Author Topic: Examples of rentals you own that perform well financially?  (Read 57132 times)

Another Reader

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Re: Examples of rentals you own that perform well financially?
« Reply #150 on: April 27, 2014, 08:58:14 AM »
The point to owning real estate is not to have a safe withdrawal rate.  The point is you never worry about a safe withdrawal rate, because you are not decumulating.  You don't run out of money, because you rely on the income of the asset, not the sale of the asset.  The asset continues to pump out net income year after year, and over time it usually goes up in value.

Blindsquirrel

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Re: Examples of rentals you own that perform well financially?
« Reply #151 on: April 27, 2014, 09:01:10 AM »
   Another reader, I could not agree with you more!  Yeah, the yields can get pretty amazing, current house under contract to close on next week is a big 4 bedroom, puchase 42.5 K, about 10K in renovations, we will rent it for $1100 a month and if recent history proves true again, we will have it rented well before renovations are complete.  Even using the 50% rule it will yield about 12.5% as far as our cash invested.  For the first 5-10 years or so after a renovation our yields generally beat the 50% rule handily baring a horrible tenant. Should have a real yield of closer to 15-18% for quite awhile. Cash on cash yields would be higher with leverage but we have been paying cash only for houses of late as that is one way to really play not to get hurt. We may sell this one though as a somewhat smaller, very similar house 1 block away just went closed with a SP of 121K vs a LP of 125.5K. That house was only on the market about 6 weeks so they probably had a sales contract in the first 2 weeks that it was listed and the SP stunned me. Much as I like the fast cash from flips, we will probably keep and rent for the next 20 years or so as cash flow is king in my book.  Not adjusted for inflation or vacancies, 20 years of gross rent on that house is $264,000. Nothing to sneeze at.

arebelspy

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Re: Examples of rentals you own that perform well financially?
« Reply #152 on: April 27, 2014, 09:09:11 AM »
I have also found it very hard to find either a good property manager or good tenants.  3 evictions (including one for 4 plex I owned briefly) and the condo was on the second eviction for the same tenant before he dropped of the keys and said I'm out of here.

Clif, why don't you talk to me about those things?  I have solutions, I know good property managers, I know where to find good tenants.  I have more units than you, and have owned them for longer, and never had to do an eviction on a tenant (one time a squatter in a flip I did, but that's a crazy story for another time).  :)

However, none of the properties are in the 1% range anymore and I'm wondering do I sell them.

If you do decide to sell, let me know, you can owner finance and I can provide the same steady cash flow you're looking for, without the hassle of tenants, management, etc.  ;)

Hell, sell me a half interest and you can share in the cash flow and appreciation and cash out some of the equity.  :D

That is only a 7.7% return. 

Not counting appreciation.  Have clif tell you his IRR for the last 3 years.  ;)

(Now no, you can't count on that going forward, or at any time, but it does happen at times.)  I'd have fully expected Vegas real estate purchased 2009-2012 to beat the stock market going forward over the next few years - and it's not just hindsight, I bet a lot of money on it.

That being said, yes, going forward one should assess where they're at and what the best move today is.  I looked at selling my Vegas properties, but the cash flow is so good and there's just no better alternative places for my funds.  I like the diversification of holding them as well.  YMMV.
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Another Reader

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Re: Examples of rentals you own that perform well financially?
« Reply #153 on: April 27, 2014, 09:39:41 AM »
I looked at selling my Vegas properties, but the cash flow is so good and there's just no better alternative places for my funds.

Yep, finding alternative investments is the barrier to selling in most cases.

arebelspy

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Re: Examples of rentals you own that perform well financially?
« Reply #154 on: April 27, 2014, 09:54:51 AM »
I looked at selling my Vegas properties, but the cash flow is so good and there's just no better alternative places for my funds.

Yep, finding alternative investments is the barrier to selling in most cases.

Owner financing is a good solution in that case though.  I've thought about doing that years (a few decades?) down the road.  You spread out the capital gains hits over multiple years, and you don't need to find an alternate place for the money because it's still invested in the house, and someone is paying you whatever rate you negotiated (6-9%, maybe more?), hopefully matching or beating the market but with much less variance.  No need for the SWR, because it's steady cash flow (though you'll want to reinvest some of it to deal with inflation issues, naturally).

I've got it on my mind, just attended a three day conference (Paper Source Seminar) on notes.  ;)
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Blindsquirrel

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Re: Examples of rentals you own that perform well financially?
« Reply #155 on: April 27, 2014, 10:15:04 AM »
Quote
Yep, finding alternative investments is the barrier to selling in most cases.
  Owner financing is something I have not done but may do in the future.  The other barrier to selling is recapture of depreciation which is a nasty, nasty part of the tax code. We have 3 houses that we bought on 1031 exchanges that we can never sell outside of 1031 exchanges without getting smoked by the tax man. The rolled forward gain coupled with the appreciation of the new house is a huge incentive to keep forever. My plan is to hold forever until I kick off and then the cost basis will reset to the value when I am pushing up daisies. Thus depriving the evil tax man of a small bit of our loot. I hope. Either way, will not care at that point.

Another Reader

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Re: Examples of rentals you own that perform well financially?
« Reply #156 on: April 27, 2014, 10:19:26 AM »
Yep, probate is an effective tax avoidance strategy.  Leave a smoothly running operation for the heirs.

arebelspy

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Re: Examples of rentals you own that perform well financially?
« Reply #157 on: April 27, 2014, 10:24:07 AM »
Yep, probate is an effective tax avoidance strategy.  Leave a smoothly running operation for the heirs.

Funny how the vast majority of heirs I hear about want nothing to do with that "smoothly running operation."  ;)

I agree that it's pretty much the only exit strategy sometimes, especially in cases of 1031s.  But for just recapturing regular depreciation on a single property, owner financing spreading that out over 15-30 years helps take the sting out.
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Another Reader

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Re: Examples of rentals you own that perform well financially?
« Reply #158 on: April 27, 2014, 10:51:21 AM »
There are often unused carryover depreciation losses that can be used to offset recapture and gain.  If you had high earned income for awhile and could not use all the paper losses or had properties that were cash flow positive before depreciation but cash flow negative after depreciation, you probably have banked some of that. 


Nords

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Re: Examples of rentals you own that perform well financially?
« Reply #159 on: April 27, 2014, 01:11:38 PM »
Condo 53K+3K  Rent 700-750 current value 89K
SFR 67K+3K+3K Rent 850 current value $115K
SFR 97+4K Rent 1015 current value $155K

I had terrific appreciation in the last 2-3 years.
Wow.  That's impressive.

I think you should turn over all your properties to Arebelspy to either manage or sell, or possibly to roll over into new properties!

The other barrier to selling is recapture of depreciation which is a nasty, nasty part of the tax code. We have 3 houses that we bought on 1031 exchanges that we can never sell outside of 1031 exchanges without getting smoked by the tax man. The rolled forward gain coupled with the appreciation of the new house is a huge incentive to keep forever. My plan is to hold forever until I kick off and then the cost basis will reset to the value when I am pushing up daisies. Thus depriving the evil tax man of a small bit of our loot. I hope. Either way, will not care at that point.
If landlords could 1031 a rental property into a REIT then exit strategies would be a lot easier.  The NAREIT-sponsored companies that advertise 1031s into managed TIC properties seem to be exploiting elderly landlords (of perhaps declining cognition) with fear marketing...

golfer44

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Re: Examples of rentals you own that perform well financially?
« Reply #160 on: April 27, 2014, 08:54:27 PM »
My plan is to hold forever until I kick off and then the cost basis will reset to the value when I am pushing up daisies. Thus depriving the evil tax man of a small bit of our loot. I hope. Either way, will not care at that point.

Swap 'til you drop, friend.

juicifer

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Re: Examples of rentals you own that perform well financially?
« Reply #161 on: April 29, 2014, 11:30:19 AM »
Hi, just thought I'd chime in with how I (maybe) got lucky with my real estate investment. I'm writing to share my story and for some advice on what to do next.

I bought a 3800 sq ft property for 200k with a college fund/inheritance I didn't use on school and some family financing (I still am paying about 16k in interest to family members for that loan which will be paid off within another year or two) in a questionable but up and coming neighborhood in 2009. The house was in need or serious updating as it was a crummy 16 bed asssisted living facility when purchased and I slowly converted it into 4 units housing 6 people while living there from July 2009- March 2014 sort of Mr. Money Moustache style with my own labor whenever possible and salvaged items/craigslist deals. Luckily most of the plumbing was intact from prior decades as a rental. From 2009-2014 I spent about 15k in materials and some labor to do the first three units, and then financed 100k over a 10 year period at 2.75% to get 25k to hire out the last 1000sq ft unit rehab and to pay back family members while I moved to a different state for a job.   

I currently pull 43200 a year (3600 a month) uitilities included and spend about 10k a year on utitilites, taxes, insurance, and various fees (I still spend more for repairs) although this is only the second month the house is completely full having just finished the rehab of the unit I occupied. I'm surprised at having used your % tool that I'm only at about 1.2% as I feel as if I'm making a killing! I also set rent slightly below the market rate in order to make renting easy and my target is the 22-30 year old demographic who are perhaps recently out of college or in grad school, don't yet have a very high income, want to save their money, want to live in a city, and want to live in an exciting/eclectic/walkable neighborhood but can't quite afford it. I value my tenants and each of their financial situations/quality of life, am flexible when possible to their needs and have never increased rent. They all treat me and the house well and pay on time.

The house will be paid off in about 9 years and barring catastrophe I'm hoping to be able to support a family with my investement and bank my income for the sake of setting up my children in a similar matter that my family did for me. In the meantime, besides paying for improvements and repairs, what should I do with the profit I make? Put it all in an index fund? Try for another rental once I've saved say 20k for a downpayment? Borrow against the house again in the future in order to purchase more property? I feel as if my purchase even though it's turned out well was a big risk and now wish to do something safe, but I do want to grow my investements. What would you do?  Thanks.

Daleth

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Re: Examples of rentals you own that perform well financially?
« Reply #162 on: April 29, 2014, 12:34:47 PM »
That sounds great, Juicifer. We have some rentals and plan to plow extra money into more, so obviously that's what I would recommend you do. You may also want to max out your 401k, if you have one (and especially if your employer matches contributions). Personally I prioritize cash flow--IOW I would rather put spare money into an income property than my 401k--but you can certainly lower your tax burden with 401k contributions so that's something to consider.

juicifer

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Re: Examples of rentals you own that perform well financially?
« Reply #163 on: April 30, 2014, 10:07:20 AM »
That sounds great, Juicifer. We have some rentals and plan to plow extra money into more, so obviously that's what I would recommend you do. You may also want to max out your 401k, if you have one (and especially if your employer matches contributions). Personally I prioritize cash flow--IOW I would rather put spare money into an income property than my 401k--but you can certainly lower your tax burden with 401k contributions so that's something to consider.

Thank you for the response! I have a pension plan and no 401k match from my employer so I guess I'll save up for another downpayment and see what the local market is like when I've got something to invest. 

JT

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Re: Examples of rentals you own that perform well financially?
« Reply #164 on: May 03, 2014, 03:39:26 AM »
I'm just starting out:

$330,000, rehab $4k, monthly rent $1517

Will have to get my head around the 1%/2% rule, as this is the first time I've heard it (unless it's called something else in NZ!)

One of the calculations I did before purchase was for gross yield/net yield:

total rent less rates divided by cost, which brings a percentage that can be compared against other investment classes.


Daleth

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Re: Examples of rentals you own that perform well financially?
« Reply #165 on: May 03, 2014, 09:45:18 AM »
I'm just starting out:

$330,000, rehab $4k, monthly rent $1517

I wouldn't touch it. The 1% rule says that house would be worthwhile if it brought in $3340/mo in rent; your numbers put the rent at less than half that.

Is that normal for NZ? Very high purchase prices and low rents?

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Re: Examples of rentals you own that perform well financially?
« Reply #166 on: May 04, 2014, 10:41:34 AM »
I'm just starting out:

$330,000, rehab $4k, monthly rent $1517

I wouldn't touch it. The 1% rule says that house would be worthwhile if it brought in $3340/mo in rent; your numbers put the rent at less than half that.

Is that normal for NZ? Very high purchase prices and low rents?

The USA is very much the exception rather than the rule when it comes to these things. I don't know of anywhere else in the developed world where 1%+ is the sensible norm. Deals happen, sure, but nothing like the same way.

OTOH in the US and Canada, the landlord pays property taxes, where in other places this is not true.

arebelspy

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Re: Examples of rentals you own that perform well financially?
« Reply #167 on: May 04, 2014, 11:29:39 AM »
The USA is very much the exception rather than the rule when it comes to these things. I don't know of anywhere else in the developed world where 1%+ is the sensible norm. Deals happen, sure, but nothing like the same way.

Which probably explains why so many foreign nationals invest in US real estate.  I know of a number of Canadians, UKers, Aussies, and Chinese citizens investing in US real estate. I do wonder why more foreign Mustachians aren't.
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totoro

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Re: Examples of rentals you own that perform well financially?
« Reply #168 on: May 04, 2014, 12:08:41 PM »
I looked at selling my Vegas properties, but the cash flow is so good and there's just no better alternative places for my funds.

Yep, finding alternative investments is the barrier to selling in most cases.

Owner financing is a good solution in that case though.  I've thought about doing that years (a few decades?) down the road.  You spread out the capital gains hits over multiple years, and you don't need to find an alternate place for the money because it's still invested in the house, and someone is paying you whatever rate you negotiated (6-9%, maybe more?), hopefully matching or beating the market but with much less variance.  No need for the SWR, because it's steady cash flow (though you'll want to reinvest some of it to deal with inflation issues, naturally).

I've got it on my mind, just attended a three day conference (Paper Source Seminar) on notes.  ;)

Yes, I've thought of this too and believe it to be a good idea.  I working on a legal agreement for rent-to-own. 

totoro

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Re: Examples of rentals you own that perform well financially?
« Reply #169 on: May 04, 2014, 12:18:37 PM »
The USA is very much the exception rather than the rule when it comes to these things. I don't know of anywhere else in the developed world where 1%+ is the sensible norm. Deals happen, sure, but nothing like the same way.

Which probably explains why so many foreign nationals invest in US real estate.  I know of a number of Canadians, UKers, Aussies, and Chinese citizens investing in US real estate. I do wonder why more foreign Mustachians aren't.

In Canada, because of:

1.  income tax issues for Canadians investing in RE in the US;
2.  restrictive rules on having to hire out repairs and renovations;
3.  lack of in-depth knowledge of a market;
4.  competing demands on time getting in the way of figure out #3;
5.  lack of access to financing.

Of all of the, #5 is the most difficult imo.  People I know generally pull out money on a HELOC to invest in RE in the US.  You need to have equity first and this takes a lot of time to get in Canada because of high purchase prices and low ROI on rental income.  Mostly find this in people 45 and older and then they may have other priorities and a more conservative plan for their investments - like RRSPs and TFSAs and paying off the mortgage.

I considered the US closely in 2008, but rejected this ultimately due to the hassle factor and competing priorities.  I can do okay here using my local knowledge, good credit, low-rate mortgages and some sweat equity.  Long-term this is enough.

Another Reader

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Re: Examples of rentals you own that perform well financially?
« Reply #170 on: May 04, 2014, 12:39:33 PM »
I don't know about Mustachians per se, but a lot of Canadians own in Phoenix.  It's a combination of snowbirds and investors.  There are large concentrations of Canadian owners in areas that got hit the worst in the collapse, such as the City of Maricopa.  Snowbirds come for the climate, not the proximity to jobs, so the outer suburbs were very attractive to them.  There are agents and property managers that specialize in working with Canadians because it has been a lucrative way to get through the downturn.

Now that the Canadian dollar buys less and the Phoenix market has appreciated, the purchases are down substantially. 

arebelspy

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Re: Examples of rentals you own that perform well financially?
« Reply #171 on: May 04, 2014, 12:45:32 PM »
I don't know about Mustachians per se, but a lot of Canadians own in Phoenix.  It's a combination of snowbirds and investors.  There are large concentrations of Canadian owners in areas that got hit the worst in the collapse, such as the City of Maricopa.  Snowbirds come for the climate, not the proximity to jobs, so the outer suburbs were very attractive to them.  There are agents and property managers that specialize in working with Canadians because it has been a lucrative way to get through the downturn.

Now that the Canadian dollar buys less and the Phoenix market has appreciated, the purchases are down substantially.

Agreed.  I know of a lot of foreign investors buying US RE, or investing in it in other ways.  It doesn't seem common among non-US Mustachians though.

Pretty much currency risk is the only reason I can think of why I wouldn't invest elsewhere in that scenario, but if you aren't worried about the US currency, and you're getting like 0.3% gross rent to purchase price at home but can get 1-2% (i.e. 3-6x the return) in the US, why not go for that?  In essence turn your 3-4% return into at least 9-12%.
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clarkfan1979

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Re: Examples of rentals you own that perform well financially?
« Reply #172 on: May 21, 2014, 04:57:16 PM »
I don't know about Mustachians per se, but a lot of Canadians own in Phoenix.  It's a combination of snowbirds and investors.  There are large concentrations of Canadian owners in areas that got hit the worst in the collapse, such as the City of Maricopa.  Snowbirds come for the climate, not the proximity to jobs, so the outer suburbs were very attractive to them.  There are agents and property managers that specialize in working with Canadians because it has been a lucrative way to get through the downturn.

Now that the Canadian dollar buys less and the Phoenix market has appreciated, the purchases are down substantially.

Agreed.  I know of a lot of foreign investors buying US RE, or investing in it in other ways.  It doesn't seem common among non-US Mustachians though.

Pretty much currency risk is the only reason I can think of why I wouldn't invest elsewhere in that scenario, but if you aren't worried about the US currency, and you're getting like 0.3% gross rent to purchase price at home but can get 1-2% (i.e. 3-6x the return) in the US, why not go for that?  In essence turn your 3-4% return into at least 9-12%.

The same thing happened in Florida. However, Florida is currently passing new laws to encourage the Canadians to keep buying Florida real estate.

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Re: Examples of rentals you own that perform well financially?
« Reply #173 on: May 24, 2014, 12:45:56 PM »
Arebelspy,
Where do you find good tenants?  I have rentals in the Midwest and with 30+ units, I was evicting at least 10% each month.  Sold "slum" properties in 2007 and 1031 exchanged to better locations.  Now I have only a couple of evictions per year.  However, it is still pretty hit or miss whether I get good applicants.  What are your tricks?

Daleth

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Re: Examples of rentals you own that perform well financially?
« Reply #174 on: May 24, 2014, 02:02:22 PM »
Arebelspy,
Where do you find good tenants?  I have rentals in the Midwest and with 30+ units, I was evicting at least 10% each month.  Sold "slum" properties in 2007 and 1031 exchanged to better locations.  Now I have only a couple of evictions per year.  However, it is still pretty hit or miss whether I get good applicants.  What are your tricks?

10% a year? Good god. How do you screen your applicants? What checks do you run, what references do you request (and call)?

Hugh H

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Re: Examples of rentals you own that perform well financially?
« Reply #175 on: May 24, 2014, 04:55:20 PM »
If it is so easy and requires no work, why isn't some giant corporation buying every house that meets the 2% rule and renting it out?  They would have a huge advantage in getting discount labor and efficiency in management due to multiple properties.

If some giant corp is doing this, why not just invest in them?

They exist, it's called Blackrock. Great investment.

sol

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Re: Examples of rentals you own that perform well financially?
« Reply #176 on: May 24, 2014, 05:53:15 PM »
I had a rental that cost me 44k and rented for $1900/mo and everyone here told me to sell it.  What counts as "performing well" is pretty subjective.

mooreprop

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Re: Examples of rentals you own that perform well financially?
« Reply #177 on: May 25, 2014, 06:49:25 AM »
Daleth,  If you own in the slums in my area, it really isn't possible to get good tenants.  They are living in the slums for a reason.  I would call references, etc. but I would have had an empty house for 2 years if I waited for a qualified applicant.   Younger self was able to buy 60 units in very short time period (since slum houses are cheap) with the plan of living off the cash flow when loans were paid off in 10 years.  My Midwestern state lost a lawsuit regarding its property tax system and the result was that the property taxes on all older homes took a huge hit. (Example:  House had $400 per year taxes and the next year it was $3200 per year.  This was a house where gross rents were $7000 per year.)   My older slum houses were no longer cash cows, so we sold them.  Best education in how to manage rentals that you will ever find.  If you can manage slum houses, nice houses are a piece of cake!
Older and wiser self owns newer houses in a nice area where we can get good tenants.  I was just wondering how others find good tenants.  Always looking to learn.

Daleth

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Re: Examples of rentals you own that perform well financially?
« Reply #178 on: May 25, 2014, 08:04:52 AM »
Daleth,  If you own in the slums in my area, it really isn't possible to get good tenants.  They are living in the slums for a reason.  I would call references, etc. but I would have had an empty house for 2 years if I waited for a qualified applicant.   Younger self was able to buy 60 units in very short time period (since slum houses are cheap) with the plan of living off the cash flow when loans were paid off in 10 years.  My Midwestern state lost a lawsuit regarding its property tax system and the result was that the property taxes on all older homes took a huge hit. (Example:  House had $400 per year taxes and the next year it was $3200 per year.  This was a house where gross rents were $7000 per year.)   My older slum houses were no longer cash cows, so we sold them.  Best education in how to manage rentals that you will ever find.  If you can manage slum houses, nice houses are a piece of cake!
Older and wiser self owns newer houses in a nice area where we can get good tenants.  I was just wondering how others find good tenants.  Always looking to learn.

Yeah, location is key. That said, one of our houses is in a... let's say... "transitional" area, in other words it's on the nice side of a very borderline neighborhood. I say "borderline" because it's not like it's high-crime--no drive-bys or anything--but even on the nicer side where this house is, stuff does get stolen off porches, leaving the door unlocked is not a good idea, etc. But that's why it was cheap to buy and that's why we can rent it out for a couple hundred less a month than people would pay in nearby nicer neighborhoods, and we've found that the tenants we get are young professionals, like the kind who just graduated from nursing school and are starting their first job at the local hospital, or have just moved from a fast-food career into something more substantial. We also get some terrible applicants but since there are good ones, that's obviously who we pick.

And I think the reason we get good tenants despite the area is that the house is gorgeous. Hardwood floors, big kitchens with gas stoves and nice cabinets, nice paint jobs (not all white/beige; there are accent walls, nice colors etc.), garages... basically the place has amenities that would cost hundreds more a month in a better neighborhood, and it photographs well so people who care about such amenities respond to the Craigslist ads. If it had drop ceilings, fluorescent lighting and 24" electric stoves stuffed into awkward little corners, as many houses in bad or transitional areas do, we would never get these good tenants to even look at the place, much less fill out an application form and pay me $30 to run the credit and criminal background check.

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Re: Examples of rentals you own that perform well financially?
« Reply #179 on: May 25, 2014, 11:17:29 AM »
Where do you find good tenants?

Good screening processes.

You answered your own question:
If you own in the slums in my area, it really isn't possible to get good tenants.

Own decent properties in decent areas.  Charge just below market. Get decent to good tenants.

What are your tricks?

I don't know that I'd call them "tricks" per se, but make your property as attractive as possible.  Curb appeal, good photos for your listing, good advertising (multiple avenues/venues), slightly below market rent, etc.
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JoJoP

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Re: Examples of rentals you own that perform well financially?
« Reply #180 on: May 26, 2014, 06:20:49 PM »
Section 8 might be a good option for you.  Look up gosection8.com to list your rentals there.   

My best luck has been with nice, well screened tenants that want a nice home.    I listen for phrases like "I'm a real clean freak".   We don't remodel our rentals like a flip house, but we do make them nice... clean, well repaired, smelling good, windows sparkling.   I also do a minor staging (flowers, art, champagne glasses, fake fruit basket, clean towels in the the bathroom with ribbons tied around them) when I take my photos. 

 Beware the bargain seekers.  My worst house is also my worst rental..  the thing is a wreck and the tenants are real whiners.  These complainypants tenants now have mom (not on the lease) moved in on a full time basis.   I'd kick them out except we'd have to remodel the whole thing to get the type of renters that we'd want in there. 

Nate R

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Re: Examples of rentals you own that perform well financially?
« Reply #181 on: May 27, 2014, 08:53:28 AM »

Yeah, location is key. That said, one of our houses is in a... let's say... "transitional" area, in other words it's on the nice side of a very borderline neighborhood. I say "borderline" because it's not like it's high-crime--no drive-bys or anything--but even on the nicer side where this house is, stuff does get stolen off porches, leaving the door unlocked is not a good idea, etc. But that's why it was cheap to buy and that's why we can rent it out for a couple hundred less a month than people would pay in nearby nicer neighborhoods, and we've found that the tenants we get are young professionals, like the kind who just graduated from nursing school and are starting their first job at the local hospital, or have just moved from a fast-food career into something more substantial. We also get some terrible applicants but since there are good ones, that's obviously who we pick.

And I think the reason we get good tenants despite the area is that the house is gorgeous. Hardwood floors, big kitchens with gas stoves and nice cabinets, nice paint jobs (not all white/beige; there are accent walls, nice colors etc.), garages... basically the place has amenities that would cost hundreds more a month in a better neighborhood, and it photographs well so people who care about such amenities respond to the Craigslist ads. If it had drop ceilings, fluorescent lighting and 24" electric stoves stuffed into awkward little corners, as many houses in bad or transitional areas do, we would never get these good tenants to even look at the place, much less fill out an application form and pay me $30 to run the credit and criminal background check.

Our experience with our SFR in a similar area has been the same. Nicely redone inside, nicely done backyard. Get tenant applicants that are all over the map so far. Some great, some terrible, but so far we've been able to easily choose great tenants.

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Re: Examples of rentals you own that perform well financially?
« Reply #182 on: May 28, 2014, 11:04:35 AM »
I had a rental that cost me 44k and rented for $1900/mo and everyone here told me to sell it.  What counts as "performing well" is pretty subjective.

I just read the linked thread to find out about this amazing situation... and found that you left out a pretty important detail. It rents for $1900/mo, but there's a monthly mortgage payment of $1700+.

It still might be a good deal, but your description of it here was misleading (to me, at least).

sol

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Re: Examples of rentals you own that perform well financially?
« Reply #183 on: May 28, 2014, 01:43:03 PM »
found that you left out a pretty important detail.

Yes, I'm sneaky like that. 

arebelspy

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Re: Examples of rentals you own that perform well financially?
« Reply #184 on: May 28, 2014, 02:21:58 PM »
found that you left out a pretty important detail.

Yes, I'm sneaky like that.

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electriceagle

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Re: Examples of rentals you own that perform well financially?
« Reply #185 on: May 29, 2014, 06:15:14 PM »
We talk a lot about the 1% rule and making sure that properties will generate good cashflow, but there is another element to consider: tenant quality.

According to my observations, tenant quality and returns are inversely correlated. Properties in cities that are doing well (SF, NY) often cashflow 0.3-0.5% while those in areas of no hope can throw off 4-5%. I suspect that this is because everyone wants to buy in areas that are doing well and government programs (section 8, etc) provide a floor on rents in economic dead zones.

Unfortunately, you pay for those high rates of return with evictions, damage, tenant craziness and sleepless nights. Also, maintenance and repairs are a bigger deal on cheaper properties: a $500,000 1500 sqft property that rents for $4000/mo needs the same dollar amount in maintenance and repairs as a $120,000 1500 sqft property that rents for $1000/mo.

The point that I am slowly getting around to: cash flow isn't everything. Somewhere out there is an efficient frontier curve that relates tenant quality and rate of return. Beating that efficient frontier is quite an art.

arebelspy

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Re: Examples of rentals you own that perform well financially?
« Reply #186 on: May 29, 2014, 06:41:04 PM »
There's a correlation between tenant quality and property quality, certainly.  You want properties that are decent.

The problem is that there are both good and bad tenants everywhere.  It's not like all the bad tenants moved out of SF and DC and NYC and into Detroit and Memphis and Vegas.

Get decent properties in the good cash flowing areas and you'll get decent tenants.  Just because you buy in an area where cashflow sucks (SF, for example), that doesn't mean you'll get good tenants.

Learn to screen tenants and price just below market rent, and you'll be happy.  Don't compromise on returns and counting on appreciation.
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JoJoP

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Re: Examples of rentals you own that perform well financially?
« Reply #187 on: May 29, 2014, 09:40:47 PM »

There's a correlation between tenant quality and property quality, certainly.  You want properties that are decent. <snip>

Learn to screen tenants and price just below market rent, and you'll be happy.  Don't compromise on returns and counting on appreciation.
...
These are the words that I live by as a landlady- and yet we've been lucky enough to have terrific appreciation, too.   

We opt for well screened tenants (do the best you can, take the time to call the references), and a rent that's priced to be a good deal, which makes for a happy situation.   Most of my rentals have a nice edge... several of them border a nature preserve with a duck pond view; the others are clean and/or remodeled.   They aren't too big-- there are many estate homes in my area, but the demand is for reasonable rent and smaller homes.  There's a huge shortage of nice, affordable SFR for rent. 

We treat our clients (aka tenants) well.  We buy them baby shower gifts, bring fruit baskets,  and the like.  We are very friendly without crossing over to being "friends".   

As I said upthread, the only tough rental I have is the one that is  a fixer upper that is  kind of marginal.  The type of tenant that I hope for simply wouldn't want that house!  I bought it with the tenant in place but--Marginal house = marginal tenant. 

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Re: Examples of rentals you own that perform well financially?
« Reply #188 on: May 31, 2014, 02:39:54 PM »
I purchase my first rental property about six months ago. It was good to go with no repairs needed. I actually had tenants lined up two weeks before I closed on it, and they were okay with me making improvements the first week after it closed (while they were moving in.)

2bdr 2ba w/attached garage (roughly 1300 sf)

All in, total cost = $102,000
Rental amount = $800
Mortgage (all-in) = $715 (includes HOA)

So I'm slightly less than the 1.0% (technically about .8%) and my income flow is about $85/mo. While the margin isn't great at the moment, it is a positive margin. I can raise the rent a little higher when the current tenants leave to cover future expenses.

But for now, the mortgage is low in comparison to my income so there is no issue covering it if needed, it's in a great location near a growing state university, I get the experience of being a landlord and getting my feet wet, and I'm building equity. An added bonus, the water heater and gas furnace are new.

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Re: Examples of rentals you own that perform well financially?
« Reply #189 on: June 01, 2014, 01:07:40 PM »
I purchase my first rental property about six months ago. It was good to go with no repairs needed. I actually had tenants lined up two weeks before I closed on it, and they were okay with me making improvements the first week after it closed (while they were moving in.)

2bdr 2ba w/attached garage (roughly 1300 sf)

All in, total cost = $102,000
Rental amount = $800
Mortgage (all-in) = $715 (includes HOA)

So I'm slightly less than the 1.0% (technically about .8%) and my income flow is about $85/mo. While the margin isn't great at the moment, it is a positive margin. I can raise the rent a little higher when the current tenants leave to cover future expenses.

But for now, the mortgage is low in comparison to my income so there is no issue covering it if needed, it's in a great location near a growing state university, I get the experience of being a landlord and getting my feet wet, and I'm building equity. An added bonus, the water heater and gas furnace are new.

Ugh.

Rent - vacancy - property management - insurance - interest - repairs/maintenance - property tax - HOA is your cost.

Repayment to capital and anything left over is your 'win'.

GrayGhost

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Re: Examples of rentals you own that perform well financially?
« Reply #190 on: June 02, 2014, 02:21:36 AM »
Yeah, that's a pretty poor deal. It fails the 1% rule of them, as well as the 50% rule of thumb. Sure, you might come out slightly ahead in the long run, but it's not the best way to invest your dollars at all, if you're barely getting a 1% return on it.

You can speculate on appreciation all you like, and some people do that very well, but that's not for me. For me, cash flow is king.

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Re: Examples of rentals you own that perform well financially?
« Reply #191 on: June 17, 2014, 07:59:58 PM »
All of my units are fully furnished - including pots, pans, bedding, towels, etc.

Townhouse - 2 bed. Paid 36K. 4K reno. 1.5K for furniture. Rent is $2000 but I pay all utilities, Internet & cable TV (about $200 a month). HOA $270. Taxes $490 a year. Net over 1K a month.

Condo - 1 bed. Paid 47K. No reno. 2K for furniture. Rent is $1700 but I pay all utilities, Internet & cable TV (about $200 a month). HOA $220. Taxes $330 a year. Net over 1K a month.

Condo - 2 bed. Paid 45K. 3K reno. 2K for furniture. Rent is $1500 but I pay all utilities, Internet & cable TV (about $150 a month). HOA $310. Taxes $400 a year. Net just under 1K a month.

SFH - 3/2. Paid 68K at auction. 12k reno. 3K for furniture. Rent varies from $1700 to $3200 but I pay all utilities, Internet & cable TV (about $250 a month). HOA $50. Taxes $700 a year. Net varies widely. That was our former home in AZ and we still use it to thaw out in winter. Want to dump it but current value is $170K so tax hit will be high on 75K gain. great house / neighborhood but the schools in AZ are subpar.

gimp

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Re: Examples of rentals you own that perform well financially?
« Reply #192 on: June 19, 2014, 06:11:35 PM »
arebelspy - You own property all over the map. Do you visit before you buy? Do you visit a bunch of places before buying one? Do you leave the visiting to people you trust in areas you know? How does that all factor into your costs per property?

arebelspy

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Re: Examples of rentals you own that perform well financially?
« Reply #193 on: June 19, 2014, 06:20:52 PM »
arebelspy - You own property all over the map. Do you visit before you buy? Do you visit a bunch of places before buying one? Do you leave the visiting to people you trust in areas you know? How does that all factor into your costs per property?

Great question, and one I've gotten before.  I'm going to start a new thread for the answer.

EDIT: Boom.
« Last Edit: June 19, 2014, 06:30:54 PM by arebelspy »
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jmoney

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Re: Examples of rentals you own that perform well financially?
« Reply #194 on: June 20, 2014, 09:45:52 PM »
A few best

Bought 21 k, $10 k rehab rent $850. House nextdoor is smaller and sold for $108 k 6 months ago. Poor bank lended $110 k on this pre-crash.
Bought 6.5 k, $10 k rehab rent $575. Poor bank lended $100 k on this pre-crash. They walked away with $1500 from closing.
Bought $10 k, $7.5 k rehab rent $825. Poor bank lended $75 k pre-crash.


Blindsquirrel

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Re: Examples of rentals you own that perform well financially?
« Reply #195 on: June 21, 2014, 03:20:22 PM »
jmmoney, you fricken rock! WTH market is that?

usmarine1975

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Re: Examples of rentals you own that perform well financially?
« Reply #196 on: July 03, 2014, 08:18:09 AM »
Best purchase in my 14 years was last year

58k purchase and closing 1k rehab   =rent 895

On our 2nd year with this property.
Have 6 properties with 2 being bought at or near the top of the market.
All properties will be free and clear in 15 years.
Rents cover all mortgages and most expenses including our own home mortgage.

Will clear 60k+/year when free and clear without adding more properties.

I buy local our market is pretty descent for buying.  The thought of buying distant is intriguing.

Spent 15 years as a carpenter so I can do most work.  I hire plumbers and electricians.

thedayisbrave

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Re: Examples of rentals you own that perform well financially?
« Reply #197 on: July 03, 2014, 07:28:19 PM »
First and only purchase (so far): $103,000 that rents for $1400.  Definitely not the highest I've seen here, but decent considering I went into it completely green.  I'm still pretty green, but have come a long way since.

It's a 4 bed/4 bath condo built specifically for student living.  Managing it myself, the cap rate is about 10%.  Biggest problem I've run into was the PM company (it was managed the first year) not being careful about tenants and they trashed the place/got evicted for non payment of rent/etc.  I'm more selective with tenants (I currently live in the property too) and it's been pretty smooth sailing since.  Upside is since it's located a few miles from a public university, vacancy has been near 0.

fixer-upper

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Re: Examples of rentals you own that perform well financially?
« Reply #198 on: July 04, 2014, 12:05:09 AM »
Portable storage units next to my shop.  I paid 2500 each, and they rent for $75/mo.  Theres no property tax since they aren't permanent structures, almost no maintenance, very little turnover, and never having to worry about eviction is nice, too.

My absolute best performing rental is a "roofing tool kit", with a compressor, scaffold, nail gun, ladder, tarps, shingle stripper, and wheelbarrow.  I collect enough money to replace everything as security, and give them 80% back if they return it unbroken within a month.  It's been out around twenty times, and takes up very little shop space, since everything fits on the scaffold.
« Last Edit: July 04, 2014, 12:06:55 AM by fixer-upper »

totoro

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Re: Examples of rentals you own that perform well financially?
« Reply #199 on: July 04, 2014, 10:41:58 AM »
All of my units are fully furnished - including pots, pans, bedding, towels, etc.

Townhouse - 2 bed. Paid 36K. 4K reno. 1.5K for furniture. Rent is $2000 but I pay all utilities, Internet & cable TV (about $200 a month). HOA $270. Taxes $490 a year. Net over 1K a month.

Condo - 1 bed. Paid 47K. No reno. 2K for furniture. Rent is $1700 but I pay all utilities, Internet & cable TV (about $200 a month). HOA $220. Taxes $330 a year. Net over 1K a month.

Condo - 2 bed. Paid 45K. 3K reno. 2K for furniture. Rent is $1500 but I pay all utilities, Internet & cable TV (about $150 a month). HOA $310. Taxes $400 a year. Net just under 1K a month.

SFH - 3/2. Paid 68K at auction. 12k reno. 3K for furniture. Rent varies from $1700 to $3200 but I pay all utilities, Internet & cable TV (about $250 a month). HOA $50. Taxes $700 a year. Net varies widely. That was our former home in AZ and we still use it to thaw out in winter. Want to dump it but current value is $170K so tax hit will be high on 75K gain. great house / neighborhood but the schools in AZ are subpar.

May I as where in the Midwest generally and who your target market is for furnished rentals?  Are deals like this still possible in this area?