Author Topic: Getting started with rental property  (Read 2101 times)

uppy

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Getting started with rental property
« on: September 29, 2016, 04:51:24 PM »
Accidentally posted this in Investor Alley... Reposting here:
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I'm asking for future reference -- I don't have near enough cash to buy a house for myself much less a rental property. But I have seen people on MMM saying "Don't buy a house until you are $100K net worth." Currently I am worth...ahem...$4K as I pay off college loans with about 50% of my income each month.

All things being equal, at what point is it financially advantageous to mortgage a rental property? Never? Or does it still make sense as long as you can get in rental income each month more than the monthly payment with interest? ...and is it Mustachian to do so or just shoveling things around?

Pardon my noob-ness on this. Really I am just looking at my (relatively low) income and how long it will take to get to FI. Even at saving 50% of my income, all the calculators say I will be 50+ by the time I reach FI. I would love to speed this up a bit and I think having a rental property might be an investment up my alley.

I will of course be throwing money at my 403b and index funds as well...but gosh, at 32, 50 is a long ways off.
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SwordGuy

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Re: Getting started with rental property
« Reply #1 on: September 29, 2016, 05:28:16 PM »
If you are saving 50% of your salary you're doing great!

Congrats!

Here are a couple of books that might be useful:

https://www.amazon.com/Estate-Investor-Financial-Measures-Updated/dp/1259586189/ref=sr_1_1?ie=UTF8&qid=1475191184&sr=8-1&keywords=gallinelli

Gallinelli's book goes into the hard numbers of evaluating a rental property.  It's got a lot of math in it.  Relatively simple math, but a lot of it.  It's the only book I've found that really goes into the money aspects of evaluating property in real depth.

Learn how to run the numbers or risk losing your shirt.

Here's another book that talks about structuring real estate deals.   There are tricks that can reduce the amount of money it takes to get a property.  There are gobs of this type of book around, you can pick up good tips from any of them:

https://www.amazon.com/Millionaire-Real-Estate-Investor/dp/0071446370/ref=sr_1_1?ie=UTF8&qid=1475191529&sr=8-1&keywords=millionaire+real+estate+investor

Another great place to learn is your local Real Estate Investor's Association.   

Best of luck, and make sure you can handle some major expenses like a busted HVAC system...

uppy

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Re: Getting started with rental property
« Reply #2 on: September 30, 2016, 05:59:38 AM »
If you are saving 50% of your salary you're doing great!

Congrats!

Here are a couple of books that might be useful:

https://www.amazon.com/Estate-Investor-Financial-Measures-Updated/dp/1259586189/ref=sr_1_1?ie=UTF8&qid=1475191184&sr=8-1&keywords=gallinelli

Gallinelli's book goes into the hard numbers of evaluating a rental property.  It's got a lot of math in it.  Relatively simple math, but a lot of it.  It's the only book I've found that really goes into the money aspects of evaluating property in real depth.

Learn how to run the numbers or risk losing your shirt.

Here's another book that talks about structuring real estate deals.   There are tricks that can reduce the amount of money it takes to get a property.  There are gobs of this type of book around, you can pick up good tips from any of them:

https://www.amazon.com/Millionaire-Real-Estate-Investor/dp/0071446370/ref=sr_1_1?ie=UTF8&qid=1475191529&sr=8-1&keywords=millionaire+real+estate+investor

Another great place to learn is your local Real Estate Investor's Association.   

Best of luck, and make sure you can handle some major expenses like a busted HVAC system...

Awesome, thanks for the reference material. I will look into those.

waltworks

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Re: Getting started with rental property
« Reply #3 on: September 30, 2016, 09:41:18 AM »
Just read a bunch of threads here and lurk. You are in no hurry, and your questions have been answered many times before.

-W

Ensign1999

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Re: Getting started with rental property
« Reply #4 on: September 30, 2016, 12:27:21 PM »
Like Walt said, reading a bunch of threads here will give you some ideas.  You are in no rush.  Also, just because the calculators are saying you will be 50 before you reach FI doesn't mean it can't happen sooner.  Look at some other possible revenue streams/side gigs that might accelerate your path to FI. 

A simple example would be becoming a referee: I've been a soccer ref for years.  I stopped when we made our most recent move, but I'm looking to pick it back up again come January.  I get paid really pretty good money to run around the field (good exercise) and do something I enjoy.  It isn't for everyone, but it is a pretty easy way to boost income.  On an average Saturday morning, I would work three games and make anywhere from $100 to $200.

I know your question was about when and how to get into real estate investing, but that sounds like it is a long ways off.  Right now I would look at simpler and less risky ways to increase your income while you continue to work your expenses down.

EAL

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Re: Getting started with rental property
« Reply #5 on: September 30, 2016, 02:58:31 PM »
For us, rental property has been a great investment and way to grow our wealth when we were both working as civil servants (low salaries) and starting out with a lot of student loan debt.  I only buy properties that cash flow, meaning I get back my monthly payment and then some.  I think it is for sure worth buying property with a mortgage because the interest expenses you pay, are deductible from the income you make on the property when you pay income taxes.  Just start saving, the first one is the hardest then you can save everything you make and put it into buying your next several.  The great thing about buying rental property in your twenties or thirties is it can be paid off by the time you retire and then it's all income minus repair expenses.  The biggest thing to do now, is start setting money aside for a down payment. Don't get discouraged if you work hard and keep saving, you'll get there.

SwordGuy

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Re: Getting started with rental property
« Reply #6 on: September 30, 2016, 05:35:21 PM »
It is actually possible to purchase a house with little or no money down and without getting a bank involved at all.

But it takes either a lot of looking or a bit of luck.   Many of the real estate investment books or articles will discuss making use of owner financing.


Enigma

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Re: Getting started with rental property
« Reply #7 on: October 13, 2016, 09:57:13 AM »
Are you buying a house in country of 'Belize'? or the US?

Buying houses will vary drastically by location.  If you have an American income (with the tax deferred accounts) and you are living in Belize where the cost of living is much lower you have a lot of buying power.

clarkfan1979

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Re: Getting started with rental property
« Reply #8 on: October 14, 2016, 12:51:43 AM »
For us, rental property has been a great investment and way to grow our wealth when we were both working as civil servants (low salaries) and starting out with a lot of student loan debt.  I only buy properties that cash flow, meaning I get back my monthly payment and then some.  I think it is for sure worth buying property with a mortgage because the interest expenses you pay, are deductible from the income you make on the property when you pay income taxes.  Just start saving, the first one is the hardest then you can save everything you make and put it into buying your next several.  The great thing about buying rental property in your twenties or thirties is it can be paid off by the time you retire and then it's all income minus repair expenses.  The biggest thing to do now, is start setting money aside for a down payment. Don't get discouraged if you work hard and keep saving, you'll get there.

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