Author Topic: Quick Rental Property Success Stories  (Read 2031 times)

wealthviahealth

  • Stubble
  • **
  • Posts: 214
Quick Rental Property Success Stories
« on: August 26, 2020, 09:18:11 AM »
I would love to hear any short success stories on personal experiences getting into rental properties.
I just moved to a LCOL area and am now finally coming around to the idea that real estate could be a good investment option for me ( I have benefited greatly from primarily all stock approach in my 8 year earning/investing career)
Obviously it all depends on the property,market, location but could use some additional inspiration to free up some of my stock/cash reserve for a 20% downpayment on a rental property or primary home that I also rent out a room or two.

srad

  • Stubble
  • **
  • Posts: 164
Re: Quick Rental Property Success Stories
« Reply #1 on: August 26, 2020, 12:30:00 PM »
Here's some motivation for you.

I have a deal where I made a 100% return over 3 years, purchased at 750k with 25% down (185k), put 90k in for renovation, it was just appraised for 1.026.  275k in from me, value increase 276k.  I though that was great then i remembered i purchased several shares of Apple stock around March of 2018 for $170 a share, apple is now $505 a share, almost 300% return.  Making that 100% return took hundreds of hours of my time, the Apple stock,,,  just the wire from my bank account to brokerage account.

Be careful of what you wish for ;)



Evie

  • 5 O'Clock Shadow
  • *
  • Posts: 81
Re: Quick Rental Property Success Stories
« Reply #2 on: August 28, 2020, 02:31:47 PM »
Bought a duplex for our primary residence (first home purchase) with a 3-1 front house and a 1-1 back unit.  When we first bought it took about six months to get it fixed to have a tenant in place and the rent covered a third of our expenses.  Fast forward almost six years and that back unit now covers half our mortgage plus taxes.  When you purchase they do not count potential rental income--that's just a bonus once you get it going.

Over the years we have had to invest money in fixing the place, but the hope is to keep the property and move out of the front unit (which should cover the entire monthly nut of mortgage and taxes).  That would let us cash flow on the property 7 or 8 years into the mortgage in a high cost of living area. 

We are rapidly outgrowing our place, but I never want to move into something without a rental again.  What we have learned is that a studio or one bedroom is our rental sweetspot, from the perspective of being able to get a decent chunk of change but a light foot print (typically we have rented to a single young professional and one time to a couple but it's a pretty small unit).  We want the next place to have a separate unit with no shared walls and ideally a way to split the yards off.  Getting financing on a duplex or an SFR with a unit is slightly trickier, but not by much, and if you can owner occupy financing is still way easier than any other method. 

We plan to use this method to essentially buy and hold, only moving out to rent the main house when we are ready to move on to the next one.  I'm someone who has always had a side gig/second or third job so I don't mind the work, but it is definitely a time suck certain times of the year. You have to want to do the work or hire it out. 
Getting and screening a tenant is a lot of work, but the work is really seasonal.  It's a business so you need some cash reserves and you need to go in with the mindset you will need to invest money and fix any issues quickly (it's not just cashing checks).  But we have had a really great experience. 

Evie

  • 5 O'Clock Shadow
  • *
  • Posts: 81
Re: Quick Rental Property Success Stories
« Reply #3 on: August 28, 2020, 02:33:31 PM »
And I second that if you have had success with traditional passive investing that I would only get into real estate if you wanted to add a unit to your property or get a duplex to owner occupy.  I also focus on high cost of living areas since in low cost of living areas many of your better tenants just become owners themselves.

FINate

  • Handlebar Stache
  • *****
  • Posts: 2091
Re: Quick Rental Property Success Stories
« Reply #4 on: August 28, 2020, 06:29:39 PM »
We had reasonably good success with investment property. Bought in 2013 and it provided solid income over ~7 years, and recently sold for quite a bit more than we paid. No regrets, but in hindsight we would have done better just staying in equities. Would I do it again? Maybe, but only if I found the exact right location/property. However, I will never landlord in California again due to the regulatory environment, though that's a topic for a different thread.

Rentals are a business and there's nothing particularly special about real estate. Like all businesses there are good ones and bad ones. Success is largely determined at the point of purchase. If you overpay for a property it's nearly impossible to recover unless you happen to get lucky and buy in a place where rents rapidly increase. And capital appreciation is very unlikely to bail you out in a LCOL area. However, get a good deal and it's likely to work out well.

So treat it like a business and do everything by the numbers. Evaluate potential properties on a spreadsheet comparing metrics like cap rate, IRR, ROE, etc. This should be cross compared to things like the risk free rate, equities, and bonds -- no point getting into landlording if it doesn't compare favorably with passive investments.

You should know, off the top of your head, what different types of units rent for in specific neighborhoods. It may take months or even years to find something that works, or you may never find anything where you are looking (some areas are simply terrible rental markets). And that's fine, don't worry about walking away, which is way better than having an albatross hanging around your neck for the next 10 years.

If you do find a property that pencils out, keep running it like a business. Very very carefully screen tenants. I cannot stress this enough. One bad tenant can wreck everything. Maintain the property and keep it in good basic working condition: replace appliances and do repairs as needed, but resist the urge to do anything high end. Go for safe and clean and functional, but basic. Keep rents in line with market rents for the area, not the absolute highest, but also not too low. Usually this means small annual rent increases, but could also mean rent decreases in down years. You want to avoid a situation where, over many years, rent gets very far below market.

I'd be interested to hear more about your rationale for why you think this would be a good investment option for you.

thorbjorn88

  • 5 O'Clock Shadow
  • *
  • Posts: 33
Re: Quick Rental Property Success Stories
« Reply #5 on: September 03, 2020, 04:49:15 PM »
3 years ago we bought a house with a guest house for a primary residence. One unit is 3-2 the other is 2-2. We live in the smaller unit. The first 3 years we had to cover $488 of the monthly payment after rent. But we just refinanced and had tenants move out and new tenants move in. We're now saving $350 on the mortgage and were able to increase rent by $305. So now the main unit pays the mortgage plus $167. We're saving toward a down payment on a SF to move in 18 months and renting out the full house. Once we do we'll be cash flowing a pretty good chunk after accounting pretty conservatively for maintenance and other costs and we'll put that toward saving for our next rental. 

As far as equity goes we put 3.5% down 3 years ago and just got it appraised at 80% LTV, so it gained 55k in 3 years.
« Last Edit: September 03, 2020, 04:51:15 PM by thorbjorn88 »

Dicey

  • Senior Mustachian
  • ********
  • Posts: 15120
  • Age: 63
  • Location: NorCal
Re: Quick Rental Property Success Stories
« Reply #6 on: September 07, 2020, 09:12:18 PM »
I'm only a landlord because I am a real estate geek. Real Estate is easier for me to understand than the stock market. Well, it was, when I was starting out. Now, ETFs and Vanguard make investing so much easier. In hindsight, absent the geek factor, I probably would have done much better had I just stuck to JL Collins style investing.

I also adore the challenge of taking something ugly and making it pretty. It makes me happy. The stock market doesn't give me the buzz that Real Estate does.

All of our rentals are in the same very large Senior community. They all have good bones and are in excellent condition, plus we love our tenants. When DH retires, we will move in to them one by one as the tenants vacate. We will not evict anyone. We will do the "modern" updates ourselves and then sell them off over a period of 7-10 years. Then we will be out of the rental business. Unless we find a screaming deal that we can't resist...

One more thing. DH can fix anything. He knows how all housing elements/systems work and isn't afraid of anything. I realize that most people don't have that kind of expertise. For us, it makes sense to capitalize on that. Also, we never put all of our eggs into the real estate basket. We have enough to be FI without counting our rentals.

Megma

  • Pencil Stache
  • ****
  • Posts: 738
Re: Quick Rental Property Success Stories
« Reply #7 on: September 14, 2020, 02:59:51 PM »
I am really similar to Dicey in many ways. I just love to look at real estate. I browse zillow all the time to see what is out there and what the prices are but that is also the kind of market research that makes RE investing easier, I do it because I like it.

RE can be more profitable than stocks, it's also more work, even if you have a property manager. However, I like that because I like to have control over my money. You just don't have the same control over the investment when you buy an ETF. I like to have my money in assets I can control and understand. I can buy properties, pay them off over time and then they'll provide income for me in FIRE, that's my plan (yes I also have some equities, 401k/IRA but that's more my backup money).

RE is not an asset class for everyone and I wouldn't do it just because it works for other people, it's something you really need to be into to do well at imo.

clarkfan1979

  • Handlebar Stache
  • *****
  • Posts: 2283
  • Age: 41
  • Location: Pueblo West, CO
Re: Quick Rental Property Success Stories
« Reply #8 on: September 20, 2020, 10:23:07 PM »
I love going against conventional wisdom with my real estate purchases. This mostly includes buying ugly homes with lots of "perceived problems" If you can solve problems, you can make lots of money, with leverage.

BuffaloStache

  • Pencil Stache
  • ****
  • Posts: 983
  • Location: The boring middle accumulation phase
Re: Quick Rental Property Success Stories
« Reply #9 on: September 22, 2020, 04:15:38 PM »
My short story: DW and I moved to this area ~10 years ago, when it was solidly a MCOL (some may have even considered it LCOL then). She bought a Condo that we used as our primary residence for ~8 years. Since then, the area has seen a huge boom, and now the area is upper MCOL, some might even say HCOL. We moved out of the condo and have been renting it for ~2 years now with *knock on wood* lots of success. Thanks to an excellently timed ReFi on the property (before we moved, and were still able to claim it as our primary residence), we have less than 10 years left on a perfectly manageable mortgage.

I'll agree with @Megma and others that RE is more work than stocks, but 1-2 units likely isn't a huge burden. I self-manage and am lucky in that I was able to have an applicant pool to do intense screening/find good tenants, and have an HOA that is actually reasonable and takes care of a lot of the cosmetic building/property issues. I'm not 100% convinced that RE is always more profitable than standard stock-investing, but for me I consider it an extra piece of diversity in my overall portfolio and so I'm totally fine when it doesn't perform as well as a banner quarter in the markets.

exige

  • 5 O'Clock Shadow
  • *
  • Posts: 67
  • Location: Littleton, CO
Re: Quick Rental Property Success Stories
« Reply #10 on: September 23, 2020, 09:33:39 AM »
My short story: DW and I moved to this area ~10 years ago, when it was solidly a MCOL (some may have even considered it LCOL then). She bought a Condo that we used as our primary residence for ~8 years. Since then, the area has seen a huge boom, and now the area is upper MCOL, some might even say HCOL. We moved out of the condo and have been renting it for ~2 years now with *knock on wood* lots of success. Thanks to an excellently timed ReFi on the property (before we moved, and were still able to claim it as our primary residence), we have less than 10 years left on a perfectly manageable mortgage.

I'll agree with @Megma and others that RE is more work than stocks, but 1-2 units likely isn't a huge burden. I self-manage and am lucky in that I was able to have an applicant pool to do intense screening/find good tenants, and have an HOA that is actually reasonable and takes care of a lot of the cosmetic building/property issues. I'm not 100% convinced that RE is always more profitable than standard stock-investing, but for me I consider it an extra piece of diversity in my overall portfolio and so I'm totally fine when it doesn't perform as well as a banner quarter in the markets.

This sounds almost identical to the situation we are in now...we bought in 09 short sale and have lived here since we owe 130k and they are selling for 400k (renting for 2200). We just refinanced to a 30 year at 2.75 making the payment almost nothing and are thinking / planning to rent in the next 10-12 months and move. glad to hear it has worked out for you. I am still torn on the managing part since the cash flow will be large enough that a property manager will be easy to have. I am mainly worried about placing a tenant and doing all the required background / income checks

BuffaloStache

  • Pencil Stache
  • ****
  • Posts: 983
  • Location: The boring middle accumulation phase
Re: Quick Rental Property Success Stories
« Reply #11 on: September 23, 2020, 10:48:29 AM »
... I am still torn on the managing part since the cash flow will be large enough that a property manager will be easy to have. I am mainly worried about placing a tenant and doing all the required background / income checks

I was torn about this as well when we first started, but I figured I would self-manage for the first year and if it got to be too much work then I would hire a property management company. I've never looked back and plan to self-manage for the time being.

I had some friends who rented out properties as well, so I asked for copies of all of their leases and just drafted up one using the best language from each. Also, there are plenty of (mostly free!) websites that make tenant background/income checking, monthly rent collection, and other management items a breeze. I don't get paid endorsement from anybody, but I'd recommend MySmartMove for tenant screening, and we've had pretty good success using Cozy.co for rent collection and as a Landlord/Tenant portal and repository for general information. I know others that have used other services with success as well, but these are the ones that come to mind.

In my opinion, if you have a well-maintained property and have the luxury of screening tenants thoroughly, then the hardest part about managing 1-2 units is the listing/screening/move-in/move-out phase. And even with a management company that would still require time to review applications and work with your manager to select tenants and set the ground-rules in the lease. After that, and once you have systems and processes set in place, there isn't a ton of recurring work outside of typical maintenance. YMMV, but that's been my experience.

 

Fishindude

  • Magnum Stache
  • ******
  • Posts: 2737
Re: Quick Rental Property Success Stories
« Reply #12 on: September 23, 2020, 12:53:14 PM »
Myself and partners built a new building for an industrial client in 2000 at a cost of approx. $1.2 mil.   Rented it for 16 years at approx. $14,000 per month on a triple net lease meaning the tenant took care of all upkeep, paid the taxes, etc., total income for 16 years = $2.68 mil    After year 16 we sold the building to the tenant for $1.1 mil.    Did it all with cash so paid no interest.   Was a nice monthly check while renting and a nice payoff when it sold.

Dicey

  • Senior Mustachian
  • ********
  • Posts: 15120
  • Age: 63
  • Location: NorCal
Re: Quick Rental Property Success Stories
« Reply #13 on: September 24, 2020, 12:23:40 AM »
Myself and partners built a new building for an industrial client in 2000 at a cost of approx. $1.2 mil.   Rented it for 16 years at approx. $14,000 per month on a triple net lease meaning the tenant took care of all upkeep, paid the taxes, etc., total income for 16 years = $2.68 mil    After year 16 we sold the building to the tenant for $1.1 mil.    Did it all with cash so paid no interest.   Was a nice monthly check while renting and a nice payoff when it sold.
Just curious, @Fishindude, what caused the building to lose value over sixteen years? Or was there some kind of rent to own agreement?

Fishindude

  • Magnum Stache
  • ******
  • Posts: 2737
Re: Quick Rental Property Success Stories
« Reply #14 on: September 24, 2020, 10:24:33 AM »
Just curious, @Fishindude, what caused the building to lose value over sixteen years? Or was there some kind of rent to own agreement?

Yep, XX% dicounted under appraised price since they had been tenants so long.

sammybiker

  • Bristles
  • ***
  • Posts: 436
    • Making 200k in equity in 6mo - Back down the rabbit hole, long distance RE
Re: Quick Rental Property Success Stories
« Reply #15 on: September 24, 2020, 10:25:04 AM »
Damn, well done @Fishindude

If you ever have the inclination of posting a case study on this separately, I know I would love to read it.  And of course, the big question...how many more of these have you done?  If none, why not?

Myself and partners built a new building for an industrial client in 2000 at a cost of approx. $1.2 mil.   Rented it for 16 years at approx. $14,000 per month on a triple net lease meaning the tenant took care of all upkeep, paid the taxes, etc., total income for 16 years = $2.68 mil    After year 16 we sold the building to the tenant for $1.1 mil.    Did it all with cash so paid no interest.   Was a nice monthly check while renting and a nice payoff when it sold.

undercover

  • Pencil Stache
  • ****
  • Posts: 990
Re: Quick Rental Property Success Stories
« Reply #16 on: September 24, 2020, 01:40:06 PM »
Here's some motivation for you.

I have a deal where I made a 100% return over 3 years, purchased at 750k with 25% down (185k), put 90k in for renovation, it was just appraised for 1.026.  275k in from me, value increase 276k.  I though that was great then i remembered i purchased several shares of Apple stock around March of 2018 for $170 a share, apple is now $505 a share, almost 300% return.  Making that 100% return took hundreds of hours of my time, the Apple stock,,,  just the wire from my bank account to brokerage account.

Be careful of what you wish for ;)

I don’t think that’s a 100% return...at least not how you’re presenting it. If your costs are $275k and you sold for $1.026M then at time of sale you’d have to pay off the loan which is in theory still $565k because you’re not earning anything off the paid down principle (losing to opportunity costs if anything) unless you made a profit as well by renting. 1026 - 565 - 275 = 186. 186/275 = 67%. Not 100% but still not shabby. Whether you broke even or not by renting during this time would also make a difference.

srad

  • Stubble
  • **
  • Posts: 164
Re: Quick Rental Property Success Stories
« Reply #17 on: September 25, 2020, 01:12:48 PM »
Here's some motivation for you.

I have a deal where I made a 100% return over 3 years, purchased at 750k with 25% down (185k), put 90k in for renovation, it was just appraised for 1.026.  275k in from me, value increase 276k.  I though that was great then i remembered i purchased several shares of Apple stock around March of 2018 for $170 a share, apple is now $505 a share, almost 300% return.  Making that 100% return took hundreds of hours of my time, the Apple stock,,,  just the wire from my bank account to brokerage account.

Be careful of what you wish for ;)

I don’t think that’s a 100% return...at least not how you’re presenting it. If your costs are $275k and you sold for $1.026M then at time of sale you’d have to pay off the loan which is in theory still $565k because you’re not earning anything off the paid down principle (losing to opportunity costs if anything) unless you made a profit as well by renting. 1026 - 565 - 275 = 186. 186/275 = 67%. Not 100% but still not shabby. Whether you broke even or not by renting during this time would also make a difference.

I apologize.  OP asked for a quick story, and i went a little faster than i should of and did not put all the number in.  I am renting them out and the rent i collected has paid for the loan and the renovations. Total rent collected 268k, total mortgage paid is 168k, renovation 91k, so cool i've got an extra 9k waiting to spend, oh which 4k is being spent next week on repiping a unit. it never seems to end ;)







WGH

  • Stubble
  • **
  • Posts: 114
  • Location: Houston, TX
Re: Quick Rental Property Success Stories
« Reply #18 on: September 28, 2020, 10:10:47 AM »
Girlfriend has identified a MCOL area that has a nice sweetspot for rentals. She recently bought a 4/3 foreclosure for $105k. It needed less than $10k in renovations and after plunking down a for rent sign she had 50 phone calls within 24 hours. She originally thought that $1500 a month would be great but with all the interest she was able to sign a strong tenant to $1650 a month for 3 years. There are plenty of opportunities in that city for 1%+ rentals but she is being patient looking for more deals closer to 1.5%.

For her real estate is a passion and she enjoys identifying deals and finding ways to renovate herself and learning along the way. I've tried to show her how to run numbers but I think she mainly enjoys the work.

Dicey

  • Senior Mustachian
  • ********
  • Posts: 15120
  • Age: 63
  • Location: NorCal
Re: Quick Rental Property Success Stories
« Reply #19 on: September 28, 2020, 10:21:42 AM »
OP, notice with the exception of the post just above, most of the succes stories in this thread have not been quick? There's a lesson there...

srad

  • Stubble
  • **
  • Posts: 164
Re: Quick Rental Property Success Stories
« Reply #20 on: September 29, 2020, 10:41:58 AM »
OP, notice with the exception of the post just above, most of the succes stories in this thread have not been quick? There's a lesson there...

Oh, I have a quick one for you. 

Last month I refinanced 4 properties.  Increasing my cash flow by just under 1k a month.  All I had to do was send them some statements and sign a lot of documents.  That was the easiest and quickest way I've made an additional 1k a month, ever...





August26th

  • Stubble
  • **
  • Posts: 109
  • Location: Beautiful Colorado
Re: Quick Rental Property Success Stories
« Reply #21 on: September 29, 2020, 01:23:14 PM »
OP, notice with the exception of the post just above, most of the succes stories in this thread have not been quick? There's a lesson there...

I’m thinking the OP meant “quick” as in brief in explanation... but I’ve enjoyed reading all of the stories, and yeah... not really any get rich quick themes.

Archipelago

  • Bristles
  • ***
  • Posts: 364
  • Location: U.S.
Re: Quick Rental Property Success Stories
« Reply #22 on: September 29, 2020, 01:57:41 PM »
I purchased a 4-plex three years ago using an FHA loan, 3.5% down. Live in one of the unit, the other units covered the house expenses in full plus a cashflow of around $300/month. I'm refinancing this property (closing this Friday). Monthly payment will be decreasing by $700/month. Cashflow will be $1k/month. When I move out, I'll rent the last unit and it should cashflow about $2200/month.

Closing on another 4-plex this Friday. Cashflow is currently $1k/month. One the property is updated and brought up to market rents, it should perform close to the first property.

Combined I'm hoping the properties will clear $4500/month. When the mortgages are paid down it'll be closer to $6700/month. But that's a long time from now...

BuffaloStache

  • Pencil Stache
  • ****
  • Posts: 983
  • Location: The boring middle accumulation phase
Re: Quick Rental Property Success Stories
« Reply #23 on: September 30, 2020, 03:38:56 PM »
OP, notice with the exception of the post just above, most of the succes stories in this thread have not been quick? There's a lesson there...

I’m thinking the OP meant “quick” as in brief in explanation... but I’ve enjoyed reading all of the stories, and yeah... not really any get rich quick themes.

I also took it to mean "brief". I don't view RE as a get-rich-quickly type thing, but it definitely adds diversity to my portfolio.