Rental Property Investment Question for The Experts Here - Page 2

turbo6bar · 08-23-2006, 04:38 PM

Quote:

Originally posted by asphaltgambler
Really more thinking out loud here as far as RE investing is concerned. I'm looking for an avenue towards RE investing to build financial wealth over the next 20 years.

Fairly 'green' to whole commercial aspect, and honestly (for now) have very little cash to invest. I thought that buying income producing property would be a way to pyramid my way up. Leveraging as I go.

You've got the right attitude, but you're hitting it at the worst part of the cycle.

The advice from others is really great. Absorb, think, and grow. When your knowledge and confidence are high, you will be able to separate the good deals from the crap, and more importantly, be willing and able to act.

asphaltgambler · 05:21 PM

The way I see residential RE is that I easily understand it. As in: I can see it, touch it, most all the information about prior sales, tax assesments, comps, market value is free and readily available and for the most part accurate.

When I was in college many moons ago I had to use up a few electives. I opted for a three-part course in real estate (sales) I could have after that tested for my Va realtors license. I enjoyed the course tremendously and was well taught by a very seasoned realtor.

I was already in the car business and (like a Mr. Dumass) did persue that as a career. However I always have had an interest in it; but for myself only.

About 10 years ago I met a commodities trader who was a real pistol. He was one of my customers. Turns out he was some sort of high roller for one the big brokerage firms on the floor of the NYSE. He was fired and banned from the floor (supposedly) from some insider *****.

So my interest was peaked then in the stock / commoditites market. He gave me a lot of advice and told me to read four books that were the cornerstone of understanding basics of the market.

The more I read, the more I realized that most likely an average joe would get his @ss handed to him w/o some real knowledge and some inside poop on a particular stock. I also considered day trading at the time because the tech stocks were driving the market and it seemed as if everyone was making money. But I still did not jump in. I felt I could not really make an informed decision based on my lack of understanding

Fast forward to now. Burnt-out from the car business, need to have a plan in place to build for unearned income as I grow older and want more freedom.

turbo6bar · 08-23-2006, 05:28 PM

This isn't a bad time to get into RE. It is just a bad time to buy RE. That doesn't mean you can't start your education. There are many avenues to make profit, and you'll have to analyze your strengths, weaknesses, assets, and liabilities to determine the best fit. I don't like to negotiate or butt heads, but I can take a torn-up POS fixer-upper home and visualize the remodeled home in perfect condition, and I'm good at scheduling, planning, and executing. Naturally, I gravitate towards that end of the spectrum. You might be just the opposite.

If you find some deals, throw 'em here. I'm sure the OT knuckleheads can dissect it for ya.

asphaltgambler · 08-23-2006, 06:54 PM

I think that is great advice. I've done a lot or BMW 'Flippin" and thought that residential could be done the same way on a larger scale.

Also a big thanks to Amail for the REI website. I'm gonna be a member there and learn.

snowman · 08-24-2006, 07:45 PM

Basic, very basic... Check the credit of every renter. Credit no good, do not rent to them. No credit, do not rent to them. Some friends as well as me have stuck to this and it works. You wouldn't beleive the scam artists out there, thankfully they do not have good credit.

john70t · 08-24-2006, 08:58 PM

I've been thinking about doing the same, but am still a newbie about it. My cheapo unit came with "malignent tenant-itous", and I quickly found out where to get the pay-or-quit forms (just getting into court took another month and a half though).
"Experience is a hard teacher, for it gives the test first and the lesson afterwards".

http://bbs.mrlandlord.com/qanda/index.mgi is a good site for browsing. The library and wikipedia should have some readables on the subject.

The first thing I'd consider for an investment is long-term area growth. Has the population changed recently? Is the area dependant on one industry/attraction? Are there multiple freeways/roads nearbye for growth? Does the neighborhood have nearbye supermarkets/churchs/schools/shopping centers?
Who are your tenants/clients going to be? You want the wealthiest tenants in the lowest millage area.

The second is building type and location.
Obviously painted ladies(victorians) are a bad choice for investment property. A good foundation, brick and steel roof will minimize YOUR time to: uncloging toilets, mowing the lawn, etc....it adds up. Make very sure there is good drainage.
I've heard people swear by renting muti-room SF's to a group of students(1 dishwasher,1 ? to break), but this make only work with the responsible types.

Third is to crunch the numbers: insurance, taxes, outstanding repairs, vacantcys, ect. all have an impact. More info on the history of a specific property can be found at the county deed recorders office.

Fourth, screen screen screen. Refund the application fee(a "loss") but get the good tenant, and think about other stuff after that.

snowman · 08-24-2006, 10:06 PM

The real pros can rent on the cheep for as long as a YEAR. SO be careful.

motion · 08-25-2006, 07:12 AM

Quote:

Originally posted by turbo6bar
Please do. I am in single family rentals along with the rest of my family. The tenant pool is so tight right now, and getting quality tenants is a lot of work. Commercial RE is where I need to head. Commercial would be bread & butter, while fixer-upper single families would generate extra play money.

jurgen

Good luck with that... my theory is that Internet exposure has essentially killed all the good deals out there in commercial. Even mobile home parks for sale now have across-the-board identical cap rates, no matter if they're in Newport Beach or Texarkana. The internet has leveled the playing field, making properties tucked away just as visible as prominent, high traffic properties. Its a different world now.

turbo6bar · 08-25-2006, 07:52 AM

Oh, I'm not interested in today's deals, but I need to be ready to jump when everyone else is crazy down on RE investing. Ya gotta zig when all others zag.

1996-2000 was a great time to buy RE. Everyone else was playing "JDSU to 10000," and NASDAQ was the only game in town.

pwd72s · 08-25-2006, 10:20 AM

In 1977 Cindy was diagnosed with M.S. That was the trigger that prompted me to get my ass in gear, to start worrying about the future. I then had a little retail biz in this small town, on the main highway frontage. In 1978, the property next to my biz came up for sale. It is zoned commercial, but at the time it had a small rental house and an automotive repair shop. Being tuned into city hall, knowing a plan to expand the town North was recently thwarted by those living there, I thought that if the town were to grow, it would head South, where my store was. So, I took the leap, bought the property.

In 1980, the town nearly became a ghost town, thanks to the green politics effectively shutting off the federal forests, both of the town's major mills, paper and plywood, closed.

But, somehow, I managed to keep the biz open, the bills paid, and I hung on to the property for 13 years. The rental house was a royal pain in the ass. All the horror stories of bad tenants are true. I lived 'em.

In 1993, it was announced that the first Wal-Mart to hit Oregon was to be built directly across the highway from me. Suddenly, the property I couldn't sell throughout the 80's was deemed valuable, and people began knocking on my door.

I finally sold, demanding 20% down, the balance over 30 years at a minimum of 9% but adjustable upwards should inflation kick in again. Reviewable every 5 years, if need be I can bump the rate to 2% above the Wells Fargo 30 year Home mortgage rate. Other contract terms are...well, let's just say my ass is covered with a blanket! I'm still getting payments @ 9%...

Nominally, I sold the property for about triple what I paid for it. But..this is NOT counting insurance, taxes, maintenance costs, etc.
An actual rate of return? I'd have been better off placing the same money in a Vanguard total market fund.

BUT...without having forced myself into the property payments, I doubt I would have given myself such a rigorously enforced "investment plan". There are always other places to spend money...temptations and "needs" both.

So, our venture into real estate was a springboard in many ways. When I sold we then had the $$$ to place into other less stressful investments. Cindy's body may provide difficulties for her, but her head for numbers is working just fine. When I met her, she was a bank teller. By the time she had to quit working, she was a loan officer. Managing money is her forte'...Recognizing this, I turned her loose in the market. Using conservative investing, she's done quite well. Never a losing year, and our portfolio is to the point where we can add to our income by taking away from it when needs arise.

We'll never be able to consider ourselves rich...no fleets of collector cars or homes at the beach are in our future. Our home is quite modest, 2400 sq. feet on a 1 1/2 acre lot, located on a low traffic road that doesn't go to anywhere. But then, I've reached the age that I realize that the more krap you have, the more krap you have to take care of. Everything is paid for, and I'm not worried about money.

Hey, I guess, in a way, Cindy & I ARE rich!

If this life experience helps any of you, the post is worth the time it took to make it. Good luck to all of you.

asphaltgambler · 08-26-2006, 10:04 AM

That is a great life story, very inspiring

snowman · 08-26-2006, 06:02 PM

If you have to live in Oregon, are you really living? Isn't it better to have a beach house in So CA and have everything paid for?

Just kidding---not.

turbo6bar · 08-26-2006, 07:19 PM

I'd rather have a free and clear hotel in Monaco and $1million Euro in the bank account than a beach house in SoCal.

Perspective is everything. Sometimes nice is being happy with what you have.

pwd72s · 08-26-2006, 07:43 PM

Snowman nailed it. Southern California living is where it's at. They have the sun, the bikini littered beaches, hell, they've got it all down there. Oregon sucks, man. West of the Oregon mountains it's cold & rains all the time. East of the mountains it's cold and snows all the time. Not a damned thing to see or do up here. Don't even come visit...just stay home.

snowman · 08-27-2006, 09:20 PM

You got it. RE is location, location, location and not to mention LOCATION.