing. We used MLS using our clever realtor. Our credit and income rock so we didn't need to do anything fancy like the books talk about. We do have one co-investor/silent partner who bought in on the first investment.

It was VERY difficult to find good deals, thus it took 6 months to over a year to find each property. We were only chosen as the first buyer on our 4th property, the other three were a battle and we only got them because the first buyer chosen backed out for one reason or another.

I was strict on my line in the sand for cash flow and all properties make way more than my minimum requirement. Note that the market changes, right now in my area it is very difficult to get any good cash flow numbers.

I feel I now have a "team" working for me. I have my realtor (for the last 20 years now), a broker who knows my finances and makes financing relatively painless, a property manager who manages the tenants for us, an accountant (never had used one before) and my DH who handles all maintenance.It was scary to get started, but you have to get in the ring and start fighting at some point.

The best of luck to you!






FatCat

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Re: Does Landlording have to be this complicated?
« Reply #7 on: September 24, 2015, 01:53:04 PM »
Papa bear makes a good point.


I understand you want to do things in the best way possible, but information overload can cause you to end up with analysis paralysis. You don't want to be that person that keeps reading landlord books for years and attending real estate seminars but never ever does anything.

I haven't read that book, but you can make it very complex or very simple. Don't end up making it so complex that you never get started. I'm sure the ideas in the book help, but they aren't all necessary.

Start looking at real estate listings and ads. Then when you see a good deal you'll know it. Usually something that's a good deal doesn't stay up very long. Look daily.

As far as financing... Have you tried just talking to the bank first? I think topics on creative financing are more for people who have already found out they can't get regular financing.

Louisville

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Re: Does Landlording have to be this complicated?
« Reply #8 on: September 25, 2015, 05:49:05 AM »
Thanks all. Good news.
FatCat, I haven't looked for financing at all - yet. But, I don't think I'd have any trouble, though, with banks or traditional mortgage lenders.
I brought it up because the author I'm reading points out that seller financing, hard money investors, and the like are often cheaper than banks.

FatCat

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Re: Does Landlording have to be this complicated?
« Reply #9 on: September 25, 2015, 07:45:22 AM »
Thanks all. Good news.
FatCat, I haven't looked for financing at all - yet. But, I don't think I'd have any trouble, though, with banks or traditional mortgage lenders.
I brought it up because the author I'm reading points out that seller financing, hard money investors, and the like are often cheaper than banks.

My local bank was cheaper than every other option I looked it. I'm sure this isn't always the case, but it was for me.

thelamb

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Re: Does Landlording have to be this complicated?
« Reply #10 on: September 25, 2015, 08:30:34 AM »
I have no experience myself but have thought about this and assume a lot can be gained/learned by just diving in.  Pick a house, run cursory numbers; if they don't work, pick a different house.  If they do, find a lender.  Run the numbers; if they don't work, pick a different lender.  And so on.  You'll probably quickly end up with a nifty spreadsheet, a list of criteria, a list of lenders and contacts and all sorts of little tools and tricks that make sense to you.  And with something tangible, you can go back to the book, or any number of books, as a reference to see if there are ways you can be more efficient. 

Louisville

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Re: Does Landlording have to be this complicated?
« Reply #11 on: September 25, 2015, 08:32:30 AM »
I have no experience myself but have thought about this and assume a lot can be gained/learned by just diving in.  Pick a house, run cursory numbers; if they don't work, pick a different house.  If they do, find a lender.  Run the numbers; if they don't work, pick a different lender.  And so on.  You'll probably quickly end up with a nifty spreadsheet, a list of criteria, a list of lenders and contacts and all sorts of little tools and tricks that make sense to you.  And with something tangible, you can go back to the book, or any number of books, as a reference to see if there are ways you can be more efficient.
Excellent perspective.

babysteps

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Re: Does Landlording have to be this complicated?
« Reply #12 on: September 25, 2015, 09:57:19 AM »
Thanks all. Good news.
FatCat, I haven't looked for financing at all - yet. But, I don't think I'd have any trouble, though, with banks or traditional mortgage lenders.
I brought it up because the author I'm reading points out that seller financing, hard money investors, and the like are often cheaper than banks.

My local bank was cheaper than every other option I looked it. I'm sure this isn't always the case, but it was for me.

Sounds usual to me.

Might be the difference of $ out of pocket up front (seller financing or hard money might require less) vs. how much you pay in interest and fees for the life of the loan (banks would typically be lower than other sources of money).

alicet

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Re: Does Landlording have to be this complicated?
« Reply #13 on: September 28, 2015, 12:07:24 PM »
You need to stay abreast with the real estate market. Being updated with the market trend is the key to being a successful landlord.

Ricky

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Re: Does Landlording have to be this complicated?
« Reply #14 on: September 28, 2015, 11:09:18 PM »
I have no experience myself but have thought about this and assume a lot can be gained/learned by just diving in.  Pick a house, run cursory numbers; if they don't work, pick a different house.  If they do, find a lender.  Run the numbers; if they don't work, pick a different lender.  And so on.  You'll probably quickly end up with a nifty spreadsheet, a list of criteria, a list of lenders and contacts and all sorts of little tools and tricks that make sense to you.  And with something tangible, you can go back to the book, or any number of books, as a reference to see if there are ways you can be more efficient.

Yes, I think it really is that simple. People telling you that it's incredibly difficult to find deals are basing that claim on their own set of criteria. First, one has to define "deal". For some people, that's making 2% or better on rent/purchase price. For others, that's beating the S&P. See how quickly the word "deal" can become meaningless? Also, some investors steer completely clear of "war zone" areas while others love them and will invest in anything they can make money on. Real estate is highly local and highly anecdotal, and highly theorized in too many books and articles. So, you can't always go by what you read. A recent guest on the BP podcast had the best thing to say about real estate books that I've ever heard: the truly good ones are timeless. They don't chase trends or try to be overly complex, they simply define fundamentals that are always true.

There's endless strategies, which is what makes it sound so confusing. But you really need to find what strategy you like and go for it.

NoNonsenseLandlord

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Re: Does Landlording have to be this complicated?
« Reply #15 on: October 03, 2015, 08:26:17 AM »
I am a regular schlub.  I made it happen, so can you.  I was able to find foreclosures, but regardless, do not buy properties that have poor returns.  That is the secret.  Shoot for 10%+ cash-on-cash returns, no less than 8% cap rates.

In a crappy neighborhood, double the above numbers.

arebelspy

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Re: Does Landlording have to be this complicated?
« Reply #16 on: November 01, 2015, 03:39:11 AM »
No one would buy or read a book like:

Chapter one: locating a house. Look at MLS.

Chapter 2: financing.
Call a bank.

Chapter 3: renting a house.
Post ad on Craigslist

Chapter 4: collecting rent
Deposit check.

Hah.  That's what it is 90% of the time.  It's the 10% edge cases for which you read a dozen real estate books.  ;)
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adamcollin

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Re: Does Landlording have to be this complicated?
« Reply #17 on: November 09, 2015, 01:49:18 AM »
No, it is not at all important .You just need to be familiar with the local real estate market and hire the right agent.

Doubleh

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Re: Does Landlording have to be this complicated?
« Reply #18 on: November 10, 2015, 06:09:30 AM »
Ditto to everything that has been said here.

I read the book and found it fascinating - mainly because most of the creative financing talked about would not be legal in the UK - but my take on it was on how to address the problem of getting started if you don't have a handy few tens of thousands to put down on a deposit for a traditional loan. Remember this is the situation the vast majority of the population are in, including most aspiring landlords. Selling the dream of how you can build a fortune even without startup capital is pretty attractive to the mass market. Lots of the techniques are not about how to make the deal at the lowest cost, but with the lowest out of pocket amount upfront. This is the classic bootstraps dream.

Once you're in the position most on this board are that you can easily qualify for regular loans then much of this becomes moot, or at least an optional tweak that may help you build your empire larger faster