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If you can afford to just flat out buy a property when you're getting into the business, should you do it, or is financing it always the way to go?
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Mar 25, 2017 03:54
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Sun Wu Kampf posted:If you can afford to just flat out buy a property when you're getting into the business, should you do it, or is financing it always the way to go? In general expected returns on well priced and well managed rentals are significantly higher than the extremely low rates on mortgages at present, however financing effectively leverages your capital risk.
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Mar 25, 2017 04:01
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goku chewbacca posted:Posting this in here hoping to get the attention of another DIY landlord with experience with old homes. you have the drain pipe next to the wall that goes to a sump pump i take it? 5"x5" french drain shouldn't be terrible...but i would not put it flush with a foundation wall and instead further inward the basement. is this the only part of your basement that gets flooded? how far does the water perforate from the foundation? we have duplexes from the 40's that are like yours with no footer, water loves to creep in. if anything dude get a quote from a plumber and understand what hes doing and why hes doing it and make sure hes licensed and then do it yourself lol BEHOLD: MY CAPE posted:How do you make any money if you pay some kind of retail price for a rental property and then (presumably) pay a management company to deal with it remotely you can make a reasonable gauge of what your return will be from purchase to expected work orders, taxes, management cut, and the refresh after your first go around. 8%/yr would not be surprising but it can be estimated by all those factors above. generally management firms will give you a rough estimation as well Thermopyle posted:One thing I will say about property you're not local to is that it can be a loving headache. Even if you've got a good company to take care of stuff, there's no guarantee they're going to stay a good company. i could not comprehend not actively being in the area to take care of general maintenance, work orders etc. property management firms can be pretty drat lovely in the work ethic/level of care while also charging full retail for all things rental maintenance. the only thing they are good for is having a lawyer that knows how to kick them out, credit checking, and being the big bad firm that people will oblige by. let them handle all the financial- human relations and try to take care of your houses yourself and you will save a lot of money (just try not to burn it down in the meantime). bef fucked around with this message at 06:59 on Mar 31, 2017 |
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Mar 31, 2017 06:26
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My tenant has put in legitimate but annoyingly small maintenance requests every few months for the past year so I offered to renew at the same rent. I'll take the annoyance of sending out the handyman every few months for someone who cares enough to call and pays the rent.
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Apr 2, 2017 18:51
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I have a question.. I'm renting my apartment for the first time in my life so I'm naturally nervous - the tenants are friends of a friend and they would like to pay weekly via Paypal. They plan on staying about 4 months. We are going to sign a weekly lease agreement today. Do I have ANY recourse if 5 months from now, he decides to dispute every weekly payment he made? I've read too many horror stories about PayPal even though it is convenient. Am I just being paranoid?
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May 1, 2017 12:48
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The problem with paypal is that you can't tell whether the payer has paid you with a credit card or not, and that is the potential route to a chargeback. I'd insist on something else such as cozy or popmoney unless you really trust these people.
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May 1, 2017 13:05
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Would the fee be different if they pay with a credit card vs bank account? My first payment was for exactly the amount I asked for.
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May 1, 2017 18:38
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I'm planning on converting my primary residence to a rental property. I bought it for 233k. Zillow has it worth $362k (realistically, probably closer to 325k). I owe $158k, and have an interest rate of 2.75% through mid-2020. Don't need the equity for my new home. My plan would be to rent this for the foreseeable future. I don't need the money, and the home is in a nice area with good schools, so it should be fairly easy as an annual rental with good families coming in (assuming it is priced correctly). I'm expecting a mid single digit return on my equity, accounting for poo poo breaking/non-rental, but wouldn't be surprised by closer to 10%. It looks like I have two options here on avoiding paying any capital gains: (1) I immediately sell it to an S-Corp or (2) sell it to an S-Corp within the next 3 years (which would allow me to qualify for the 2-in-5 years exclusion). Am I correct in that? And would it not be more advantageous for me to delay selling it to an S-Corp due to my 2.75% interest rate? I know I need a lawyer/accountant to answer this 100% accurately, but just wondering if I am headed in the right direction here.
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Jun 26, 2017 18:17
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Arkane posted:I'm planning on converting my primary residence to a rental property. Are you paying the house off? Assuming no but.... What is your mortgage/taxes/insurance payment today How old is the house. What are the rental comps like in your area. How do you plan to convince your lender to let you sell it to an S-Corp you control as a rental property (probably not). Does your lender allow you to rent the house out/not be the primary resident and still qualify for your current term/rate. Or will you need to re-fi. (Probably not and probably yes).
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Jun 26, 2017 23:31
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Ixian posted:Are you paying the house off? Assuming no but.... Lender has no say in what I do with my house at this point (re: rentals). I don't need to refinance. Mortgage/taxes/insurance is $950 a month on a 19 year old house, of which $350 is principal. Conservatively, I think I can get $1700 a month in rentals, which is below comps, and which would generate about a 6% ROI on my equity. That's assuming a 10% management fee, and includes maintenance/HOA/lawn service/vacancy. Not a killer ROI, but whatevs. I'm not sure as yet how to sell it into an S-Corp, but I understand there are a couple of options available if I go that route. One thing I'm not sure of, and I would need to research if this option is open to me, is whether my property taxes would change with the change of ownership from individual to an s-corp. Arkane fucked around with this message at 00:31 on Jun 27, 2017 |
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Jun 27, 2017 00:11
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The switch to a rental could result in the loss of a homestead exemption. Your ROI could also consider if depreciation can shield your income from taxes. You could also look at eventually doing a 1031 exchange of this property for another if you want to defer capital gains.
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Jun 27, 2017 00:21
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Arkane posted:I'm planning on converting my primary residence to a rental property. There's no real benefit of putting it into an S-Corp. It'll be single member so your liability protection doesn't exist, and you can't sell it to your S-Corp, you would quitclaim it which would probably trigger the loan to being due. And depending on your state, just by having an LLC/S-Corp you have to pay a certain fee. California I think is $900.
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Jun 27, 2017 02:12
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Arkane posted:Lender has no say in what I do with my house at this point (re: rentals). I don't need to refinance. Good news re: current mortgage because as you probably know if you were to buy a second property to rent it is very unlikely you'd get that low a rate. I'd double check the fine print on your lender agreement just in case. I don't know how big a break you get from homestead but as Crazypeltast52 points out you'll lose it (though obviously gain on the new house). Factor that in your payment. Also look into his/her advice re: tax depreciation - if you have a high income and taxes to shield you can probably get a decent break there. Obviously I don't have all the details but based on what you've provided $1700 seems a little high. If you've done your comp research and that seems right then I'd wrap it in to the following rental property rule which is: Always. Be. Conservative. If you think you can get $1700 based on research, budget for $1500. If you think your vacancy rate will be 5%, budget 10% (almost everybody underestimates vacancy). Maintenance, I would budget at least 15% on a 19 year old house you are going to rent. That might even be too low unless it is in really good shape. Also: 20 year old house, when was the roof last replaced? Roofs can kill rental ROI dead. If this is your first/only rental maybe ditch property management. Though for budget purposes it doesn't hurt to keep it in. You end up with around $1472/month in expenses going off my back of the napkin assumptions (I assumed $25 for HOA) and the info you provided. Not great. Maybe if depreciation works out for you it's...ok? Seems like a lot of risk for a low return. You can play with assumptions of course. Maybe you really will get $1700/month. Maybe you get $1500 but you drop PM which saves you $150. Maybe you won't need that much for maintenance - though 15%, or $225/month on a 1.5k rent, seems low to me for a house that is about to turn 20. Sure, maybe it is in good shape but trust me underestimating maintenance costs is the second big mistake new rental property owners make right after underestimating vacancy rate. Speaking of which, sure you could get lucky and have a 5 year tenant that always pays on time (and accepts annual increases). It happens. It also doesn't happen  Always plan conservatively. If things work out well great, you have a budget surplus. Finally, I am not sure what you are trying to do with the S-Corp but you probably don't need to do it. I built a custom Excel spreadsheet to evaluate my rental investments or those I am considering. I highly recommend visiting sites like BiggerPockets which can help a lot with this kind of stuff.
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Jun 27, 2017 03:37
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You can't transfer the deed without calling your mortgage due and you don't want to refinance since you currently have a rate well under market. Rent away and make sure you have ample insurance including an umbrella policy.
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Jun 27, 2017 18:53
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You do get to take depreciation from your original basis against ordinary income if you self manage and then pay at a lower rate when you sell it assuming you have a gain and the tax law doesn't change by then.
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Jun 27, 2017 19:14
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I've been researching triplexes and fourplexes in my area and I have a few that I think would be profitable, assuming there isn't something horribly wrong that isn't shown in the pictures. Would you all recommend using an agent to approach the sellers, given that I've never bought a house before, or to talk to the sellers directly and use a realestate agent if I decide to make an offer?
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Jun 27, 2017 20:53
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Anyone have experience with turnkey property sellers in the Midwest? I heard that the Midwest is like the only reliable place to find properties with good cashflow nowadays, but I'm pretty sure I'm a naive Johnny-come-lately to the world of rental investing and everything good in every good city 2009 has already been snatched up. I'd love to invest in my area but that area is NYC which seems really overpriced.
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Jul 17, 2017 00:59
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Why would someone sell a turnkey rental property?
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Jul 17, 2017 03:44
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Maybe they want more money faster, because they're buying distressed properties and fixing them up for less than the market rate?
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Jul 17, 2017 06:47
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House flippers don't care who they sell to and "turnkey" is just a marketing gimmick term to widen the scope of buyers. Look at sites like Realtymogul, who seem to have a good rep, and check out what they do for commercial real estate. You can even do 1031 exchanges on investments with them and they have pretty decent returns, better than REIT, and with the same lack of hassle. Not that it is risk free but neither is buying a rental property. Unless you are speculating on a price boom in the next few years you probably won't come out better buying a SFH to rent.
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Jul 17, 2017 23:33
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Ixian posted:House flippers don't care who they sell to and "turnkey" is just a marketing gimmick term to widen the scope of buyers. Why do you think realty mogul will give you better returns than a REIT? Aren't they basically a choose your own adventure REIT?
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Jul 17, 2017 23:41
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Hi guys, I'm in NJ and rented my apartment out to a friend of a friend. Edit: I'll remove the details as recommended and talk to a lawyer. Thanks guys
FateFree fucked around with this message at 02:12 on Jul 31, 2017 |
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Jul 31, 2017 01:51
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FateFree posted:Hi guys, I'm in NJ and rented my apartment out to a friend of a friend... Stop talking to the tenant and get an attorney. Tell the attorney everything that's happened and everything you've said or written to the tenant. Don't leave anything out, you're going to need help cleaning some of that up. Delete the details of that post. Don't accept any payment from him or make any more promises about forgiving debt, etc.
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Jul 31, 2017 01:59
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FateFree posted:Hi guys, I'm in NJ.... I found a week to week lease online JFC you needed a lawyer so long ago. NJ is incredibly tenant friendly and you could be hosed in 1 to multiple holes depending on what that internet lease you signed says. (chances are good most of the things that go your way are unenforceable in NJ)
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Jul 31, 2017 02:05
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I get the impression that real estate has been the last place where individuals can practice value-investing. That is, carefully figuring out what things are worth until you finally find something that is worth more than the price it would cost you to buy it. But it seems like there are companies popping up that purport to find areas for investment on your behalf: http://www.businessinsider.com/best-us-housing-markets-real-estate-investment-2017-7/#73003-edmond-oklahoma-3 Does anyone think that will make it harder to find profitable properties to invest in? Seems like, at the very least, it will mean more competition from other investors as time goes on. Do you think we'll ever get to the point where real estate is like the stock market, where value-investing purportedly "works" but only for the teams of full-time analysts evaluating stocks for huge mutual funds, because they're the only ones with the time and resources to figure everything out, so individuals could ever compete with them?
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Jul 31, 2017 14:38
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oliveoil posted:I get the impression that real estate has been the last place where individuals can practice value-investing. That is, carefully figuring out what things are worth until you finally find something that is worth more than the price it would cost you to buy it. Im not sure what to think honestly. Most of this activity takes place in "B" and "C" neighborhoods where there is typically plentiful housing stock, so I'm just not sure what will happen as rental wholesalers and REITs descend on them. I'd like to think that the wholesalers will want to operate at scale and keep the costs down, which would hopefully keep the rents somewhat reasonable, but who the hell knows. I think the concentration of cash is going to make it tougher for small time landlords to expand their portfolio. When you're trying to leverage a few properties into a portfolio loan it's tough to go up against a wholesaler buying entire blocks for cash.
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Jul 31, 2017 18:09
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I'm a bit nervous about the current market to be honest. When everyone is dumping investment money into real estate the prices go up, which causes the rents to go up, which causes renters to not be able to afford rents since their pay isn't also increasing and with that you have a real recipe for disaster. Many of these turn key companies are driven by a markets ability to sustain flipping but unless you're looking at a place like Detroit, the number of houses available for that type of transaction are limited and not really growing while the number of people thinking it's quick/easy money is increasing (screw you HGTV). I saw this where we used to live in Utah. When we purchased our first property the bad properties were incredibly cheap but by the time we were looking for a 3rd the prices for a meth contaminated house that had been sitting empty for years was pushing $100k. At those prices there's just no way for landlording to make sense and an owner occupier could do a whole lot better for less than what the rehabber is going to charge to try and make the deal worth pursuing. With that kind of market happening in a small town in Utah I can only imagine what's happening in the more metropolitan areas where owning property was already cost prohibitive.
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Jul 31, 2017 23:12
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Eventually the answer is 
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Sep 21, 2017 19:58
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I was listening to a podcast the other day that introduced the concept of becoming a "mortgage trustee", basically lending money to people that make investments and then profiting from that (i guess it's like you and a group of people act as a bank???) Where do I find more information on that?
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Sep 22, 2017 06:18
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Rocks posted:I was listening to a podcast the other day that introduced the concept of becoming a "mortgage trustee", basically lending money to people that make investments and then profiting from that (i guess it's like you and a group of people act as a bank???) Where do I find more information on that? That sounds like a great way to... lose all your money?
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Sep 22, 2017 08:53
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Zero VGS posted:That sounds like a great way to... lose all your money? Fair but was just something I wanted to read more about. I've never heard of it
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Sep 22, 2017 09:21
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This seems like a good thread to plug my airbnb in Hawaii: http://abnb.me/EVmg/GW4Ma2QWDG We just had our first guests and they were a real pleasure! So quiet and they left the place sparkling clean. Couldn't be happier with the process so far.
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Sep 22, 2017 09:23
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Rocks posted:Fair but was just something I wanted to read more about. I've never heard of it It sounds like another take on those "microlending" things like Kiva or Lending Club, but instead of losing your money to the average Joe who bails on his payments, you'd be losing your money to some already rich rear end in a top hat real estate investor who can't rent out his overpriced luxury condos or something. I don't actually know, that's just my hot take. But there's plenty of perfectly good ways to invest right now without trying some new unproven model. I don't know anyone personally who outpaced the stock market issuing microlending.
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Sep 22, 2017 17:10
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Sounds like what you're describing is becoming a private lender. It's done all the time by real estate investors. It's usually called a "Hard Money Loan" and they're really common when a person isn't able to use a bank to purchase a property. I haven't heard the term "Mortgage Trustee" before so maybe there's some specific differences but being a private lender is a perfectly viable way to make money in real estate. I can't really recommend any resources as I've never been on the lending side before but searching for Hard Money Lender should help give you an idea of what you'd be looking at. Or you could go to your local Real Estate Investment Association (REIA) and you should be able to find people with experience on both sides. edit: Private lenders (who actually have the cash to lend and aren't dicking around with small shares through those sites listed before) will charge rates higher than a bank (sometimes 10%+) with much shorter terms (<5 years). Since it's a private loan everything is negotiable. TouchyMcFeely fucked around with this message at 23:40 on Sep 22, 2017 |
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Sep 22, 2017 23:35
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Rocks posted:I was listening to a podcast the other day that introduced the concept of becoming a "mortgage trustee", basically lending money to people that make investments and then profiting from that (i guess it's like you and a group of people act as a bank???) Where do I find more information on that? NOT AN EXPERT, but from what I understand this variation is closer to "note buying" rather than "hard money lending." Basically, you're the bank for a mortgage, but it's not called a mortgage. It's main advantage over hard money lending is that, although the expected return is lower, the steady payments over many more years resembles typical real estate investing without the landlord hassle. Also, if the renters don't pay and the investor can't eat the costs, you will foreclose on them and have the
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Sep 23, 2017 01:09
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I have a friend who is a real estate agent. We've been friends for a while, before he became an agent. We hang out sometimes, but not close enough that losing him as a friend would be devastating. I believe his head is on straight, and he isn't your typical "real estate can only go up and you should lever up and buy 74 properties" kind of agent. On a scale of bad idea to "buying a house with a girlfriend" really bad idea, how dumb of an idea would it be to buy a small multi-family rental with him? A few things: It was my idea, not his. It wouldn't be for a few years (so, no specific property in mind, but also no timeline, so we can wait for the right one). I save a good chunk of my income, so if this went bad and I lost the investment, it would suck, but not make me homeless. I'm thinking of this as a way to diversify my income for possible early retirement. If this isn't the worst idea in the world, I'd want to do it right, and write up an ownership agreement with a lawyer and all that. Does anyone have experience with owning a rental property with someone else? Any pitfalls or best practices? Advice?
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Sep 23, 2017 10:03
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Personally, I default to a big fat "NO" to any kind of business partner arrangement because it introduces too much risk. Why do you need a partner?
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Sep 23, 2017 16:06
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Don't go into business with any friends or family you want to keep. Personal relationships and business relationships are very different things, and businesses often require you to make decisions that will strain personal relationships.
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Sep 23, 2017 17:02
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In my attempt to continue to give bad advice, I wouldn't rule out going into business with a partner out of hand. The real question is what do each of you bring to the table and do your strengths compliment each other? As the real estate agent, if he's good at finding deals, do you have the skills/time available to rehab the houses? Or would he be in charge of finding the homes and you would be the manager, etc? The flip side is also true, other than using him as a real estate agent, do you really need him after the purchase is made? What does he bring to the table for you that you lack? For example, I have a guy who is a real estate agent, that I'm friends with, who I use to find properties but we don't partner on ownership. We let him know when we're looking for a property, he lets us know when he's found one, he gets his 3% commission if we buy it and we take it from there. I think partnering can be useful for a variety of reasons but isn't necessary unless there's something lacking that the other person has.
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Sep 23, 2017 17:33
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Thermopyle posted:Personally, I default to a big fat "NO" to any kind of business partner arrangement because it introduces too much risk. It's a fair question. I wouldn't say I need a partner. I could purchase one on my own and carry the payments without trouble from my day job, but he has experience with rental properties already, and I don't. I've read a ton about it, but there's a difference between that and doing it. Also, if I bought it completely by myself, I think too much of my net worth would be in real estate. That's a lot to think about, appreciate it.
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Sep 23, 2017 18:30
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