Any Real Estate Investors in the House?

Off Topic
101

[quote]Waittz wrote:

[quote]dmaddox wrote:

[quote]Waittz wrote:
BUMP.

DMaddox where you at big guy? Need some advice. [/quote]

Hit me bro.[/quote]

Decided to either sell or rent my current house. The wifey and I want to downsize and move into the urban part of town. We figured we might as well turn this house into our first rental instead of buying one. It’s a 4-2 1850 sqft with a pool. It is in a great location surronded by work oppurtunities.

How do I start? What is the most reliable way to find out what I could and should charge for rent?

I planned on doing the following in the coming months as we prepare for this:
seek legal council for renter agreement
seek financial council for break-even and tax implications(my old man has offered his service)
Get a roofer to the house to check on the current situation(noticed some water marks, roof is 17 years old).
Locate a yard/pool service and see if I should work into the rental price
Replace stove and microwave(antiquated and issues, we were going to replace them if we decided to stay)
Cleaning service to steam the carpets etc before we show it.
I have a reliable handyman that I can call on for needed issues.
Perhaps getting an inspection for termites/mold and appraisal?

my fears?

The roof. If i get out of the house now I can avoid having to deal with it. If i rent it, I know it will come up soon and maybe through off the profitability of the house or be a huge cash outlay.

The pool. It is a vinyl pool and how do I ensure the renters dont mess it up? A rip or leak, or a blown motor from lack of cleaning can be a big financial issue to handle.

The fear. How do I handle the fear of the first time investment property? It would be so much simpler to just bail and sell it and make out now with some equity but no future earning potential. [/quote]

Lets take this one step at a time.

First, find out what the rental comps are for the neighborhood. A realtor should be able to pull this for you. If the rent does not cover PITI, principle interest taxes and insurance, then sell the property do no rent it. Negative Cash flow is the quickest way to the poor house.

Second, get a good lease the realtor should have that also. In the lease you can either increase the rent to have a pool guy come in, or the tenet can pay for it out of their pocket. Get a pool company out there to give you a price to clean. Either way you will have to make sure the pool is kept clean.

One of my co-workers has only one house that is an issue out of 15 and that house has a pool. It is here only rental with a pool. Every week the tenet turns off the pump because they do not want to pay for the electricity on it, but then the pool turns green and the pool guy goes out there and sees the pump has been turned off. One the vinyl there is zero way to make sure the tenets do not rip it.

This is where the security deposit comes into play if they do tear it. The cost to replace the vinyl will be more than the deposit so you will have to sue to get the difference back if they do rip it. The judge might consider it normal wear and tear and make you pay for it. This is a risk so factor it into your rate of return you are wanting to get.

Third, have the roof fixed or replaced. If it is a 20 year roof just get it replaced. It will save you money and the headache of the calls when it rains.

Fourth, replace the appliances. Do not get the most expensive ones. If you have a habitat for humanity appliance store then check that out. This is a rental not a primary residence. If you are going to sell the house then upgrade the appliances.

The fear of your first rental is always there. Get over the fear because that will keep you from making money. Remember it is all about the Cash Flow. You have to make money on this deal. If you don’t then either stay in the house or sell it.

102

[quote]dmaddox wrote:

[quote]Waittz wrote:

[quote]dmaddox wrote:

[quote]Waittz wrote:
BUMP.

DMaddox where you at big guy? Need some advice. [/quote]

Hit me bro.[/quote]

Decided to either sell or rent my current house. The wifey and I want to downsize and move into the urban part of town. We figured we might as well turn this house into our first rental instead of buying one. It’s a 4-2 1850 sqft with a pool. It is in a great location surronded by work oppurtunities.

How do I start? What is the most reliable way to find out what I could and should charge for rent?

I planned on doing the following in the coming months as we prepare for this:
seek legal council for renter agreement
seek financial council for break-even and tax implications(my old man has offered his service)
Get a roofer to the house to check on the current situation(noticed some water marks, roof is 17 years old).
Locate a yard/pool service and see if I should work into the rental price
Replace stove and microwave(antiquated and issues, we were going to replace them if we decided to stay)
Cleaning service to steam the carpets etc before we show it.
I have a reliable handyman that I can call on for needed issues.
Perhaps getting an inspection for termites/mold and appraisal?

my fears?

The roof. If i get out of the house now I can avoid having to deal with it. If i rent it, I know it will come up soon and maybe through off the profitability of the house or be a huge cash outlay.

The pool. It is a vinyl pool and how do I ensure the renters dont mess it up? A rip or leak, or a blown motor from lack of cleaning can be a big financial issue to handle.

The fear. How do I handle the fear of the first time investment property? It would be so much simpler to just bail and sell it and make out now with some equity but no future earning potential. [/quote]

Lets take this one step at a time.

First, find out what the rental comps are for the neighborhood. A realtor should be able to pull this for you. If the rent does not cover PITI, principle interest taxes and insurance, then sell the property do no rent it. Negative Cash flow is the quickest way to the poor house.

Second, get a good lease the realtor should have that also. In the lease you can either increase the rent to have a pool guy come in, or the tenet can pay for it out of their pocket. Get a pool company out there to give you a price to clean. Either way you will have to make sure the pool is kept clean.

One of my co-workers has only one house that is an issue out of 15 and that house has a pool. It is here only rental with a pool. Every week the tenet turns off the pump because they do not want to pay for the electricity on it, but then the pool turns green and the pool guy goes out there and sees the pump has been turned off. One the vinyl there is zero way to make sure the tenets do not rip it.

This is where the security deposit comes into play if they do tear it. The cost to replace the vinyl will be more than the deposit so you will have to sue to get the difference back if they do rip it. The judge might consider it normal wear and tear and make you pay for it. This is a risk so factor it into your rate of return you are wanting to get.

Third, have the roof fixed or replaced. If it is a 20 year roof just get it replaced. It will save you money and the headache of the calls when it rains.

Fourth, replace the appliances. Do not get the most expensive ones. If you have a habitat for humanity appliance store then check that out. This is a rental not a primary residence. If you are going to sell the house then upgrade the appliances.

The fear of your first rental is always there. Get over the fear because that will keep you from making money. Remember it is all about the Cash Flow. You have to make money on this deal. If you don’t then either stay in the house or sell it.
[/quote]

Great info man. Thanks as always.

103

[quote]Waittz wrote:

[quote]dmaddox wrote:

[quote]Waittz wrote:

[quote]dmaddox wrote:

[quote]Waittz wrote:
BUMP.

DMaddox where you at big guy? Need some advice. [/quote]

Hit me bro.[/quote]

Decided to either sell or rent my current house. The wifey and I want to downsize and move into the urban part of town. We figured we might as well turn this house into our first rental instead of buying one. It’s a 4-2 1850 sqft with a pool. It is in a great location surronded by work oppurtunities.

How do I start? What is the most reliable way to find out what I could and should charge for rent?

I planned on doing the following in the coming months as we prepare for this:
seek legal council for renter agreement
seek financial council for break-even and tax implications(my old man has offered his service)
Get a roofer to the house to check on the current situation(noticed some water marks, roof is 17 years old).
Locate a yard/pool service and see if I should work into the rental price
Replace stove and microwave(antiquated and issues, we were going to replace them if we decided to stay)
Cleaning service to steam the carpets etc before we show it.
I have a reliable handyman that I can call on for needed issues.
Perhaps getting an inspection for termites/mold and appraisal?

my fears?

The roof. If i get out of the house now I can avoid having to deal with it. If i rent it, I know it will come up soon and maybe through off the profitability of the house or be a huge cash outlay.

The pool. It is a vinyl pool and how do I ensure the renters dont mess it up? A rip or leak, or a blown motor from lack of cleaning can be a big financial issue to handle.

The fear. How do I handle the fear of the first time investment property? It would be so much simpler to just bail and sell it and make out now with some equity but no future earning potential. [/quote]

Lets take this one step at a time.

First, find out what the rental comps are for the neighborhood. A realtor should be able to pull this for you. If the rent does not cover PITI, principle interest taxes and insurance, then sell the property do no rent it. Negative Cash flow is the quickest way to the poor house.

Second, get a good lease the realtor should have that also. In the lease you can either increase the rent to have a pool guy come in, or the tenet can pay for it out of their pocket. Get a pool company out there to give you a price to clean. Either way you will have to make sure the pool is kept clean.

One of my co-workers has only one house that is an issue out of 15 and that house has a pool. It is here only rental with a pool. Every week the tenet turns off the pump because they do not want to pay for the electricity on it, but then the pool turns green and the pool guy goes out there and sees the pump has been turned off. One the vinyl there is zero way to make sure the tenets do not rip it.

This is where the security deposit comes into play if they do tear it. The cost to replace the vinyl will be more than the deposit so you will have to sue to get the difference back if they do rip it. The judge might consider it normal wear and tear and make you pay for it. This is a risk so factor it into your rate of return you are wanting to get.

Third, have the roof fixed or replaced. If it is a 20 year roof just get it replaced. It will save you money and the headache of the calls when it rains.

Fourth, replace the appliances. Do not get the most expensive ones. If you have a habitat for humanity appliance store then check that out. This is a rental not a primary residence. If you are going to sell the house then upgrade the appliances.

The fear of your first rental is always there. Get over the fear because that will keep you from making money. Remember it is all about the Cash Flow. You have to make money on this deal. If you don’t then either stay in the house or sell it.
[/quote]

Great info man. Thanks as always. [/quote]

Anytime. The next time I’m in Florida I need to make a trip to hang out and have a beer.

104

[quote]dmaddox wrote:

[quote]Waittz wrote:

[quote]dmaddox wrote:

[quote]Waittz wrote:

[quote]dmaddox wrote:

[quote]Waittz wrote:
BUMP.

DMaddox where you at big guy? Need some advice. [/quote]

Hit me bro.[/quote]

Decided to either sell or rent my current house. The wifey and I want to downsize and move into the urban part of town. We figured we might as well turn this house into our first rental instead of buying one. It’s a 4-2 1850 sqft with a pool. It is in a great location surronded by work oppurtunities.

How do I start? What is the most reliable way to find out what I could and should charge for rent?

I planned on doing the following in the coming months as we prepare for this:
seek legal council for renter agreement
seek financial council for break-even and tax implications(my old man has offered his service)
Get a roofer to the house to check on the current situation(noticed some water marks, roof is 17 years old).
Locate a yard/pool service and see if I should work into the rental price
Replace stove and microwave(antiquated and issues, we were going to replace them if we decided to stay)
Cleaning service to steam the carpets etc before we show it.
I have a reliable handyman that I can call on for needed issues.
Perhaps getting an inspection for termites/mold and appraisal?

my fears?

The roof. If i get out of the house now I can avoid having to deal with it. If i rent it, I know it will come up soon and maybe through off the profitability of the house or be a huge cash outlay.

The pool. It is a vinyl pool and how do I ensure the renters dont mess it up? A rip or leak, or a blown motor from lack of cleaning can be a big financial issue to handle.

The fear. How do I handle the fear of the first time investment property? It would be so much simpler to just bail and sell it and make out now with some equity but no future earning potential. [/quote]

Lets take this one step at a time.

First, find out what the rental comps are for the neighborhood. A realtor should be able to pull this for you. If the rent does not cover PITI, principle interest taxes and insurance, then sell the property do no rent it. Negative Cash flow is the quickest way to the poor house.

Second, get a good lease the realtor should have that also. In the lease you can either increase the rent to have a pool guy come in, or the tenet can pay for it out of their pocket. Get a pool company out there to give you a price to clean. Either way you will have to make sure the pool is kept clean.

One of my co-workers has only one house that is an issue out of 15 and that house has a pool. It is here only rental with a pool. Every week the tenet turns off the pump because they do not want to pay for the electricity on it, but then the pool turns green and the pool guy goes out there and sees the pump has been turned off. One the vinyl there is zero way to make sure the tenets do not rip it.

This is where the security deposit comes into play if they do tear it. The cost to replace the vinyl will be more than the deposit so you will have to sue to get the difference back if they do rip it. The judge might consider it normal wear and tear and make you pay for it. This is a risk so factor it into your rate of return you are wanting to get.

Third, have the roof fixed or replaced. If it is a 20 year roof just get it replaced. It will save you money and the headache of the calls when it rains.

Fourth, replace the appliances. Do not get the most expensive ones. If you have a habitat for humanity appliance store then check that out. This is a rental not a primary residence. If you are going to sell the house then upgrade the appliances.

The fear of your first rental is always there. Get over the fear because that will keep you from making money. Remember it is all about the Cash Flow. You have to make money on this deal. If you don’t then either stay in the house or sell it.
[/quote]

Great info man. Thanks as always. [/quote]

Anytime. The next time I’m in Florida I need to make a trip to hang out and have a beer.
[/quote]

For sure.

What is a good target cash flow I should be looking at? The Hoa is very low, under 300$ a year. Monthly payment not including the utilities(which I would have tenants put in their name) is 1200 and comps in my neighborhood are around 1400-1700 for 3-2 and 4-2.

Next steps for me will be putting down everything mathwise and finding exactly what I need to break even and what I would ideall need to charge as well as get together all expenses to make sure nothing sneaks up. Going to look into local realtors who handle rentals.

What are you thoughts on property management companies? I have a local friend who is up to two rentals now and brought this up when I mentioned what do I do if I move back down south in a year or so(which is looking like a strong posibility). They charge 10% rent, prescreen aplicants, handle inspects etc. Is this a frivilous expense?

105

Unless you own 20+ units dont give away your profits to management co’s… If you are new to the biz you need to learn the hard way how to screen, evict, and deal with tenants… PM’s also hit you with repairs you dont need and over pay. If your not handy you need to find a good plumber and HVAC guy prior to jumping in the land lord game…

By good I mean cheap… So get ready to scarp any ideologies you have becuase in order to keep costs low its wise to hire out to the immigrant labor populations. Learn to master craigs list… Its the best place for cheap labor & material. I own 5 duplexs & I’ve been a land lord for 10yrs personnaly if the deal doesnt net you at least $1000 in proff per month walk… Theres many deals that will be patient

106

[quote]thehebrewhero wrote:
Unless you own 20+ units dont give away your profits to management co’s… If you are new to the biz you need to learn the hard way how to screen, evict, and deal with tenants… PM’s also hit you with repairs you dont need and over pay. If your not handy you need to find a good plumber and HVAC guy prior to jumping in the land lord game…

By good I mean cheap… So get ready to scarp any ideologies you have becuase in order to keep costs low its wise to hire out to the immigrant labor populations. Learn to master craigs list… Its the best place for cheap labor & material. I own 5 duplexs & I’ve been a land lord for 10yrs personnaly if the deal doesnt net you at least $1000 in proff per month walk… Theres many deals that will be patient[/quote]

I just became a landlord about a month ago, but $1k/month seems crazy to me. A lot of that has to do with how much money you put down on the house which is reflected in your monthly payment.

107

[quote]Waittz wrote:

[quote]dmaddox wrote:

[quote]Waittz wrote:

[quote]dmaddox wrote:

[quote]Waittz wrote:

[quote]dmaddox wrote:

[quote]Waittz wrote:
BUMP.

DMaddox where you at big guy? Need some advice. [/quote]

Hit me bro.[/quote]

Decided to either sell or rent my current house. The wifey and I want to downsize and move into the urban part of town. We figured we might as well turn this house into our first rental instead of buying one. It’s a 4-2 1850 sqft with a pool. It is in a great location surronded by work oppurtunities.

How do I start? What is the most reliable way to find out what I could and should charge for rent?

I planned on doing the following in the coming months as we prepare for this:
seek legal council for renter agreement
seek financial council for break-even and tax implications(my old man has offered his service)
Get a roofer to the house to check on the current situation(noticed some water marks, roof is 17 years old).
Locate a yard/pool service and see if I should work into the rental price
Replace stove and microwave(antiquated and issues, we were going to replace them if we decided to stay)
Cleaning service to steam the carpets etc before we show it.
I have a reliable handyman that I can call on for needed issues.
Perhaps getting an inspection for termites/mold and appraisal?

my fears?

The roof. If i get out of the house now I can avoid having to deal with it. If i rent it, I know it will come up soon and maybe through off the profitability of the house or be a huge cash outlay.

The pool. It is a vinyl pool and how do I ensure the renters dont mess it up? A rip or leak, or a blown motor from lack of cleaning can be a big financial issue to handle.

The fear. How do I handle the fear of the first time investment property? It would be so much simpler to just bail and sell it and make out now with some equity but no future earning potential. [/quote]

Lets take this one step at a time.

First, find out what the rental comps are for the neighborhood. A realtor should be able to pull this for you. If the rent does not cover PITI, principle interest taxes and insurance, then sell the property do no rent it. Negative Cash flow is the quickest way to the poor house.

Second, get a good lease the realtor should have that also. In the lease you can either increase the rent to have a pool guy come in, or the tenet can pay for it out of their pocket. Get a pool company out there to give you a price to clean. Either way you will have to make sure the pool is kept clean.

One of my co-workers has only one house that is an issue out of 15 and that house has a pool. It is here only rental with a pool. Every week the tenet turns off the pump because they do not want to pay for the electricity on it, but then the pool turns green and the pool guy goes out there and sees the pump has been turned off. One the vinyl there is zero way to make sure the tenets do not rip it.

This is where the security deposit comes into play if they do tear it. The cost to replace the vinyl will be more than the deposit so you will have to sue to get the difference back if they do rip it. The judge might consider it normal wear and tear and make you pay for it. This is a risk so factor it into your rate of return you are wanting to get.

Third, have the roof fixed or replaced. If it is a 20 year roof just get it replaced. It will save you money and the headache of the calls when it rains.

Fourth, replace the appliances. Do not get the most expensive ones. If you have a habitat for humanity appliance store then check that out. This is a rental not a primary residence. If you are going to sell the house then upgrade the appliances.

The fear of your first rental is always there. Get over the fear because that will keep you from making money. Remember it is all about the Cash Flow. You have to make money on this deal. If you don’t then either stay in the house or sell it.
[/quote]

Great info man. Thanks as always. [/quote]

Anytime. The next time I’m in Florida I need to make a trip to hang out and have a beer.
[/quote]

For sure.

What is a good target cash flow I should be looking at? The Hoa is very low, under 300$ a year. Monthly payment not including the utilities(which I would have tenants put in their name) is 1200 and comps in my neighborhood are around 1400-1700 for 3-2 and 4-2.

Next steps for me will be putting down everything mathwise and finding exactly what I need to break even and what I would ideall need to charge as well as get together all expenses to make sure nothing sneaks up. Going to look into local realtors who handle rentals.

What are you thoughts on property management companies? I have a local friend who is up to two rentals now and brought this up when I mentioned what do I do if I move back down south in a year or so(which is looking like a strong posibility). They charge 10% rent, prescreen aplicants, handle inspects etc. Is this a frivilous expense? [/quote]

I am not a huge fan of Management Companies or Realtors to lease a house. They just take your money, and the leasing takes some time, but management of the property is easy. It is just another number to add to your break even number if that is the way you want to go. Take your PITI (Principal, Interest, Taxes, and Insurance) and subtract that from the rent. That gives you your cash flow. In this market you should be looking at 10-15% Cash on Cash Return. So if you make $300 a month Cashflow and you have $36,000 in the deal you have a 10% cash on cash return. The numbers are a little different since this is your primary residence. I would use the number of equity in the house to calculate a return. If that return is less than 10% I would sell the house and find another rental that makes you more money. Just my $0.02

108

[quote]LankyMofo wrote:

[quote]thehebrewhero wrote:
Unless you own 20+ units dont give away your profits to management co’s… If you are new to the biz you need to learn the hard way how to screen, evict, and deal with tenants… PM’s also hit you with repairs you dont need and over pay. If your not handy you need to find a good plumber and HVAC guy prior to jumping in the land lord game…

By good I mean cheap… So get ready to scarp any ideologies you have becuase in order to keep costs low its wise to hire out to the immigrant labor populations. Learn to master craigs list… Its the best place for cheap labor & material. I own 5 duplexs & I’ve been a land lord for 10yrs personnaly if the deal doesnt net you at least $1000 in proff per month walk… Theres many deals that will be patient[/quote]

I just became a landlord about a month ago, but $1k/month seems crazy to me. A lot of that has to do with how much money you put down on the house which is reflected in your monthly payment. [/quote]

Duplexs are cash cows, but the appreciation sucks. It is a trade off. I personally only do SF houses because the cash flow is good, and the appreciation is good. I have to get positive cash flow that is the number 1. If you have negative cashflow you will go bankrupt. Appreciation is just icing on the cake. My equity capture and appreciation will allow me to sell my houses and move up into Apartments.

109

[quote]dmaddox wrote:

[quote]LankyMofo wrote:

[quote]thehebrewhero wrote:
Unless you own 20+ units dont give away your profits to management co’s… If you are new to the biz you need to learn the hard way how to screen, evict, and deal with tenants… PM’s also hit you with repairs you dont need and over pay. If your not handy you need to find a good plumber and HVAC guy prior to jumping in the land lord game…

By good I mean cheap… So get ready to scarp any ideologies you have becuase in order to keep costs low its wise to hire out to the immigrant labor populations. Learn to master craigs list… Its the best place for cheap labor & material. I own 5 duplexs & I’ve been a land lord for 10yrs personnaly if the deal doesnt net you at least $1000 in proff per month walk… Theres many deals that will be patient[/quote]

I just became a landlord about a month ago, but $1k/month seems crazy to me. A lot of that has to do with how much money you put down on the house which is reflected in your monthly payment. [/quote]

Duplexs are cash cows, but the appreciation sucks. It is a trade off. I personally only do SF houses because the cash flow is good, and the appreciation is good. I have to get positive cash flow that is the number 1. If you have negative cashflow you will go bankrupt. Appreciation is just icing on the cake. My equity capture and appreciation will allow me to sell my houses and move up into Apartments.[/quote]

The advantage MF properties hold (in my mind anyhow), is that you have more control over the cash flow than you do over appreciation. Since a MF property’s value is tied directly to its cash flow, then you can basically control the appreciation as well.

BTW, as a direct result of this thread I’m putting an offer on my first duplex this week. It is probably going to get shot down with no counter (EDIT: seller is asking roughly 70% more than what it’s worth), but I probably wouldn’t have even started looking at RE investment if this thread had not come along. So thanks everyone for the inspiration!

EDIT: I agree that $1000/month BTCF is a little high. He must be talking about NOI.

110

[quote]Steel Nation wrote:

[quote]dmaddox wrote:

[quote]LankyMofo wrote:

[quote]thehebrewhero wrote:
Unless you own 20+ units dont give away your profits to management co’s… If you are new to the biz you need to learn the hard way how to screen, evict, and deal with tenants… PM’s also hit you with repairs you dont need and over pay. If your not handy you need to find a good plumber and HVAC guy prior to jumping in the land lord game…

By good I mean cheap… So get ready to scarp any ideologies you have becuase in order to keep costs low its wise to hire out to the immigrant labor populations. Learn to master craigs list… Its the best place for cheap labor & material. I own 5 duplexs & I’ve been a land lord for 10yrs personnaly if the deal doesnt net you at least $1000 in proff per month walk… Theres many deals that will be patient[/quote]

I just became a landlord about a month ago, but $1k/month seems crazy to me. A lot of that has to do with how much money you put down on the house which is reflected in your monthly payment. [/quote]

Duplexs are cash cows, but the appreciation sucks. It is a trade off. I personally only do SF houses because the cash flow is good, and the appreciation is good. I have to get positive cash flow that is the number 1. If you have negative cashflow you will go bankrupt. Appreciation is just icing on the cake. My equity capture and appreciation will allow me to sell my houses and move up into Apartments.[/quote]

The advantage MF properties hold (in my mind anyhow), is that you have more control over the cash flow than you do over appreciation. Since a MF property’s value is tied directly to its cash flow, then you can basically control the appreciation as well.

BTW, as a direct result of this thread I’m putting an offer on my first duplex this week. It is probably going to get shot down with no counter (buyer is asking roughly 70% more than what it’s worth), but I probably wouldn’t have even started looking at RE investment if this thread had not come along. So thanks everyone for the inspiration!

EDIT: I agree that $1000/month BTCF is a little high. He must be talking about NOI.[/quote]

1-4 properties (SF, Duplexs, Triplexes, and Quads) do not count as MF for lending. 5 units and greater do. I agree with your assesment though on the MF NOI increases your value for lending. I am looking right now for a 60+ unit apartment complex.

111

Dmaddox you are saying that I should look at the current equity to figure out earnings. Should I be looking at it as what i owe currently versus what it is worth? Or what I paid for it versus what it is worth?

@steelnation really cool how this thread turned out and that it has not only inspired or helped people, but that we got some great guidance from professionals with track records.

112

[quote]Waittz wrote:
Dmaddox you are saying that I should look at the current equity to figure out earnings. Should I be looking at it as what i owe currently versus what it is worth? Or what I paid for it versus what it is worth?

@steelnation really cool how this thread turned out and that it has not only inspired or helped people, but that we got some great guidance from professionals with track records. [/quote]

In your instance since you are living in the property now a way to get a rate of return on your money just take the current market value and subtract the loan amount. This gives you the equity. Now once you calculate your positive cash flow per month multiply that by 12 and divide that number by the equity. Now you have a ROE. For me once this number drops below 9% I am either going to do a cash out refi (if my cash flow is still positive after the refit) or sell the house (take my equity) and either buy two new properties or if I have enough cash buy an apartment complex. This is just a way to calculate when to get out of a property.

Everyone has their way of how to calculate when to get out of a property and some people never sell them. They might want to pay off the loan and just keep the cash flow. I like leverage because it gives me a higher rate of return on my money.

113

[quote]dmaddox wrote:

[quote]Waittz wrote:
Dmaddox you are saying that I should look at the current equity to figure out earnings. Should I be looking at it as what i owe currently versus what it is worth? Or what I paid for it versus what it is worth?

@steelnation really cool how this thread turned out and that it has not only inspired or helped people, but that we got some great guidance from professionals with track records. [/quote]

In your instance since you are living in the property now a way to get a rate of return on your money just take the current market value and subtract the loan amount. This gives you the equity. Now once you calculate your positive cash flow per month multiply that by 12 and divide that number by the equity. Now you have a ROE. For me once this number drops below 9% I am either going to do a cash out refi (if my cash flow is still positive after the refit) or sell the house (take my equity) and either buy two new properties or if I have enough cash buy an apartment complex. This is just a way to calculate when to get out of a property.

Everyone has their way of how to calculate when to get out of a property and some people never sell them. They might want to pay off the loan and just keep the cash flow. I like leverage because it gives me a higher rate of return on my money. [/quote]

How do you finance your properties? Do you use any particular lender?

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[quote]Steel Nation wrote:

[quote]dmaddox wrote:

[quote]LankyMofo wrote:

[quote]thehebrewhero wrote:
Unless you own 20+ units dont give away your profits to management co’s… If you are new to the biz you need to learn the hard way how to screen, evict, and deal with tenants… PM’s also hit you with repairs you dont need and over pay. If your not handy you need to find a good plumber and HVAC guy prior to jumping in the land lord game…

By good I mean cheap… So get ready to scarp any ideologies you have becuase in order to keep costs low its wise to hire out to the immigrant labor populations. Learn to master craigs list… Its the best place for cheap labor & material. I own 5 duplexs & I’ve been a land lord for 10yrs personnaly if the deal doesnt net you at least $1000 in proff per month walk… Theres many deals that will be patient[/quote]

I just became a landlord about a month ago, but $1k/month seems crazy to me. A lot of that has to do with how much money you put down on the house which is reflected in your monthly payment. [/quote]

Duplexs are cash cows, but the appreciation sucks. It is a trade off. I personally only do SF houses because the cash flow is good, and the appreciation is good. I have to get positive cash flow that is the number 1. If you have negative cashflow you will go bankrupt. Appreciation is just icing on the cake. My equity capture and appreciation will allow me to sell my houses and move up into Apartments.[/quote]

The advantage MF properties hold (in my mind anyhow), is that you have more control over the cash flow than you do over appreciation. Since a MF property’s value is tied directly to its cash flow, then you can basically control the appreciation as well.

BTW, as a direct result of this thread I’m putting an offer on my first duplex this week. It is probably going to get shot down with no counter (EDIT: seller is asking roughly 70% more than what it’s worth), but I probably wouldn’t have even started looking at RE investment if this thread had not come along. So thanks everyone for the inspiration!

EDIT: I agree that $1000/month BTCF is a little high. He must be talking about NOI.[/quote]

Mind if I ask where? Mainly out of curiosity. There are a few neighborhoods in the south hills along the streetcar lines that some people who work in town really go for. Not always the most beautiful, but a few rental owners seem to love them.

115

[quote]Steel Nation wrote:

[quote]dmaddox wrote:

[quote]Waittz wrote:
Dmaddox you are saying that I should look at the current equity to figure out earnings. Should I be looking at it as what i owe currently versus what it is worth? Or what I paid for it versus what it is worth?

@steelnation really cool how this thread turned out and that it has not only inspired or helped people, but that we got some great guidance from professionals with track records. [/quote]

In your instance since you are living in the property now a way to get a rate of return on your money just take the current market value and subtract the loan amount. This gives you the equity. Now once you calculate your positive cash flow per month multiply that by 12 and divide that number by the equity. Now you have a ROE. For me once this number drops below 9% I am either going to do a cash out refi (if my cash flow is still positive after the refit) or sell the house (take my equity) and either buy two new properties or if I have enough cash buy an apartment complex. This is just a way to calculate when to get out of a property.

Everyone has their way of how to calculate when to get out of a property and some people never sell them. They might want to pay off the loan and just keep the cash flow. I like leverage because it gives me a higher rate of return on my money. [/quote]

How do you finance your properties? Do you use any particular lender?

[/quote]

Depends. I want lenders that are nice to investors. Most large banks hate lending to investors so their rates are usually 1-1.5% higher than normal owner occupiers. Sometimes I use Hard Money, short term 18months max high interest rate, because they will lend the purchase price and the rehab, then once the house is rented I rate term refi the loan into a conventional loan. Sometimes I just do a conventional loan if the rehab is $5000 or less. I try to get the longest amort schedule with the lowest rates. I like small local banks for my conventional mortgages whether purchasing or refinance. They just treat you better. Once you reach 10 Fannie Mae style loans on SF houses then you go into commercial lending. Commercial loans are usually 2-2.5% higher than owner occupier loans. Much more expensive but if the deal still cash flows why not.

Also do not discount the appraisal process. This is another way the larger banks will screw you. Give you a low appraisal so they do not have to lend so much. This is where mortgage brokers who deal with investors shine.

116

@dmmaddox

How difficult would it be for someone in the middle of the earning curve (say 60’s - 70’s) to get started in real estate investment?

I assume the money you have/make the better, but could someone get started with a moderate investment?

Also, if you don’t mind me asking, how’d you go about getting started in the business? Did you get started with the company you now work for?

I live in Houston, so if the company is legit (which you’ve already said it is) I’d like to go to a meeting or something to get a feel for everything.

Heh, maybe I should just do that instead of wasting a post on these questions. :slight_smile:

117

[quote]En Sabah Nur wrote:
@dmmaddox

How difficult would it be for someone in the middle of the earning curve (say 60’s - 70’s) to get started in real estate investment?

I assume the money you have/make the better, but could someone get started with a moderate investment?

Also, if you don’t mind me asking, how’d you go about getting started in the business? Did you get started with the company you now work for?

I live in Houston, so if the company is legit (which you’ve already said it is) I’d like to go to a meeting or something to get a feel for everything.

Heh, maybe I should just do that instead of wasting a post on these questions. :)[/quote]

I am teaching the class tomorrow night.

I started investing with $25k. I got started out of necessity. I was laid off from a position of 5 years 2 days before closing on my 2nd rental property. My lender was willing to continue to lend to me so I kept going till I got to 7 SF and $3,000 a month in positive cash flow. I started back at work because I wanted to not because I had to.

My father and his mother have a couple of rental properties so I wanted to get some myself. My father and grandmother were the definition of “slum lords”. I wanted to do it correctly so I happened across Lifestyles Unlimited and the rest is history. My father joined earlier this year, and he now asks me for advice.

118

[quote]En Sabah Nur wrote:
@dmmaddox

I live in Houston, so if the company is legit (which you’ve already said it is) I’d like to go to a meeting or something to get a feel for everything.

[/quote]

Also Lifestyles Unlimited has been around for 23 years.

119

[quote]dmaddox wrote:

[quote]En Sabah Nur wrote:
@dmmaddox

I live in Houston, so if the company is legit (which you’ve already said it is) I’d like to go to a meeting or something to get a feel for everything.

[/quote]

Also Lifestyles Unlimited has been around for 23 years.[/quote]

The name makes the organization sound more like a swinger’s club than a real estate education group.

120

[quote]Dr. Pangloss wrote:

[quote]dmaddox wrote:

[quote]En Sabah Nur wrote:
@dmmaddox

I live in Houston, so if the company is legit (which you’ve already said it is) I’d like to go to a meeting or something to get a feel for everything.

[/quote]

Also Lifestyles Unlimited has been around for 23 years.[/quote]

The name makes the organization sound more like a swinger’s club than a real estate education group.
[/quote]

You are not the first to say that.

We have a saying up here, “It’s not about the money. It’s the Lifestyle.” Basically leading a balanced life with yourself, family, charity, job, health and the like. The rental properties get you the money so you can have that balanced Lifestyle. It is a great philosophy on life and I have drank the kool-aid myself and I like it.