Author Topic: Reader Case Study – Proceed with closing on 4th rental property?  (Read 15093 times)

MMM4life

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Reader Case Study – Proceed with closing on 4th rental property?
« on: September 06, 2014, 09:40:26 PM »
So I wanted to get your expert opinions on this potential deal I am working. As always, if I need to provide more info please let me know and I will obtain it.

Personal info:
Manage 3 other rental properties, started in RE business in 2012
2 bed/2 bath, 905 sq ft

House info:
Market Value: $120,000 - $160,000
Original Purchase price: $120,000
Original Mortgage Amount: $90,000
Interest Rate: 5.25%
Mortgage Term: 30 yrs
Term remaining: 30 yrs
Amount remaining on mortgage: $90,000
Gross Rents: should be around $1200
Principal and Interest: $497
Taxes and Insurance: $181
HOA costs: $175 monthly, unknown yearly assessments
Deferred maintenance notes: unknown
Closing costs: $37,786

Since I haven’t closed, these numbers could change (ie. daily interest, taxes, etc).

So with those numbers, I had a few statements to make:

1) I wanted to hear your thoughts about the deal

2) This house is near a major military base that has seen nothing but growth over the past few years and will continue to grow.

3) While this isn’t probably accepted in the RE field, previous units have sold for as high as $210k. With the growth expected in the next 3 years and time in general, I believe it is very possible to sell for $190k in a few years.

4) Worst case, I move into this property and rent out my current property which reduces my monthly bills by $220 (a savings of around $66,000 off my FIRE number), though I wouldn’t want to really stay in the area but could if needed.

With all that said, do you think I should continue with this deal or put that $38k in vanguard funds?

arebelspy

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #1 on: September 06, 2014, 09:52:02 PM »
You need to nail down your numbers more:
- That's a HUGE range on the market value (your top end is 33% higher than your bottom end number!)
- Your gross rents starts with "should be around" - should it?  What will it actually be?
- 37k in closing costs is clearly wrong - I'm assuming you mean a down payment of 30k and 7k in closing costs?
- Unknown deferred maintenance?  You should inspect and figure that out.
- How is the HOA financials?

Assuming the numbers are accurate (what ones there are), I personally wouldn't purchase this.  It barely hits the 1% rule (1200 rent for 120k purchase price) and has a 175/mo. HOA on top of that.  It doesn't mention the property type, but I'm assuming this is a condo?

I think you're maybe break-even at best on this, so unless you're profiting day one from buying significantly under market, it's pretty meh to me.  YMMV, and I don't know your market.
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waltworks

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #2 on: September 06, 2014, 11:28:21 PM »
I agree with A-spy. This is a just-by-a-whisker acceptable rental based on a bunch of assumptions about value and rent as well as a "this market can only go up" dollop of optimism. That's a pretty cheap HOA but anytime I see cheap dues I wonder if there's a ton of assessment activity on the horizon because of cheapskate boards during the recession.

So, basically, if all your most optimistic assumptions turn out to be true, it's a good deal. If even one of those assumptions is wrong, though, it sucks.

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Nords

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #3 on: September 06, 2014, 11:29:02 PM »
2) This house is near a major military base that has seen nothing but growth over the past few years and will continue to grow.
I hear that a lot.  I've seen what happens to rental markets around military bases during the 1990s drawdown, and this drawdown is going to be almost as significant.  If sequestration clamps down on federal spending then there's going to be a lot less growth... and perhaps even a little contraction.

You may be right about your local base continuing to grow.  However it's better to stop counting on it and hope to be pleasantly surprised if it happens. 

MMM4life

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #4 on: September 07, 2014, 03:04:42 AM »
- It’s hard to nail down numbers for market value when the comps vary that much. Some of it is affected by seasonal trends, others by conditions, and lastly by supply and demand. Based on that, let’s go with the average of $140k.

- As with market value, market should expect $1200 a month. However, seeing how it is Sept/Oct timeframe, it’s not exactly peak season so I may get as low as $1100 depending on time it takes for turnover.

- Well, closing costs (aka money I need to bring to the table) includes down payment 30k (120k-90k) + 7k in closing costs.

- Unknown because I haven’t done the inspection yet because it’s a short sale and the bank has been dragging its feet. We have had several amendments to the contract for extensions. Seeing how we are in the 6th month (the other short sales have taken 6 months to complete), when the speed starts to pick up is when I will schedule the inspection. From the walkthrough and what I remember, all major appliances seemed newish or in good condition. Probably fresh paint and it should be ready to go. 

- Assuming financials are good but haven’t received the documents yet. Still waiting on final approval. 

Yes, this is a condo. Most of the properties in the area are part of condo associations due to it being a city type of atmosphere. Yes, there are SFH but also have some sort of HOA.

And the base is Fort Meade, MD; home of cyber security. Which over the past few years has seen significant increases whereas the rest of the DoD has decreased due to the war drawdowns. A base once housing a 36 hole golf course has been taken over by multiple commands and agencies moving to the base as part of the BRAC program = tens of thousands of individuals new to the area.

Hopefully that doesn’t come off as argumentative, just trying to explain the situation as best as possible and explain the local market. This is the only place I can bounce ideas off people who have much more knowledge about this then I do.

waltworks

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #5 on: September 07, 2014, 07:09:08 AM »
Your followup makes it sound even worse, honestly. Short sale that you haven't inspected that doesn't make the 1% rule? With an HOA on top to potentially tell you in a year that you're not allowed to rent the place out anymore and by the way, how about $10k to replace the roof? Run away.

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Nords

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #6 on: September 07, 2014, 10:16:42 AM »
And the base is Fort Meade, MD; home of cyber security. Which over the past few years has seen significant increases whereas the rest of the DoD has decreased due to the war drawdowns. A base once housing a 36 hole golf course has been taken over by multiple commands and agencies moving to the base as part of the BRAC program = tens of thousands of individuals new to the area.
You might have picked the only military base in the country that's not suffering from troop drawdowns, but I still think you're being suckered into projecting history onto the future.  Maybe this is a good chance to invert the question to see whether further growth really makes sense.  How much longer do you expect the 2005 BRAC merry-go-round to continue in that area?  What happens when the federal government's sequestration causes a hiring freeze?

I'm baffled by a piece of property in the DC area that (1) is a short sale and (2) doesn't have other buyers driving up the price.  Is there something that "everyone else" knows about the place which you haven't found yet?

Is this one of those condo associations where the banks are reluctant to lend money because so many of the properties are rentals?  Worse yet, as others have mentioned, are you at risk of special assessments for the common grounds (or the roofs, or the painting) if the HOA reserves are too low? 

If you only had one or two concerns about the property and the rest of the fundamentals seemed strong, then you'd be happy with the risks.  Yet you're possibly heading into value-trap territory.  This seems to be one of those rental properties where everything has to go right for your finances to succeed.  No margin for surprises or tree roots in the sewer system.

MMM4life

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #7 on: September 07, 2014, 12:25:23 PM »
Everyone always refers to the 1% rule but I have never seen a property that could command that price unless you plan on slumlording it. Consider this investment vehicle a little safer due to it's higher quality (which obviously equals a higher price which essentially means a lower ROI) but also commands higher quality tenants (ie. all my tenants so far have had credit scores of 750 or above just looking for housing for the next 2-3 years).  Here is what the market has done for me in the past 2+ years:

House 1 – Market Value $475,000 – minus outstanding mortgage – minus selling fees – Net $90k (0 principle in closing cost of $14,500)
Produces $230 additional rent after all bills paid
In 13 months, it’s been vacant for 3 days and 7 days. 1.5 years left on lease

House 2 – Market Value $220,000 – minus outstanding mortgage – minus selling fees – Net $44k ($56,000 principle in closing cost of $62,000)
Produces $441 additional rent after all bills paid
In 2 years, it was vacant for 45 days.

House 3 – Market Value $220,000 – minus outstanding mortgage – minus selling fees – Net $75k ($45,000 principle in closing cost of $52,000)
Currently live in, could produce $417 additional rent after all bills paid
Never rented

House 4 – Market Value $220,000 – minus outstanding mortgage – minus selling fees – Net $88k ($40,000 principle in closing cost of $50,000)
Produces $418 additional rent after all bills paid
Had for 1 year, had tenant on closing date, have a tenant moving in on previous tenants move out date for unspecified time frame (should be minimum 1-2 years)

House 5 – On the way, set to close in September, principle $30,000
Should produce additional $340 a month (not accounted for in total or rent below)

Correct, I haven't inspected it because there's been no rush. Obviously, prior to closing the property will be inspected. This post was to see what the expert opinion of the MMM community thought. As far as I'm aware, HOAs are not allowed to do that; they can prevent new investors from acquiring properties but can't stop old ones. IRT to the roof statement, isn't that one applicable to any property?

The "BRAC merry-go-round" should be ending 2017-18 I believe when construction finishes on all the buildings. You mean the sequestration where no one lost any pay and was a dog and pony show since all employees were all back paid? lol

Looking at the comps they range from $110k-155k dating back to April-June 2014. The 110k needed probably around 10k in work. Units are selling but seems the supply is keeping up with the demand.

No, I believe banks require a certain amount of properties to be owned by homeowners vs investors (somewhere around less than 25%, don't remember the exact number but in the 10-20%).

As I said, I think the property is on par with my other properties but definitely has me rethinking if I should buy it since 1) might not be in the area much longer, 2) liquid assets are always more desirable 3) if returns are equal, why deal with the hassle of tenants.

Then again, it is hard to argue when houses 1, 3, and 4 have produced significant returns based on my projections. House 2 was a bad deal and it was my first property; you live and your learn.

Do these numbers make sense?
Total paper profit: $297k (added up all the net profits from above if I sold now, which I shouldn't since I have leases on them)
Total principle reduction: $141k (25% down on 3 out of 4 properties that I paid)
Total cost of properties: $177k (Closing costs including principle)
Actual cost of properties: 36k (177k-141k), let's round up to 55k for additions and work completed on houses; includes closing costs
Actual paper profit: $156k (297k-141k)

Rate of return on 55k to 156k in about 2.5 years: 51%

Since I have had very little time in between tenants, most principle reduction was done by them in forms of rent. This isn't even including the monthly profits from the houses.

Thanks for letting me bounce my ideas off you guys.

waltworks

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #8 on: September 07, 2014, 01:09:36 PM »
Obviously you want to buy the place, but here's the thing: all of your properties suck. You just bought them at the right time to get some appreciation because you could buy *anything* from about 2009-2011 and do great.

Your 5th property is going to suck about the same as the rest. As soon as you need a major repair or have to evict a tenant, you'll be at a net loss. But clearly you have your own way of looking at it (~$3k net rent on a $475k investment?!?! That's awful!), so by all means, do what you want. The 1%/50% rules exist for a reason and there are plenty of non-slumlord properties that exist that you could be buying. They just aren't in your neck of the woods.

Yes, you've done fine on appreciation. So did *anyone* who bought a house in the 2008-2011 time period, anywhere, who had no idea what they were doing. Expecting house prices to keep rising at double digit rates is IMO crazy. I mean, I bought 2 houses in 2011 that don't hit the 1% rule because I was sure I'd get some appreciation, so I understand the mindset - but the bubble bounceback is over. Period. When rates rise there's a decent chance prices will drop, too. So best of luck, you'll need it.

-W

arebelspy

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #9 on: September 07, 2014, 01:23:05 PM »
Everyone always refers to the 1% rule but I have never seen a property that could command that price unless you plan on slumlording it.

Your mind will be blown then you find real estate investors who won't go below the 2% rule.

1% is a minimum and has been a standard for decades.  The exceptions are few and far between.  This isn't one.
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marty998

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #10 on: September 07, 2014, 03:59:15 PM »

MMM4life it doesn't matter if down the track you have 10 properties with 2 million equity using your methods, you will never convince some people.

Look for validation in your own results and numbers. You have and continue to do your own research. Do what you feel comfortable with.

waltworks

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #11 on: September 07, 2014, 04:05:24 PM »
You certainly won't, because the numbers here are sure losers unless appreciation bails you out. Which, apparently, everyone thinks is automatic again. This is like advising everyone to buy lottery tickets because you won, or advising everyone to hit the slots because you came out ahead one night. The fact that the OP has made money on appreciation does not impress or surprise me - as I said, anyone who bought anything in that time period has made money.

I really, really need to sell my RE next year at the rate things are going. If I ever went to a barber I'd bet he'd be giving me RE investing tips.

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Sdsailing

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #12 on: September 07, 2014, 04:28:55 PM »

I would not buy a condo Under any circumstance. Too many horror stories.

arebelspy

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #13 on: September 07, 2014, 04:31:17 PM »

MMM4life it doesn't matter if down the track you have 10 properties with 2 million equity using your methods, you will never convince some people.

Look for validation in your own results and numbers. You have and continue to do your own research. Do what you feel comfortable with.

You have to compare it to the alternative.  What if instead he had bought better properties and ended with 5 million in equity and 3x the cash flow?

Sure, you can do okay buying mediocre real estate.  You can do even better buying better properties.
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MMM4life

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #14 on: September 07, 2014, 05:15:24 PM »
I definitely appreciate everyone's feedback. I just trying to decipher what is likely "fact" vs all "real estate is bad" vs "I've read 2 RE books so obviously I'm an expert in this field".

While we can all agree that there could be better deals (using the 1% rule), I feel their risk has to be higher or another variable makes it where they might be on par with my current houses. I've seen easily over a 100 properties or ran the numbers and if they met the 1% rule, they were discounted by HOA, taxes, or some other fee where the ROI was about equal (around 7-11%). The only case where the 1-2% rule seems like it would always work out is in a multi-unit property where you get economies of scale and multi families contribute to cash flow (2 1000 sq ft houses would most likely contribute to more cashflow then a 1 2000 sq ft house). 

I like this local market, think it will continue to grow, and my properties have not given me any issues. Since I work full time, it fits my needs. HOWEVER, I have no idea how this market will be affected by the pending rate increases. Then again, that's really no different then how the market "experts" feel there is going to be an adjustment to the stock market. Both investment vehicles will most likely turn a profit, I am just trying to decide what the biggest ROI will be. Unfortunately, it seems we have to speculate on that which apparently is forbidden in the RE world but perfectly ok in the stock market.

waltworks

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #15 on: September 07, 2014, 05:36:11 PM »
I don't think anyone here is claiming any special knowledge, and in fact at least Arebelspy and I both own a decent amount (I think I have about $1.3 million worth?) of RE. I have a pretty crap track record and made some bad decisions but have (so far) been bailed out by the same appreciation as you have. I'm planning get the F out of those properties asap, though, and either invest somewhere that makes sense (I did that same "I have to buy local, even if no properties here make sense financially!" thing that everyone does) or else just go index/stocks and forget the RE for now.

It's not like we're the only people in the universe talking about the 1% rule. You can find discussions of it (and the other usual rules of thumb) all over the place. Go read some of that stuff and then come back and explain why your case is special/different. Or just ignore us and do your deal.

-W

arebelspy

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #16 on: September 07, 2014, 07:41:41 PM »
+1 to what walt said. (Other than I do indeed have more than him, if you count that as a "decent amount" and I'm not planning on getting out, but am still acquiring more.)

It's really no skin off our back, I just like to help others succeed in real estate investing.  It's painful when people buy poor deals when there are so many better ones out there.

Best of luck to you, whatever you decide.
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MMM4life

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #17 on: September 07, 2014, 08:02:19 PM »
Ok, would you agree the 1% rule is maybe geared towards properties that most likely are in an established location where market is stable and they use the 1% for monthly income. Do you think it should apply to areas that could be due for an increase in property values?

And hey, I have somewhere north of $1m in properties also lol. And like I said, I'm not arguing or taking offense to your guys' posts, just trying to ensure we all are on the same page so I can come to an understanding and make the best possible decisions based on most likely scenarios.

Before I even say this I can already hear everyone yelling at me but let's just toss this idea out there.

Purchase price: $120k
Hold for 3 years; outstanding mortgage: $86k
Selling for (get ready for it........) $160k
I picked this number because several houses have sold for $155k less than 0.1 miles away and no more than in the previous 6 months. Plus if we look at inflation, I think this number is more than reasonable, or at least possible. Yes, that is a 33% increase in appreciation... However, the market could command that already at this time.

Should receive around $62k from sale
Closing costs (+ 25% principle): $37.8k

Hell, let's even bump up costs for repairs to 40k and receiving 62k in 3 years: ROR = 16.10%

If I run into other repairs or times property is unoccupied, my cash flow of $340 will cover this.

Is any of that absolutely outlandish?

arebelspy

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #18 on: September 07, 2014, 08:10:37 PM »
Ok, would you agree the 1% rule is maybe geared towards properties that most likely are in an established location where market is stable and they use the 1% for monthly income. Do you think it should apply to areas that could be due for an increase in property values?

If it's "due for an increase in property values" then the purchase price should be lower relative to the rents, meaning it should be well above 1%.
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MMM4life

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #19 on: September 07, 2014, 11:10:45 PM »
Ok, well disregarding the 1% rule, which I should be able to easily achieve in a year or two since property values are likely to increase (which currently the market shows it will), does the math look feasible?


Purchase price: $120k
Hold for 3 years; outstanding mortgage: $86k
Selling for (get ready for it........) $160k
I picked this number because several houses have sold for $155k less than 0.1 miles away and no more than in the previous 6 months. Plus if we look at inflation, I think this number is more than reasonable, or at least possible. Yes, that is a 33% increase in appreciation... However, the market could command that already at this time.

Should receive around $62k from sale
Closing costs (+ 25% principle): $37.8k

Hell, let's even bump up costs for repairs to 40k and receiving 62k in 3 years: ROR = 16.10%

If I run into other repairs or times property is unoccupied, my cash flow of $340 will cover this.

Is any of that absolutely outlandish?

Nords

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #20 on: September 07, 2014, 11:49:07 PM »
Is it just me, or does this thread smell like 2005-06 all over again?

Ok, well disregarding the 1% rule, which I should be able to easily achieve in a year or two since property values are likely to increase (which currently the market shows it will), does the math look feasible?
As I understand the 1% rule, the value of your property is in the denominator of the equation.  This means that if your property values rise (good for you), then your percentage will drop even lower.  The only way you can boost the percentage is to raise your rents (good for you) or lower your property values (not so good). 

Here's another real-life example of a sucky version of the 1% rule:  I charge $2900/month rent for a 4BR/2BA SFH.  "Unfortunately" on Oahu the median value of a SFH is $600K.  The percentage works out to $2900/$600,000 = 0.48%.  If I raise the rent to $3000/month then I'm up to 0.5%.  If I raise it again then nobody will rent the place.  If I'd done this at the pit of our last real estate recession then I would've achieved 1% because the property would've been worth just $300K.  Of course my tenants would have made me drop the rent or they would have moved out, so realistically I'll never reach the ratio of the 1% rule.

On the other hand, if I sold the place and paid all my taxes then I'd have (in round numbers) $400,000.  Assuming that half of the gross rent is eaten up with taxes and maintenance/repair costs, I still clear $17,400/year.  That's a 4.35% APY on the $400,000 after-tax capital I'd get out of the property.  It looks great compared to CDs, but rental properties tend to be more work than CDs (and CD insurance fees are paid by the bank, not by me). 

So estimate your net annual rental income (perhaps using the 50% rule) and figure out how much yield you're getting on your investment.  You could either use your cash that you have into the properties now (both the purchase price as well as the improvements) or the cash that you'd have after you sell the properties and pay your taxes (federal, state, local capital gains, federal & state depreciation recapture, and AMT).  Either way I suspect that you're working harder for your rental yield than you would be in a CD-- and with higher potential risk to both your principal and your yield.  You'd probably be making way less than the average annual compounded return of a passive index equity fund.

This is what people mean when they tell you that your rental properties suck.  I appreciate this because I've put up with this similar situation for most of the last 25 years, and mainly for family (non-financial) reasons.  If I was trying to maximize the yield on the capital invested in our rental property then I'd probably be better off selling it.  Instead I accept the lower yield as a way of diversifying my portfolio asset allocation, which lets me rationalize find other extremely risky ways to invest my money.  At least the cash that I have locked up in dead equity keeps me from doing stupid things with that money, and we've had a good run of tenants from our three local military bases.

Yeah, I know, property values in the DC area have been going straight up since Washington was a private.  However you are still taking outsize risks with little (or no) margin for error, and your plan is essentially hoping that the rise in property values continues until you've sold the place.  That's not investing for rental income-- that's speculation.

In 2006 I watched a guy in our neighborhood buy four properties with mortgages and hard-money loans.  He immediately signed up for home equity lines of credit and started making his payments from his HELOCs, along with whatever month-to-month rentals he could pull in.  Property values had been going up for years, so he was confident that he could keep juggling until he reached the peak of the market.  Unfortunately he ran out of cash in 2009 and the peak didn't come back until 2014.
« Last Edit: September 07, 2014, 11:52:41 PM by Nords »

marty998

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #21 on: September 08, 2014, 02:33:55 AM »

In 2006 I watched a guy in our neighborhood buy four properties with mortgages and hard-money loans.  He immediately signed up for home equity lines of credit and started making his payments from his HELOCs, along with whatever month-to-month rentals he could pull in.  Property values had been going up for years, so he was confident that he could keep juggling until he reached the peak of the market.  Unfortunately he ran out of cash in 2009 and the peak didn't come back until 2014.


See but that is stupid and he got what was coming to him. The OP isn't doing that.

Some buy for cashflow (the 1 percent rule followers)
Some buy for growth
Some buy and hold land.
Some buy land and develop
Some buy a knockdown rebuild
Some buy a knockdown, subdivide and rebuild
Some are fortunate to get decent income and growth

1% rule is not a be all and end all, and is not the only strategy out there. It's not going to work in all cases (certainly not if your tenants trash the place, which can happen to anyone) and its not going to be the most tax efficient in all cases either.

To quote an americanism (can't believe I'm doing that) YMMV. All depends what sort of market you're in.

Meanwhile downunder, Sydney & Melbourne house prices continue to break new records.....

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #22 on: September 08, 2014, 07:45:04 AM »
That's why I'm on a mission to sell by next year. I am seeing *way* too much of this kind of "I can't lose", "they aren't making more land" crap. I personally think people are in for a rude surprise when rates go back to "normal" 7 or 8 percent levels.

-W

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #23 on: September 08, 2014, 08:05:24 AM »
House 1 – Market Value $475,000 – minus outstanding mortgage – minus selling fees – Net $90k (0 principle in closing cost of $14,500)
Produces $230 additional rent after all bills paid
In 13 months, it’s been vacant for 3 days and 7 days. 1.5 years left on lease

House 2 – Market Value $220,000 – minus outstanding mortgage – minus selling fees – Net $44k ($56,000 principle in closing cost of $62,000)
Produces $441 additional rent after all bills paid
In 2 years, it was vacant for 45 days.

House 3 – Market Value $220,000 – minus outstanding mortgage – minus selling fees – Net $75k ($45,000 principle in closing cost of $52,000)
Currently live in, could produce $417 additional rent after all bills paid
Never rented

House 4 – Market Value $220,000 – minus outstanding mortgage – minus selling fees – Net $88k ($40,000 principle in closing cost of $50,000)
Produces $418 additional rent after all bills paid
Had for 1 year, had tenant on closing date, have a tenant moving in on previous tenants move out date for unspecified time frame (should be minimum 1-2 years)

House 5 – On the way, set to close in September, principle $30,000
Should produce additional $340 a month (not accounted for in total or rent below)


As always, if I need to provide more info please let me know and I will obtain it.

You could post your Schedule E so we can see how these investments are actually affecting your income and your taxes.  You seem to be telling us just about the current market value but not much about the real numbers. What kind of real returns are you enduring to see these "paper profits".  If appreciation was this good to me, I'd stop counting my chickens and take the eggs to the market.

Food for thought.  The guy selling this condo for $120K.  The one that's worth $120-$160K.  The one that will sell for $190K within a few years.  He may have it listed on his balance sheet at $170K right now.  He can keep it at $170K right up till the day he sells it.  I'm not saying that appreciation can't be real.  But it isn't real until it's realized. 

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #24 on: September 08, 2014, 08:22:10 AM »

In 2006 I watched a guy in our neighborhood buy four properties with mortgages and hard-money loans.  He immediately signed up for home equity lines of credit and started making his payments from his HELOCs, along with whatever month-to-month rentals he could pull in.  Property values had been going up for years, so he was confident that he could keep juggling until he reached the peak of the market.  Unfortunately he ran out of cash in 2009 and the peak didn't come back until 2014.


See but that is stupid and he got what was coming to him. The OP isn't doing that.

Some buy for cashflow (the 1 percent rule followers)
Some buy for growth
Some buy and hold land.
Some buy land and develop
Some buy a knockdown rebuild
Some buy a knockdown, subdivide and rebuild
Some are fortunate to get decent income and growth
I agree with you on the "stupid" assessment, but in 2006 he was "brilliant" and "forward-looking" and "new paradigm"... and buying for growth.  At the time I was listening to him describe his strategy, I felt like Walt-- not only was I not going to buy from this guy, but I was wondering whether I should sell my rental after all. 

He's only stupid now because of the results, and one of the reasons he got to the results so quickly is that he left himself with no margin for error in a market that was always going to go up forever.

Luckily we held on to our rental, and after 25 years of ownership it's appreciated at (here's a real shocker) the rate of inflation.  Which would seem to be a reasonable assumption for OP to include in his business model... not to count on military base expansion and rapid property-value appreciation. 

However I agree that in the whole two years the OP has been in the rental property business, nothing bad seems to have happened and he looks pretty smart.  Hopefully the status quo perpetuates.

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #25 on: September 08, 2014, 08:23:50 AM »
Some buy for cashflow (the 1 percent rule followers)
Some buy for growth
Some buy and hold land.
Some buy land and develop
Some buy a knockdown rebuild
Some buy a knockdown, subdivide and rebuild
Some are fortunate to get decent income and growth

See though, the great thing is: no one is forcing you to buy.  You can pick and choose good investments, and avoid subpar ones. 

1% rule is not a be all and end all, and is not the only strategy out there. It's not going to work in all cases (certainly not if your tenants trash the place, which can happen to anyone) and its not going to be the most tax efficient in all cases either.

You're right.  I probably wouldn't buy anything that only hit 1%, rare exception aside.

It's not going to work in all cases (certainly not if your tenants trash the place, which can happen to anyone)

Uh, isn't that a reason you should shoot for at least 1% or more?  Because if tenants trash your place, which, as you say, can happen to anyone, it'll drag down your return?  And if you're already accepting a sub-1%rule return, you can't afford for that to happen.  Whereas if you're getting a higher return, you're more likely to be okay.

1% rule is not a be all and end all, and is not the only strategy out there. It's not going to work in all cases (certainly not if your tenants trash the place, which can happen to anyone) and its not going to be the most tax efficient in all cases either.

YMMV. All depends what sort of market you're in.

Absolutely, what you can buy depends on what sort of market you're in.  Some markets are subpar.  But luckily, since you aren't forced to buy, you don't have to invest in them.
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« Last Edit: September 08, 2014, 10:18:47 AM by Captain and Mrs Slow »

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #27 on: September 08, 2014, 11:20:43 AM »
I feel for you if you only have properties in your area that do not meet the 1% rule.  I personally shoot for 2%, and as a result I purchased nothing from 1999 to 2007.  It killed me, but I refused to make bad deals.  Instead, I saved money and worked on the rentals that I already had to improve them.  I sold most of my investments in 2007, and was pleased to find that there were lots of great investments that fit my criteria by 2010.  If you are buying during times or in locations that you cannot meet the 1% rule, then I would only do so if I could afford a really big downpayment.  That way, when or if the market crashes, you will not be underwater.  If you are operating on thin margins, then when times get bad, you may be one of the foreclosures that I purchase after the crash.  My own comfort level  requires that I be able to survive the worst case scenario.  I am not sure that your plans have enough emphasis on worst case scenario.  Good luck with your investing!  Even if you lose it all, you will be better off for the experience and will be wiser the next time. 

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #28 on: September 08, 2014, 09:08:46 PM »
  I agree with the above, 1% rule is the below the floor now for me, low COL area but if you can't beat 2% around here,  deal is  not for me. More recent deals round to 3% and  I would love to get 4%. We have been doing this for some time and have seen good times and bad, however, good cash flow on you rentals is a fine thing that insulates you from most financial problems. . Paying off a dozen or so houses does reduce your yield but it turns on a GD embarrassing fire house of cash on a monthly basis. I personally would not do this deal. The cash flow is meh and the purchase price is at the low end of the ARV so your buying and fixing it is not much of a value add. My personal pref is purchase price plus repair costs at no more than 75% of the lower end of conservative retail ARV (and I am not the one swinging a hammer in my repair estimates either) and no more than 5X-6x gross rents. Go look at 20 foreclosures/bank owned/wholesaler deals before you take the plunge on that deal in my opinion. I think that you will find a better deal and know it when you see it. I am not the best RE investor by any stretch but we have done well in the long run. We play first not to get hurt and a very low price entry point  or low investment vs rent multiple is the are the best ways to not get hurt financially. Just my opinion and there are much wiser ones available.

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #29 on: September 08, 2014, 10:25:32 PM »
Can the people who are getting 2-3% rule returns tell me what cities, neighborhoods, etc they are achieving this because I just don't see how a SFH/condo worth 100k get returns of 2000-3000 a month. I will even throw you a few thousand for the advice lol

Assuming you finance everything at 5%, your PI is $536, hell, let's go with $464 in taxes, HOAs,  and whatever other random fees there are, there is no way you can charge 2-3k in rent. If this is correct, I'm selling all my houses here and buying every single property in that market because your returns are unheard of. Based on rough estimates, on 3 houses I am getting about a 13.66% return ($24,265 a year on an initial cost of $140,000 which includes principle and major updates); this isn't including the appreciation of over 100k (yes, paper appreciation, I get that) but I do plan on selling in 1-2 years based on prices. If my houses suck, you guys have to be pulling in 40% returns since based on the 3 houses I have combined only pull in 0.74% based on the 1% rule).

The only way I can see this working is if you are using your new assessed value based on current market value and not what you paid for it.

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #30 on: September 08, 2014, 10:33:50 PM »
http://forum.mrmoneymustache.com/real-estate-and-landlording/examples-of-rentals-you-own-that-perform-well-financially/

You need to look outside of your immediate area, probably. Maybe well outside it.

-W

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #31 on: September 08, 2014, 10:40:17 PM »
Look. The 1% 'rule'  equates to a 12% roi.

That is an absolute minimum for me.

You have to remember you can do other things with that money that are lower risk and probably would pull say 5 or 6 % return.

So to take a RE deal that hardly matches returns on a passive portfolio in the market is just silly. You're not being rewarded for the risk premium.  Heck, you'd get better going with a Memphis turn key deal.

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #32 on: September 08, 2014, 10:55:13 PM »
http://forum.mrmoneymustache.com/real-estate-and-landlording/examples-of-rentals-you-own-that-perform-well-financially/

You need to look outside of your immediate area, probably. Maybe well outside it.

-W

While that sounded exactly what I was looking for, ya purchase price to rent is all fine and dandy. I saw some properties in Daytona Beach that went over the 1% rule, but after you invest 10-20k in closing costs, my monthly returns were only around $78-140 a month (after everything was factored in). One hurricane with a $1000 deductible made the risk too high. And ya everyone would love to make a killing per month, but I wanna see ROI from net profit (rent - all costs) over purchase price. That number would be even across the board.

I'm not angry, I'm just amazed that people are making an absolute killing out there compared to returns I thought were perfectly acceptable; I'll take a 13% return any day.

marty998

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #33 on: September 09, 2014, 12:25:45 AM »

In 2006 I watched a guy in our neighborhood buy four properties with mortgages and hard-money loans.  He immediately signed up for home equity lines of credit and started making his payments from his HELOCs, along with whatever month-to-month rentals he could pull in.  Property values had been going up for years, so he was confident that he could keep juggling until he reached the peak of the market.  Unfortunately he ran out of cash in 2009 and the peak didn't come back until 2014.


See but that is stupid and he got what was coming to him. The OP isn't doing that.

Some buy for cashflow (the 1 percent rule followers)
Some buy for growth
Some buy and hold land.
Some buy land and develop
Some buy a knockdown rebuild
Some buy a knockdown, subdivide and rebuild
Some are fortunate to get decent income and growth
I agree with you on the "stupid" assessment, but in 2006 he was "brilliant" and "forward-looking" and "new paradigm"... and buying for growth.  At the time I was listening to him describe his strategy, I felt like Walt-- not only was I not going to buy from this guy, but I was wondering whether I should sell my rental after all. 

He's only stupid now because of the results, and one of the reasons he got to the results so quickly is that he left himself with no margin for error in a market that was always going to go up forever.


Luckily we held on to our rental, and after 25 years of ownership it's appreciated at (here's a real shocker) the rate of inflation.  Which would seem to be a reasonable assumption for OP to include in his business model... not to count on military base expansion and rapid property-value appreciation. Yes, but if you bought with debt, what is your actual return on equity? Much higher right? Yes it's higher risk, but its still a valid strategy to use if you are comfortable with it.

However I agree that in the whole two years the OP has been in the rental property business, nothing bad seems to have happened and he looks pretty smart.  Hopefully the status quo perpetuates.

No its stupid regardless of the state of the market. You don't take out HELOCs to spend on crap or interest. It's dumb in all cases.

ARS, I can't respond to everything above but I suppose the key take out I'd like to make is that your way is not the only way. You can't convince me that say the Sydney market is "sub-par" in your words for not meeting your cash flow rules, when consistently down here the market returns phenomenal capital gains over extended period of times.

Down here if yields are high, the market corrects by pushing up prices. I don't know if there is something fundamentally different about your housing market, but to me it is not priced correctly...

IMHO

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #34 on: September 09, 2014, 06:51:29 AM »
Think about the eventual result if house prices rise significantly faster than inflation/wages for a long period of time.

Seriously, just think about it.

-W

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #35 on: September 09, 2014, 08:03:43 AM »
ARS, I can't respond to everything above but I suppose the key take out I'd like to make is that your way is not the only way. You can't convince me that say the Sydney market is "sub-par" in your words for not meeting your cash flow rules, when consistently down here the market returns phenomenal capital gains over extended period of times.

Of course it's not the only way.  But I think there are clearly better markets than cash flow negative ones hoping for high appreciation, in my opinion.

I think you'll see appreciation, yes.  But I also think you'll see that in a cash flow market, so why not go for 10k/year positive cash flow instead of 10k/year negative?  Having four houses that get you to FIRE with 40k/yr net annual cash flow without worrying about appreciation is worth the extra hassle of investing out of one's local area, to me, over having four houses in one's local area that area that net you -40k/year (or -10k or whatever) annual cash flow and hoping they all appreciate enough to somehow fund your FIRE.  YMMV, obviously.

Think about the eventual result if house prices rise significantly faster than inflation/wages for a long period of time.

Seriously, just think about it.

This exact thought experiment, when I thought of it, years ago, is what convinced me cash flow was the way to go.

Houses rising above inflation is not sustainable.  No one could afford a house after awhile.

(Think about how many people are priced out of the Canadian housing market right now - think that will keep rising well above inflation for the next 10, 20 years?  I sure don't.)

Not only that, but a bunch of new construction would spring up - builders could build them for the same real rate as today (their wages would have increased with inflation, and the materials would have increased with inflation), so they could undercut all those ones that rose above inflation.  Who's going to buy an old property when they can get a new one cheaper?

There are about 8 ways to look at house prices rising, but they all rise with inflation.

(Actually, to be clearer: they rise with wages.  Long term, housing prices have to match wages.)

Therefore if houses will rise with inflation, cash flow is the benefit of owning rentals.
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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #36 on: September 09, 2014, 08:38:58 AM »
Nords and ARS.

I think I got some serious RE education today.

Thanks

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #37 on: September 09, 2014, 10:51:38 AM »
Nords and ARS.

I think I got some serious RE education today.

Thanks
Glad to share.  I wish I'd had this education about 30 years ago...

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #38 on: September 10, 2014, 04:45:55 AM »
Can the people who are getting 2-3% rule returns tell me what cities, neighborhoods, etc they are achieving this because I just don't see how a SFH/condo worth 100k get returns of 2000-3000 a month. I will even throw you a few thousand for the advice lol

Assuming you finance everything at 5%, your PI is $536, hell, let's go with $464 in taxes, HOAs,  and whatever other random fees there are, there is no way you can charge 2-3k in rent. If this is correct, I'm selling all my houses here and buying every single property in that market because your returns are unheard of. Based on rough estimates, on 3 houses I am getting about a 13.66% return ($24,265 a year on an initial cost of $140,000 which includes principle and major updates); this isn't including the appreciation of over 100k (yes, paper appreciation, I get that) but I do plan on selling in 1-2 years based on prices. If my houses suck, you guys have to be pulling in 40% returns since based on the 3 houses I have combined only pull in 0.74% based on the 1% rule).

The only way I can see this working is if you are using your new assessed value based on current market value and not what you paid for it.

Hi MM4Life,

I don't have 2-3% properties, but my properties are above 1%.
Example:
Purchase price: 56,700
Rent: 725$/mo

Another one:
Purchase price: 88,900
Rent: 1150$/mo

These are SFH that have been recently renovated so NO HOAs and hopefully not a lot of maintenance expenses in the near future.

I agree with the advice that you might need to look outside your market. Most of my properties are in Memphis, TN. I chose to go with a company which specializes in the area so while I would have managed to get things done cheaper if it was in my area and I'd had done the rehab myself, this gives me access to a great opportunity that is not available where I live. The key is to go with a company you trust or have had solid referrals for.

Am happy to share more details.

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #39 on: September 10, 2014, 07:08:23 AM »
Got you beat by an order of magnitude, Nords. I wish I'd known it 3 years ago!

-W

Nords and ARS.

I think I got some serious RE education today.

Thanks
Glad to share.  I wish I'd had this education about 30 years ago...

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #40 on: September 10, 2014, 08:26:00 AM »
I agree with the advice that you might need to look outside your market. Most of my properties are in Memphis, TN. I chose to go with a company which specializes in the area so while I would have managed to get things done cheaper if it was in my area and I'd had done the rehab myself, this gives me access to a great opportunity that is not available where I live. The key is to go with a company you trust or have had solid referrals for.

Am happy to share more details.

jnc, if it's not too much trouble, I would love to hear the further details.  I am interested in RE investment, but because I live in the SF Bay Area, going out of area for properties is essential.  I've been reading most of the recommended reading list for months, but truthfully I'm a little paralyzed by the number of potential markets, the fact that I don't have intimate knowledge of any of them, etc.

ARS, I know from reading your threads that you also invest out of area, mostly sight unseen.  I'd love to know more specifics about who people went with, how they decided on a particular market an property, how they selected contractors and property management, etc.  Sort of a reverse case study.  I'm happy to open another thread rather than subvert the original (though perhaps this might help the OP too) if you would prefer.

Thanks!

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #41 on: September 10, 2014, 08:49:28 AM »
ARS, I know from reading your threads that you also invest out of area, mostly sight unseen.  I'd love to know more specifics about who people went with, how they decided on a particular market an property, how they selected contractors and property management, etc.  Sort of a reverse case study.  I'm happy to open another thread rather than subvert the original (though perhaps this might help the OP too) if you would prefer.

I've had phone call discussions with a few forum members about this who reached out to me, but it's like an hour long conversation if we keep it short.

It would probably take me 12 hours and 20 pages to type up.  :)

I'm completely willing to answer questions, but not really interested in writing my own book at this point.  ;)
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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #42 on: September 10, 2014, 10:20:13 AM »
ARS, I know from reading your threads that you also invest out of area, mostly sight unseen.  I'd love to know more specifics about who people went with, how they decided on a particular market an property, how they selected contractors and property management, etc.  Sort of a reverse case study.  I'm happy to open another thread rather than subvert the original (though perhaps this might help the OP too) if you would prefer.
It would probably take me 12 hours and 20 pages to type up.  :)

I'm completely willing to answer questions, but not really interested in writing my own book at this point.  ;)
D'oh!

My research indicates that writing a book does not get easier with age...

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #43 on: September 10, 2014, 11:26:44 AM »
I'm not sure if the is the correct place to ask this question, but since I saw it discussed on this thread I will just go ahead and ask it here.

I want to make sure I understand the 1% and 50% rule, and what that would mean in regards to ROI.
If your monthly rent was 1% of purchase price then if you purchased the home for cash you would have a 12% return before expenses? Then using the 50% expense rule you would then expect your final ROI to be 6%? Please let me know if this correct. If this is how it works it makes complete sense that if you are buying cash you really need to be using the 2% rule, but using the 1% rule at current interest rates could still deliver a good ROI if you leverage money.

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #44 on: September 10, 2014, 12:04:47 PM »
I have owned rentals since 2000.  And by no means am I an expert.  I have quite a few experiences and all of them vary.  My wife and I own 6 properties that comprise of 7 units we rent and 1 that we live in.

I started buying when interest rates were in the 6 to 9 % range.  Yea Nordes sorry I don't remember the teens.  I am not in the 2% range my area doesn't support it (more on that later).  Most of the communities in and around me are around 50/50 in homeowner or landlord owned properties.  The townships and municipalities have been trying to increase the homeowner portion of that by instituting rental laws, landlord license fee's etc...

I am however hovering around 1% depending on how my properties are valued.  My mortgages are all 15 year mortgages save 2 with around 20 years left on them. 

The 1% rule is a standard and it's one I have heard from the get go.  Realtors will actually use the 1 % rule to price rental or commercial property.  And in my area sadly it doesn't compute to well usually the selling or asking price is to high especially on multi units.  I stick to SFH and have managed to do well on a few and not so well on 2 of the properties I purchased. 

I won't say your deals suck because it's not for me to decide.  I know what has worked in my own numbers and how I feel about my own properties.  I might be on the same page as Nordes with maybe a slightly more optimistic attitude (I have only been at it for 14 years).

In my area I could pick up SFH for $500.00  Yes I said $500.00 and the return numbers would be substantial.  But so would the work needing to be done to those properties, and the headaches in dealing with the tenants from those areas.  Shootings and drugs are not uncommon near these homes.  We purchased a home for us to live in on the outskirts of this area in our City but managing rental properties in that area is not interesting to me or to my wife.  I don't care what the return is for me it just isn't what I want to deal with.  Being a Landlord is already similar to babysitting.  I don't need to pick up the bratty kid down the street to add to my frustration. 

I am currently looking at picking up a rental from my father a 4 unit with 2 garages that easily rent out.  My grandfather built it.  We have to work out the purchase details etc...  My wife isn't on board yet but I am hoping we can make the numbers work and add it to our list.  Gluten for punishment maybe. 

There are days in which I wish all my money was in investments and not tied up in Real Estate.  Mainly on the holidays that I am stuck painting or doing some other maintenance issue that I handle myself.

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #45 on: September 10, 2014, 01:42:23 PM »
I agree with the advice that you might need to look outside your market. Most of my properties are in Memphis, TN. I chose to go with a company which specializes in the area so while I would have managed to get things done cheaper if it was in my area and I'd had done the rehab myself, this gives me access to a great opportunity that is not available where I live. The key is to go with a company you trust or have had solid referrals for.

Am happy to share more details.

jnc, if it's not too much trouble, I would love to hear the further details.  I am interested in RE investment, but because I live in the SF Bay Area, going out of area for properties is essential.  I've been reading most of the recommended reading list for months, but truthfully I'm a little paralyzed by the number of potential markets, the fact that I don't have intimate knowledge of any of them, etc.

ARS, I know from reading your threads that you also invest out of area, mostly sight unseen.  I'd love to know more specifics about who people went with, how they decided on a particular market an property, how they selected contractors and property management, etc.  Sort of a reverse case study.  I'm happy to open another thread rather than subvert the original (though perhaps this might help the OP too) if you would prefer.

Thanks!

I will send you a PM as not to spam everyone.

MMM4life

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #46 on: September 10, 2014, 04:42:14 PM »
Ya, I'm not exactly territorial about my threads, any discussion regarding RE will benefit me so ask away on the questions.

Mazzinator

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #47 on: September 10, 2014, 05:22:18 PM »
I'm not sure if the is the correct place to ask this question, but since I saw it discussed on this thread I will just go ahead and ask it here.

I want to make sure I understand the 1% and 50% rule, and what that would mean in regards to ROI.
If your monthly rent was 1% of purchase price then if you purchased the home for cash you would have a 12% return before expenses? Then using the 50% expense rule you would then expect your final ROI to be 6%? Please let me know if this correct. If this is how it works it makes complete sense that if you are buying cash you really need to be using the 2% rule, but using the 1% rule at current interest rates could still deliver a good ROI if you leverage money.

Yes, your ROI would be 6% for a cash deal (no mortgage) With leverage you can increase this.

Here's how i see it..i could be looking at it all wrong, but this is my view.

Say you buy a $100k house that rents for $1k/month (1%) With the 50% rule you'll clear $6k/year (your house may increase with inflation, along with raising rents, and it doesn't assume selling any portion of the principal)
$100k invested in index funds at a 4%swr will give you $4k/year (AND this is for 30yrs, you could run out of money, and assumes in a down market you may be spending your principal)

To me, there is less risk with the "withdrawl" rate.

And, from what i've seen, and i'm NOT an expert at all, but most houses that meet the 1% rule are fairly nice) as opposed to say certain houses in a 2% area which could be "slums"

Hope this helps!! And please if any experts disagree, please set me straight!!!!

Also, OP, i commented on your other post about buying house 4, but i didn't know it was a condo. I would not buy a condo...unless maybe you rent out your other house, move in to the condo (to lower your personal expenses) and maybe you could even get another VA loan and only put 5% down (not sure this is even possible??)

MMM4life

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #48 on: September 10, 2014, 05:44:23 PM »

Also, OP, i commented on your other post about buying house 4, but i didn't know it was a condo. I would not buy a condo...unless maybe you rent out your other house, move in to the condo (to lower your personal expenses) and maybe you could even get another VA loan and only put 5% down (not sure this is even possible??)

Out of the current 4 houses I have, 3 are condos and I've had zero issues with any of them. I think why I have such an issue with the 1% rule is because while it may not net me the best return, the quality of the houses have essentially led me to collect a free paycheck per month, aka no late night phone calls about "x item" breaking.

But you may be right. I think I am allowed to use the remaining portion of my VA loan if I occupy the new property.  So I might be able to acquire the property with minimal down (instead of 25%), minimal closing costs and I would have to rent out my current location. Forgot all about that so looks like I have some researching to do.

arebelspy

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Re: Reader Case Study – Proceed with closing on 4th rental property?
« Reply #49 on: September 10, 2014, 07:28:28 PM »

It would probably take me 12 hours and 20 pages to type up.  :)

I'm completely willing to answer questions, but not really interested in writing my own book at this point.  ;)
D'oh!

My research indicates that writing a book does not get easier with age...

Heh.  Given the difficultly at that point then, it must be a real labor of love!
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