Author Topic: Examples of rentals you own that perform well financially?  (Read 57129 times)

Roland of Gilead

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Re: Examples of rentals you own that perform well financially?
« Reply #50 on: March 31, 2014, 12:26:24 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?

arebelspy

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Re: Examples of rentals you own that perform well financially?
« Reply #51 on: March 31, 2014, 12:28:04 PM »
I'm in the Seattle area. Because of the cost/rent ratios you're referencing, I've given up looking for cash-flow rentals here. I suppose you could make money with flips or on appreciation, but that's not for me. The plan I'm building is based on buying elsewhere and using a property manager. It may take a while, but I plan to not buy anything until I find something with the returns (after costs including PM) similar to the 9% Arebelspy mentioned. In theory, after that, it should be virtually no work, which is what I want :)

It won't be no work (you'll always have to manage the manager), but it should be very little work if you can find a good one.

That's the trick though.  ;)
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CanuckExpat

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Re: Examples of rentals you own that perform well financially?
« Reply #52 on: March 31, 2014, 04:50:55 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?
Not everyhouse, but there is evidence (or at least anecdotes) that larger investors and private equity groups have been doing just what you suggest while house prices were depressed:
http://www.bloomberg.com/news/2013-12-20/wall-street-unlocks-profits-from-distress-with-rental-revolution.html
http://www.usatoday.com/story/money/business/2013/10/28/investors-home-price-gains/3181339/


arebelspy

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Re: Examples of rentals you own that perform well financially?
« Reply #53 on: March 31, 2014, 05:15:10 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?

A bunch of the hedge funds did try this.

They've been having massive management issues.  You imply efficiency in management with multiple properties.  That's not necessarily the case.  They weren't able to scale well on SFRs and have been struggling.  Their vacancy rates are through the roof.

Blackstone has returned to straight up lending money to people who can do it via their new lending arm, B2R.

A lot of the hedge funds that were buying a lot in 2012-2013 are sitting on a decent amount of properties right now as they appreciate. 
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Blindsquirrel

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Re: Examples of rentals you own that perform well financially?
« Reply #54 on: March 31, 2014, 07:06:06 PM »
Quote
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.

   The hedge funds and Blackrock have done ok but not stellar. It does require some work but not as much as you think unless you are doing the rehabs yourself. I have done it for 15 years and have learned a ton as I went along, this year our target is to do 3 houses at a minimum and pick up a gross of $2500-3000 a month, counting on a net of $1250-1500 though I normally do ever so slightly better.  When houses are cheap and paper assets expensive, I buy real assets, when paper assets are cheap, I buy paper assets. If they are both cheap I am a happy fellow. If you take it semi serious in ??? or 10-15 years, RE investing alone will fund your entire lifestyle and the safe withdraw  rate smokes the 4% rule with a much lower beta that the stock market. MMM funds most of his lifestyle off a high end rental or 2 as I recall. To pick up $1500 a month from my real job is not realistic, in the RE investing world it makes you small potatoes. Independently wealthy yes, but small spuds all the same.

arebelspy

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Re: Examples of rentals you own that perform well financially?
« Reply #55 on: March 31, 2014, 07:51:29 PM »
If you take it semi serious in ??? or 10-15 years, RE investing alone will fund your entire lifestyle and the safe withdraw  rate smokes the 4% rule with a much lower beta that the stock market.

Absolutely.   It's my plan for very fast FIRE.  It's not for everyone, but if you get the real estate bug and start to enjoy reading and learning about it, it's a great way to fund a moderate lifestyle.
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clarkfan1979

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Re: Examples of rentals you own that perform well financially?
« Reply #56 on: April 01, 2014, 07:08:49 PM »
All situations are different. Appreciation or cash flow or a combination of both? One of my friends bought a 2 bed/1 bath condo in Orange County, CA for 200K about 2 years ago with no rehab. Similar condos in his complex are now selling for 320K - 330K. He is going to list for 325K in a couple weeks. Even though this is crazy appreciation he has no cash flow as a rental. His mortgage, taxes, insurance and two HOA's amounts to 1700/month and that is about what he could get in rent. I on the other hand have 500/month of cash flow, but only about 2% appreciation so if I sold I wouldn't make much. His makes more sense to "flip" and it makes more sense for me to buy and hold.   

Fishingmn

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Re: Examples of rentals you own that perform well financially?
« Reply #57 on: April 02, 2014, 12:39:58 PM »
Hedge Funds were buying very aggressively in the Twin Cities last year but pulled out of the market in December. Just as well since there's hardly any inventory and prices are up substantially.

Not sure you still want examples but my strategy is much different that arebel. I wanted to buy newer townhouses so I'd have no outside maintenance and less inside issues. I also manage them myself and paid all cash. The 50% rule is really more like the 40% rule since I manage them but it's really not much work and I'm handy. Biggest issue is when I have turnover and need a new tenant but they rent very quickly and majority of my tenants renew. Otherwise, I maybe get 1 call every other month (10 units).

Townhouse #2 - bought January 2011

Purchase + Closing + Rehab = $64,500
Rent - $1,025
Projected vacancy + expenses = 41.5% (but actually been much lower as I've never had vacancy and repairs have been half of my projections)
Cash Flow - $7,196/year
ROI - 11.16%

Townhouse #9 - bought February 2013 (very similar property but prices up substantially)

Purchase + close + rehab = $84,500
Rent - $1,090
Projected vacancy + expenses = 39.7% (taxes are less and rent higher)
Cash flow - $7,884/year
ROI - 9.33%

Admittedly, I can't find anything like these in my market right now (on MLS where I bought mine).

Roland of Gilead

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Re: Examples of rentals you own that perform well financially?
« Reply #58 on: April 02, 2014, 02:34:20 PM »
I thought the point was to leverage your money, not pay cash?

If you are getting a 9% to 11% ROI that seems like a lot of work compared to just buying a REIT that pays 12% or investing in index funds with a historical 9% to 10% return.

My vision of you real estate empire guys was one where you had 20 or 30 properties, all mortgaged at 4% with maybe 5% cash down and you were getting $10,000 a month cash flow after paying taxes/interest.

I guess I should read a few threads on this stuff to be more informed.

$200k

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Re: Examples of rentals you own that perform well financially?
« Reply #59 on: April 02, 2014, 03:00:57 PM »
Being a California native, I am still dumbfounded by the fact that there are properties for <$100k.  I guess I should start looking in other states if I want to get into real estate.

arebelspy

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Re: Examples of rentals you own that perform well financially?
« Reply #60 on: April 02, 2014, 03:43:08 PM »
I thought the point was to leverage your money, not pay cash?

Not necessarily.  Different goals and strategies and individuals dictate things like that.

If you are getting a 9% to 11% ROI that seems like a lot of work compared to just buying a REIT that pays 12% or investing in index funds with a historical 9% to 10% return.

I'm not a fan of REITs rather than real property for a number of reasons.  BP had an article recently with a few of those reasons: http://www.biggerpockets.com/renewsblog/2014/03/31/passive-real-estate-investments-vs-reits/

And versus index funds the big appeal to me is the steady return.  If I can get 7% real return in index funds over the long term, but short term volitility that means I need to cut to a 3-4% SWR, but I can get 12% from real estate and do a WR of something like 8%, that means I can FIRE with half the money (8% SWR vs 4%), and thus nearly twice as fast.  Literally years less.  And much less sequence of returns risk when you do FIRE.

I understand real estate is not for everyone, but your argument of (essentially, paraphrasing) "one must max leverage, minimize down payment" is not valid, and has nothing to do with what makes rentals great income for FIRE.
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Fishingmn

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Re: Examples of rentals you own that perform well financially?
« Reply #61 on: April 02, 2014, 03:48:26 PM »
I thought the point was to leverage your money, not pay cash?

If you are getting a 9% to 11% ROI that seems like a lot of work compared to just buying a REIT that pays 12% or investing in index funds with a historical 9% to 10% return.

My vision of you real estate empire guys was one where you had 20 or 30 properties, all mortgaged at 4% with maybe 5% cash down and you were getting $10,000 a month cash flow after paying taxes/interest.

I guess I should read a few threads on this stuff to be more informed.

I think it depends on your goals and overall plan.

First off, I'm a lot older than some on here as I'm in my early 50's and should be fully retired in a couple years. I view the rentals as a much safer alternative to bonds and basically a replacement to a traditional pension.

In addition to getting the cash flow return I am getting depreciation to protect the income return, inflation protection on my investment as rents tend to rise with inflation and property appreciation (I haven't factored in the 34% gain in the fair market value of the properties but that's what I think I'd get if I sold them today).

Also, in hindsight had I gone all in 3 years ago I maybe could have 10-20 more places at bargain prices but I think it would have been hard to find that many properties while I was working full-time and there's no way I could manage them all.

Basically, it is a much more risk averse strategy than going fully leveraged but right for where I'm at.

taekvideo

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Re: Examples of rentals you own that perform well financially?
« Reply #62 on: April 02, 2014, 05:51:37 PM »
Does my current house count? :)
I bought it a month ago for $60,000. 4 bedrooms, 1750 sf + unfinished basement. (was a foreclosure that last sold for $107k in 2007)
Renting out the 3 extra rooms for a total of $850/month plus shared utilities.
Not bad returns considering I'm also living here myself and getting a big reduction on some fixed utilities ^^
Oh and it's all financed at 4% interest rate (only put 5% down), so it's not even my money I'm earning returns on haha.

Daleth

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Re: Examples of rentals you own that perform well financially?
« Reply #63 on: April 02, 2014, 06:39:34 PM »
If you take it semi serious in ??? or 10-15 years, RE investing alone will fund your entire lifestyle and the safe withdraw  rate smokes the 4% rule with a much lower beta that the stock market.

Absolutely.   It's my plan for very fast FIRE.  It's not for everyone, but if you get the real estate bug and start to enjoy reading and learning about it, it's a great way to fund a moderate lifestyle.

We started less than 3 years ago and are already in a situation where the monthly cash intake from our rentals exceeds the monthly mortgages on our rentals AND the house we live in. Put another way, tenants are paying ALL our mortgages--not just the mortgages on our rentals. Obviously vacancies will put a dent in that, but who here would NOT prefer the occasional, short-term $1000/month dent in an otherwise mortgage-free lifestyle over having a mortgage payment every month for the next 15-20-30 years?

All situations are different. Appreciation or cash flow or a combination of both? One of my friends bought a 2 bed/1 bath condo in Orange County, CA for 200K about 2 years ago with no rehab. Similar condos in his complex are now selling for 320K - 330K. He is going to list for 325K in a couple weeks. Even though this is crazy appreciation he has no cash flow as a rental. His mortgage, taxes, insurance and two HOA's amounts to 1700/month and that is about what he could get in rent. I on the other hand have 500/month of cash flow, but only about 2% appreciation so if I sold I wouldn't make much. His makes more sense to "flip" and it makes more sense for me to buy and hold.   

Yes, buy and hold is a lot harder to do in areas with high real estate prices. Flipping is the most lucrative path there, but it's also riskier.

I view the rentals as a much safer alternative to bonds and basically a replacement to a traditional pension.

That's how I see it too. Every time we've bought a rental property I say to my husband, "I can't believe we can just BUY MONEY!" Because what happens when we put $40k or whatever into a property is that total strangers answer my Craiglist ads and fill out applications asking me to please let them not only pay our mortgage for us, but also give us hundreds of bucks a month (per rental) extra on top of that! And two of the mortgages will be paid off in about 12 years--by which time I expect the rent to have gone up considerably--so these houses are basically ATMs that dispense other people's money to us.

And it makes a lot more intuitive sense to me than the stock market does. By which I mean, I can tell a desirable house when I see it, and I can tell whether it's likely to stay desirable (or get more desirable) long term... but I can't tell a long-term desirable corporation when I see it. Stock prices just seem more randomly volatile to me.
« Last Edit: April 02, 2014, 06:47:51 PM by Daleth »

arebelspy

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Re: Examples of rentals you own that perform well financially?
« Reply #64 on: April 02, 2014, 06:42:41 PM »
If you take it semi serious in ??? or 10-15 years, RE investing alone will fund your entire lifestyle and the safe withdraw  rate smokes the 4% rule with a much lower beta that the stock market.

Absolutely.   It's my plan for very fast FIRE.  It's not for everyone, but if you get the real estate bug and start to enjoy reading and learning about it, it's a great way to fund a moderate lifestyle.

We started less than 3 years ago and are already in a situation where the monthly cash intake from our rentals exceeds the monthly mortgages on our rentals AND the house we live in. Put another way, tenants are paying ALL our mortgages--not just the mortgages on our rentals. Obviously vacancies will put a dent in that, but who here would NOT prefer the occasional, short-term $1000/month dent in an otherwise mortgage-free lifestyle over having a mortgage payment every month for the next 15-20-30 years?

Give it a few more years and they'll not only pay all the mortgages, but all your other bills too, and then you can start saving 100% of your paychecks! That's a fun crossover point.  :)
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
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Nords

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Re: Examples of rentals you own that perform well financially?
« Reply #65 on: April 02, 2014, 06:55:09 PM »
Being a California native Hawaii resident, I am still dumbfounded by the fact that there are properties for <$100k <$200K.  I guess I should start looking in other states if I want to get into real estate.
I know how you feel...

Roland of Gilead

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Re: Examples of rentals you own that perform well financially?
« Reply #66 on: April 02, 2014, 10:35:09 PM »
Do these houses ever need large maintenance like a new roof or do you just budget that into the rent?

What about painting the house, new carpets?

I am not trying to bash here, because I know you guys make this work.  I am just curious how it works.

Would it looks something like this?

$80,000 house, $20,000 downpayment, $60,000 financed at 4% for 15 years = $443 a month payment

Property taxes = $1000 a year, insurance = $200 a year, combined total = $100 a month

Maintenance = $100 a month?

Total expenses $643 a month
Rent $900 a month

Profit $257 a month

In order to retire off of these you would need about 10 houses?

Cwadda

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Re: Examples of rentals you own that perform well financially?
« Reply #67 on: April 02, 2014, 11:39:17 PM »
Arebelspy and other real estate investors, where do you shop for new properties?

fixer-upper

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Re: Examples of rentals you own that perform well financially?
« Reply #68 on: April 03, 2014, 12:42:39 AM »
Do these houses ever need large maintenance like a new roof or do you just budget that into the rent?

What about painting the house, new carpets?

I am not trying to bash here, because I know you guys make this work.  I am just curious how it works.

Would it looks something like this?

$80,000 house, $20,000 downpayment, $60,000 financed at 4% for 15 years = $443 a month payment

Property taxes = $1000 a year, insurance = $200 a year, combined total = $100 a month

Maintenance = $100 a month?

Total expenses $643 a month
Rent $900 a month

Profit $257 a month

In order to retire off of these you would need about 10 houses?

Your method looks good, but you also need to subtract the vacancy rate.

Fishingmn

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Re: Examples of rentals you own that perform well financially?
« Reply #69 on: April 03, 2014, 06:38:16 AM »
Do these houses ever need large maintenance like a new roof or do you just budget that into the rent?

What about painting the house, new carpets?

I am not trying to bash here, because I know you guys make this work.  I am just curious how it works.

Would it looks something like this?

$80,000 house, $20,000 downpayment, $60,000 financed at 4% for 15 years = $443 a month payment

Property taxes = $1000 a year, insurance = $200 a year, combined total = $100 a month

Maintenance = $100 a month?

Total expenses $643 a month
Rent $900 a month

Profit $257 a month

In order to retire off of these you would need about 10 houses?

Most investors use a 50% rule to project expenses. That means that if rent is $900 you should plan on $450/month in expenses which include taxes, vacancy, insurance, utilities, property management and repairs.

Therefore, that leaves you with $450 and if you take out the $443/mo loan payment you would have no return.

Things that could be adjusted -

- If you take out a 30 year loan instead of 15 it would lower the monthly payment.
- If you can get more than $900/mo in rent the numbers will start to look better
- If you plan to manage the properties yourself you might save on expenses and only plan on 40-45% of the rent going to expenses
 -Buy the property for less money

arebelspy

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Re: Examples of rentals you own that perform well financially?
« Reply #70 on: April 03, 2014, 07:37:03 AM »
Do these houses ever need large maintenance like a new roof or do you just budget that into the rent?

Of course.

To add to what Fishingmn (Lately I keep reading it as nm, after someone mentioned that on the E-R.org forums, they put a bug in my brain) said: You budget for all those things, but most months you won't experience them.  So you set that amount aside.

Most months I collect Rent - Mortgage amount - Property Management (some properties I self manage, so I don't have that expense, some properties I don't have a mortgage, so I don't have that expense).  And keep the whole amount.  But some months I collect no rent (vacancy/credit loss).  Some months I pay out for HVAC repairs.  Last month I had to pay for plumbing on a burst pipe, a fridge repair, a washing machine repair, and an A/C repair.   The last maintenance before that was several months though.

You collect the rent, and set aside money for repairs (and for long term capital expenses, like a new roof) even when you aren't experiencing it.

Long term you will experience those things, so you budget for it, and in the months where you don't experience them, you save towards those future expenses.
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Nate R

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Re: Examples of rentals you own that perform well financially?
« Reply #71 on: April 03, 2014, 08:45:55 AM »
I'll play.

My Milwaukee 2BR/1BA 900SF SFR that I kept as a rental, worth probably 40-45K right now. (I put in way more than that, but if I were to sell it, that's what it would bring.)  so, 45K;  Rent of $820.

Duplex I bought for 146K in a nice area of Milwaukee; Rents would've been $825 per unit, but I live in one, rent out the other. 2BR/1BA each unit, about 900-1000 SF each.

Have a relative buying a SFR rental right now, guessing 55K, Rent will be $800ish.

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Re: Examples of rentals you own that perform well financially?
« Reply #72 on: April 03, 2014, 09:31:21 AM »
I owned this stuff (all SF) since the early 90's ... time is your friend ...

15k with closing, 3k rehab, rented for 1300.
17k with closing, 5k rehab, rented for 1050.
32k with closing, no rehab, rented for 1200.
19k with closing, no rehab, rented for 1200.

Duplexes:

32k with closing, 5k rehab, rented for 1400.
40k with closing, 3k rehab, rented for 1300.

Rents are what I get today ... 20 years ago, cut it in half.

Roland of Gilead

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Re: Examples of rentals you own that perform well financially?
« Reply #73 on: April 03, 2014, 09:40:02 AM »
Would something like this seem reasonable (southern Florida house):

http://miami.craigslist.org/pbc/reb/4405204645.html

$74,000

Figure $100,000 by the time you factor closing costs/remodel

Rent it for $1200 a month and be at 1.2%?

Or do you look for much much cheaper?

The reason I ask is that if I were going to own rentals, I think it would be Florida as that is the only area I wouldn't mind spending a decent amount of our retirement time in.

Cwadda

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Re: Examples of rentals you own that perform well financially?
« Reply #74 on: April 03, 2014, 09:43:00 AM »
I owned this stuff (all SF) since the early 90's ... time is your friend ...

15k with closing, 3k rehab, rented for 1300.
17k with closing, 5k rehab, rented for 1050.
32k with closing, no rehab, rented for 1200.
19k with closing, no rehab, rented for 1200.

Duplexes:

32k with closing, 5k rehab, rented for 1400.
40k with closing, 3k rehab, rented for 1300.

Rents are what I get today ... 20 years ago, cut it in half.

That's just plain awesome.

Cwadda

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Re: Examples of rentals you own that perform well financially?
« Reply #75 on: April 03, 2014, 09:43:59 AM »
Arebelspy and other real estate investors, where do you shop for new properties?

Just want to repost this.

Edit: sorry for double post, forgot this forum doesn't auto merge.

arebelspy

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Re: Examples of rentals you own that perform well financially?
« Reply #76 on: April 03, 2014, 10:20:12 AM »
Arebelspy and other real estate investors, where do you shop for new properties?

Just want to repost this.

Edit: sorry for double post, forgot this forum doesn't auto merge.

Off topic for this thread, but here's some previous threads discussing this:
http://www.mrmoneymustache.com/forum/real-estate-and-landlording/any-tips-for-finding-desirable-investment-properties-(aside-from-the-usual-mlsr/

http://www.mrmoneymustache.com/forum/real-estate-and-landlording/real-estate-shopping-beyond-mls/
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tryan

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Re: Examples of rentals you own that perform well financially?
« Reply #77 on: April 03, 2014, 12:46:33 PM »
Quote
That's just plain awesome.
 

Thanx!

Forgot to mention all were bank owned REOs ... some bought at RTC auctions others negotiated directly with the bank.

Daleth

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Re: Examples of rentals you own that perform well financially?
« Reply #78 on: April 03, 2014, 12:56:28 PM »
Would something like this seem reasonable (southern Florida house):

http://miami.craigslist.org/pbc/reb/4405204645.html

$74,000

Figure $100,000 by the time you factor closing costs/remodel

Rent it for $1200 a month and be at 1.2%?

Or do you look for much much cheaper?

The reason I ask is that if I were going to own rentals, I think it would be Florida as that is the only area I wouldn't mind spending a decent amount of our retirement time in.

I don't look at the purchase price of the house as my investment, since I don't pay that--the bank pays it up front by giving me a mortgage, and the tenants pay them back. So I don't factor in the purchase price or the portion of rent that covers the mortgage at all.

I look at it like this:
- my investment is the actual money I have to come up with. In other words, down payment, closing costs and any rehab costs.

- my return is the amount of rent that exceeds the monthly mortgage payment. (That payment includes taxes and insurance, but again, since those costs are entirely paid for out of the rent, I ignore them in my calculations).

- from that excess amount, I then subtract maintenance, vacancy and any utility costs I have to cover (garbage pickup, gas/electric when between tenants...). What's left is my return.

So on a $100k house, my investment will be $25k (banks require 20-25% down on investment properties) plus around $5-7k closing costs, plus rehab. The most I've spent for rehab was around $10k and the least was $0--we both work full time so at the moment fixer-uppers are not our thing).

I bought two houses in that price range and one yields about $925/mo after I pay the mortgage (including taxes/insurance) and the utilities I cover, while the other yields about $700/mo. So in total about $19,500/yr, on a total investment (as defined above) of about $78k. Even subtracting 10-15% for maintenance, and 6% for vacancies (average in my area--these places rent fast), that is an enormous ROI, without even factoring in that the tenants are also buying houses for me!!!

I realize how fortunate I am and how these possibilities don't exist everywhere... low purchase prices usually go along with low rents, and when purchase prices get too high (CA, NYC, HI...) the rents don't keep up. But if you can find $100k-ish properties in Florida, that's awesome. Your next step is to check Craigslist to see what comparable places rent for.
« Last Edit: April 03, 2014, 01:06:04 PM by Daleth »

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Re: Examples of rentals you own that perform well financially?
« Reply #79 on: April 03, 2014, 01:06:56 PM »
Would something like this seem reasonable (southern Florida house):

http://miami.craigslist.org/pbc/reb/4405204645.html

$74,000

Figure $100,000 by the time you factor closing costs/remodel

Rent it for $1200 a month and be at 1.2%?

Or do you look for much much cheaper?

The reason I ask is that if I were going to own rentals, I think it would be Florida as that is the only area I wouldn't mind spending a decent amount of our retirement time in.

<long post about calculating a return>

That's all well and good for calculating an investment afterwards, assuming you're financing, but it doesn't help you compare if it's a good deal or not. What if you paid 100k for it after rehab, but you could have got one a block away that's nicer for 80k?

Roland, I can't tell you if that's a deal or not because I'm not intimately familiar with that market.  You should start studying what the market is doing there and you'll learn what is a good deal.

And, of course, always start by identifying your market first, because a deal in a market you don't want to be in isn't a deal.
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Re: Examples of rentals you own that perform well financially?
« Reply #80 on: April 03, 2014, 03:04:49 PM »
Being a California native Hawaii resident, I am still dumbfounded by the fact that there are properties for <$100k <$200K.  I guess I should start looking in other states if I want to get into real estate.
I know how you feel...

$200,000?? Hah!! Here is what $345,000 buys you in my neck of the woods (there were NO sfr's under $300,000 for sale), and this is the next cheapest one that came up:

http://www.realtor.com/realestateandhomes-detail/7212-Roosevelt-Ave_Falls-Church_VA_22042_M60587-18920

This is a 1,100 sq. ft. house in a questionable neighborhood at best, described as an "INVESTOR'S DREAM .. CASH ONLY, property being sold strictly AS IS. House is stripped down to the studs in most places." Imagine paying $345,000 cash for this p.o.s. that is stripped down to the studs, in a crappy neighborhood. Needless to say, not exactly a great place for buying cash flowing properties.

Edit: Edited to say I'm not trying to one-up anyone or be snarky, just commiserating on being in a place where local investing is out of the question.





« Last Edit: April 03, 2014, 03:25:35 PM by DoubleDown »

fixer-upper

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Re: Examples of rentals you own that perform well financially?
« Reply #81 on: April 03, 2014, 03:17:02 PM »
House is stripped down to the studs in most places." Imagine paying $345,000 cash for this p.o.s. that is stripped down to the studs, in a crappy neighborhood. Needless to say, not exactly a great place for buying cash flowing properties.

If I'm buying a junker, stripped to the studs can be a selling point.  Saves me the work of tearing it out myself.

$345k for that house is crazy!

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Re: Examples of rentals you own that perform well financially?
« Reply #82 on: April 04, 2014, 08:52:03 AM »
That's all well and good for calculating an investment afterwards, assuming you're financing, but it doesn't help you compare if it's a good deal or not. What if you paid 100k for it after rehab, but you could have got one a block away that's nicer for 80k?

If you're investing for cashflow, shouldn't the ROI on your own $ put in be the defining fact of what is a good deal?

Roland of Gilead

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Re: Examples of rentals you own that perform well financially?
« Reply #83 on: April 04, 2014, 09:39:02 AM »
What about buying a storage unit property?  Those seem to do well even in a down market (people lose jobs and have to move, put their junk in storage).  It probably would be great for cash flow but would require significant down payment ($400,000?) for a small one (50 to 100 units).

arebelspy

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Re: Examples of rentals you own that perform well financially?
« Reply #84 on: April 04, 2014, 09:52:08 AM »
That's all well and good for calculating an investment afterwards, assuming you're financing, but it doesn't help you compare if it's a good deal or not. What if you paid 100k for it after rehab, but you could have got one a block away that's nicer for 80k?

If you're investing for cashflow, shouldn't the ROI on your own $ put in be the defining fact of what is a good deal?

No, because it's relative to what else you could get in the market at the time.

A CD at 4% right now would be amazing.  A CD at 4% a decade or so ago would be crap.

If your cash on cash return on a property that costs 100k and rents for 1500 is 9%, that may be great, or it may be crap.

What if you could buy essentially the same property (qualifty-wise, location, etc.) for only 80k (and get just above an 11% return)?  Then that 100k one isn't a deal.  What if there's dozens of them at 70k?  Still like that 9% return?  What if the comparables are 150k?  That 100k is suddenly looking really good.

You can't just look at ROI in isolation from a market and tell if it's a deal or not.
« Last Edit: April 04, 2014, 09:53:39 AM by arebelspy »
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Re: Examples of rentals you own that perform well financially?
« Reply #85 on: April 04, 2014, 09:52:43 AM »
What about buying a storage unit property?  Those seem to do well even in a down market (people lose jobs and have to move, put their junk in storage).  It probably would be great for cash flow but would require significant down payment ($400,000?) for a small one (50 to 100 units).

It's much more of a job/business than real estate investment, IMO, and a lot more work, but it can be a great strategy for some people.
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Re: Examples of rentals you own that perform well financially?
« Reply #86 on: April 04, 2014, 10:01:44 AM »
What about buying a storage unit property?  Those seem to do well even in a down market (people lose jobs and have to move, put their junk in storage).  It probably would be great for cash flow but would require significant down payment ($400,000?) for a small one (50 to 100 units).

It's much more of a job/business than real estate investment, IMO, and a lot more work, but it can be a great strategy for some people.

I wish I had looked into it a few years ago as it would have been a good way to save on taxes.  Unlike most other investments, if I managed the property I could be self employed and dump a ton of money into SEP IRA (our tax rate is 33%+).  I would have had to pay self employment tax of course but it would have been offset by all of the lovely depreciation you could charge.

Probably not a good idea now as we want to be mobile and I would not have time to manage it.

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Re: Examples of rentals you own that perform well financially?
« Reply #87 on: April 05, 2014, 07:46:49 AM »
What about buying a storage unit property? 
That market looked overbuilt in the mid-90s, wonder how it is now?

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Re: Examples of rentals you own that perform well financially?
« Reply #88 on: April 05, 2014, 08:51:42 AM »
What about buying a storage unit property? 
That market looked overbuilt in the mid-90s, wonder how it is now?

It "looked" overbuilt?  According to what metrics? Was it actually overbuilt?
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Re: Examples of rentals you own that perform well financially?
« Reply #89 on: April 05, 2014, 03:38:52 PM »
What about buying a storage unit property?  Those seem to do well even in a down market (people lose jobs and have to move, put their junk in storage).  It probably would be great for cash flow but would require significant down payment ($400,000?) for a small one (50 to 100 units).

It's much more of a job/business than real estate investment, IMO, and a lot more work, but it can be a great strategy for some people.

It can be fairly inexpensive and low maintenance in the right situations.  A guy I know started buying portable storage units, and put them on a gravel pad on his own (rural) land.  As they filled up and paid for themselves, he bought more.  Most of his tenants are long term, so he just sits back and collects the rent every month. 

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Re: Examples of rentals you own that perform well financially?
« Reply #90 on: April 06, 2014, 12:02:21 AM »
It can be fairly inexpensive and low maintenance in the right situations.  A guy I know started buying portable storage units, and put them on a gravel pad on his own (rural) land.  As they filled up and paid for themselves, he bought more.  Most of his tenants are long term, so he just sits back and collects the rent every month.
We have a guy doing that in a Central Oahu gulch:  Waikele Self Storage.
http://waikeleselfstorage.com/

The "property" started in the 1940s as a series of caves drilled into the bedrock lava rock to store ammunition for Navy ships.  This continued up through the 1980s with nuclear TOMAHAWK missiles.  When this part of the base was shut down, he subleased the land from the state and filled the caves with storage lockers.  One of the caves is even cool enough year-round to serve as wine storage.

If you're military, ask for the discount.  They also store vehicles & boats for deployments.
« Last Edit: April 06, 2014, 12:04:26 AM by Nords »

Boz86

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Re: Examples of rentals you own that perform well financially?
« Reply #91 on: April 06, 2014, 07:48:02 AM »
What about buying a storage unit property? 
That market looked overbuilt in the mid-90s, wonder how it is now?
It "looked" overbuilt?  According to what metrics? Was it actually overbuilt?
Beats me, ergo "looked." And by "looked" I mean my wife and I were looking for real estate/business opportunities in the Norfolk, Va area then. We knew a fair number of people getting into them and it just had that oversaturated (or soon to be) feel.

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Re: Examples of rentals you own that perform well financially?
« Reply #92 on: April 07, 2014, 07:10:30 PM »
Own 3 rentals right now.

    1 Duplex up/down by Temple U. Rented at $2,400 per unit so $4,800 paid $400K with a lot of finagling with money back and taxes/misc paid so I really paid net of $380k. No money in for rehab prior to renting.

    1 SFH also by temple rented at $2,400 and bought for $170K last year (they paid transfer tax). I knew the owners had it under rented. I did renovate 1 bathroom and do a little work so say $4K in repairs plus $800 to the tenants who were in it to give me a week early move out so I could do the bathroom.

     I do pay lease up fee for the two 3 units in temple of half a months rent for each unit. so $3,600/year. I live close enough to fix or hire out the rest.

     1 SFH in a Delaware suburb that I lived in and completely rehabbed. Rented at $1625 (actually $1,700 with a $75 early pay discount) paid $170k and put in another $28K. I figured I would live here and made it my own. Def over did it for a flip and prob will only get about $230-235k for it when I sell this year. 

     In the middle of flipping a bit of land (could be good or a colossal waste of 11K) so that I can get back into the game once I sell the SFH in DE. Either buy another in DE as a multi to move into or something else to work on.

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Re: Examples of rentals you own that perform well financially?
« Reply #93 on: April 08, 2014, 01:35:54 AM »
I never knew about the % rules, so that's interesting.  We have two, and I guess one follows the 1% rule and the other the 2% rule.  After paying the mortgages, we net almost the exact same dollar amount from each one, even though one house originally cost much more than the other.

$56,000 purchase price + ~$4,000 closing costs + ~$8,000 improvements = $68,000 (rents for $700-$800/month)
$160,000 purchase price + ~$3,000 closing costs + no improvements = $163,000 (rents for $1,350/month)

Fishingmn

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Re: Examples of rentals you own that perform well financially?
« Reply #94 on: April 08, 2014, 05:54:31 AM »
I never knew about the % rules, so that's interesting.  We have two, and I guess one follows the 1% rule and the other the 2% rule.  After paying the mortgages, we net almost the exact same dollar amount from each one, even though one house originally cost much more than the other.

$56,000 purchase price + ~$4,000 closing costs + ~$8,000 improvements = $68,000 (rents for $700-$800/month)
$160,000 purchase price + ~$3,000 closing costs + no improvements = $163,000 (rents for $1,350/month)

Actually home 1 = 1.1% (750/68000)
And home 2 = 0.8%  (1350/163000)

If the cash flow is equal on both then home 1 was a WAY better investment property since it cost less than half of the first to get the same returns.

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Re: Examples of rentals you own that perform well financially?
« Reply #95 on: April 08, 2014, 06:40:23 AM »
I never knew about the % rules, so that's interesting.  We have two, and I guess one follows the 1% rule and the other the 2% rule.  After paying the mortgages, we net almost the exact same dollar amount from each one, even though one house originally cost much more than the other.

$56,000 purchase price + ~$4,000 closing costs + ~$8,000 improvements = $68,000 (rents for $700-$800/month)
$160,000 purchase price + ~$3,000 closing costs + no improvements = $163,000 (rents for $1,350/month)

This is almost exactly the difference in prices of homes I'm considering -- and I can't decide what to pursue!  See the thread I posted about "how to learn a market".   I don't know how to zero in, don't know how to decide between a neighborhood I'm comfortable with and a price that's attractive / easier to succeed with.

Roland of Gilead

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Re: Examples of rentals you own that perform well financially?
« Reply #96 on: April 08, 2014, 07:13:12 AM »
I would like to own a small marina one day but I do not know if it could be done mustachian style.  I guess it isn't really something you could bootstrap yourself into.  Probably you have to run a store/shop to make it profitable.

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Re: Examples of rentals you own that perform well financially?
« Reply #97 on: April 08, 2014, 07:24:23 AM »
If the cash flow is equal on both then home 1 was a WAY better investment property since it cost less than half of the first to get the same returns.

Indeed, that should mean the return is almost double. 

However with the price to rent ratios so similar, it seems odd that this is the case.  OP did mention mortgage(s) - I'm guessing not an equal amount was put down on each or something like that, because their rates of return shouldn't be that dissimilar.  They probably pencil out within a few percent of each other cash on cash (unless one has some big glaring issues not mentioned - massive HOA fee, ongoing maintenance cost like a pool, or something).
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Re: Examples of rentals you own that perform well financially?
« Reply #98 on: April 08, 2014, 07:25:14 AM »
I would like to own a small marina one day but I do not know if it could be done mustachian style.  I guess it isn't really something you could bootstrap yourself into.  Probably you have to run a store/shop to make it profitable.

The nice thing about FI is being able to do things that aren't necessarily profitable just because you want to do them.
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Re: Examples of rentals you own that perform well financially?
« Reply #99 on: April 08, 2014, 12:44:36 PM »
I never knew about the % rules, so that's interesting.  We have two, and I guess one follows the 1% rule and the other the 2% rule.  After paying the mortgages, we net almost the exact same dollar amount from each one, even though one house originally cost much more than the other.

$56,000 purchase price + ~$4,000 closing costs + ~$8,000 improvements = $68,000 (rents for $700-$800/month)
$160,000 purchase price + ~$3,000 closing costs + no improvements = $163,000 (rents for $1,350/month)

Actually home 1 = 1.1% (750/68000)
And home 2 = 0.8%  (1350/163000)

If the cash flow is equal on both then home 1 was a WAY better investment property since it cost less than half of the first to get the same returns.

In practice, home 1 has been a bit of a pain in the ass, and home 2 has been a dream.  Home 1 is 60 years old and in an older part of town, so it can't attract the quality of renter that home 2, which was brand new when we bought it in 2010, attracts.  That said, home 1 was purchased as an investment property, but we originally intended to live in home 2.  We just got lucky that it rented well instead.