Income property - what's the best type?

[recycled sixtie]

Originally Posted by Rick Lee

Please telll me more about this. I'm getting killed on my condo and the tax benefits don't seem to help much. I'm told I can only write off 50% of the losses because wife's and my incomes. I'll lose a good $5k in 2012 between rent and carrying costs. How can I write off more than $2500 of those losses?

I don't pretend to be an accountant but have done a few accounting courses. I am not familiar with US tax laws/property accounting but a couple of hours with a qualified one would be worth the fee to find out what u can do to fix those losses and use them to tax advantage.

[McLovin]

I own both residential and commercial property.

Like a lot of things, you make your money on the purchase. It has to be a good property with good numbers, at the right price.

Investment property can be a godsend that secure your future and are financially fantastic, or can be a nightmare that can wipe you out and lead to bankruptcy. For the most part, that is already determined the second you stroke the check and title is passed to you.

So you need to be very careful when you buy. Need to be able to analyze the number, etc.

[svandamme]

best income property is a cathouse.
And by that i don't mean a house with cats in it.

[Christien]

Lots of good stuff here, guys - thanks. Vacation rental is out - nowhere near enough return. I hadn't considered commercial property, but I'll look into it. Storage facility is out for 2 reasons: 1. buy-in is way too high (did a quick search, 3 for sale in Ont, $800k and up) and 2. I don't need another business to run.

[McLovin]

One other thing: IMO 99% of listings that brokers have, are on the internet, etc. are bad deals.

[turbo6bar]

You gotta pound the pavement and network for the best deals.

I like residential rental property. If you buy in nicer neighborhoods, they aren't vacant for long periods.

Ultimately, it all comes down to the numbers. I help manage and maintain a fleet of properties owned by the family. It's ideal, because I have the motivated workforce in house to tackle the projects, as well as the volume to enable this to be full-time. The work comes in waves. I may not see a property or expend even one man-hour for months, and then it will hit like mad (working 40-50 hr weeks to make things happen).

You just have to weigh the options and your goals to find the right match.

I would definitely consider commercial RE. I haven't, since I know residential RE well, and it works. Why change what works?
Jurgen

[Christien]

Originally Posted by McLovin

One other thing: IMO 99% of listings that brokers have, are on the internet, etc. are bad deals.

So where do you find the good listings? Around here, for residential, mls is pretty much the only game in town. There are fsbo websites, but their #s are a fraction of mls's.

Originally Posted by turbo6bar

I like residential rental property. If you buy in nicer neighborhoods, they aren't vacant for long periods.

This is what I'm thinking. A nice neighbourhood with small houses, buy one that needs some tlc, sink $10-15k into it before renting. Rents around $1200-1600/month should keep most of the riff-raff away.

[turbo6bar]

Originally Posted by Christien

This is what I'm thinking. A nice neighbourhood with small houses, buy one that needs some tlc, sink $10-15k into it before renting. Rents around $1200-1600/month should keep most of the riff-raff away.

If you can buy that house at a reasonable price, it sounds good to me. Most of our properties are in the $1000+/month range. In flyover states, that's above the low end, but still affordable for most working-class folks.

Provide safe, clean, attractive properties and screen well. That recipe has worked for decades and will continue to work as long as the economy doesn't go to shinola.

Get a good property at a reasonable price, and you're halfway there. Get a good tenant at a reasonable rate, and you've almost hit the home run. Buy a dud of a property or rent to a deadbeat and you're likely to lose.

[1990C4S]

I own industrial triple net. It's easy but big $ to get into.

My friend has five houses in Burlington/Oakville. She does all right. Go new, no maintenance. And check references. Deadbeats cost $10k before you know it.

[Dantilla]

Originally Posted by McLovin

One other thing: IMO 99% of listings that brokers have, are on the internet, etc. are bad deals.

Originally Posted by Christien

So where do you find the good listings?

When a commercial broker gets a new listing, he will shop it hard by himself for a couple days to try to get both sides of the commission. After a day or two, it will be spread around the listing agent's office, and all the agents do their best to get a deal with their own customers.

Only after a week or three go by does it end up advertised for all the world to see.

With this system, the best properties are sold before being offered to the general public.

A good website to get an education for commercial property is Loopnet.

http://loopnet.com

Loopnet is where all the brokers list properties that didn't sell quickly through the office, so there are a lot of "dud" properities there, but it is also a common place for individual owner's to list their properties without going through an agent- The commercial version of "FSBO".

Without buying a subscription the info is limited, and they will try hard to get lurkers to subscribe, but it is still a good starting place to learn about commercial property.

The only way to get the inside scoop on the best properties is to either have a good working relationship with a broker who specializes in thew type of property you're interested in, or other inside info from friends or relatives who know of available property.

One of my best properties was found sorta by accident- I called a broker about a property I was interested in, and was told it was already sold, but knew the seller had another similar property. Ended up buying it though it was never officially listed for sale.

[Dantilla]

I have some experience in both residential and commecial property management.

With residential properties, there are many small problems.
With commercial property, there are far fewer problems, but they tend to be bigger problems.

It is more fun to deal with commercial tenants. People who are willing to rent high-quality commercial space, roll up their sleeves and work long hours at building their business are energetic go-getters that solve small problems on their own, and are just plain sharp.

A stark contrast to the typical person renting a one-bedroom apartment who makes a maintenence call whenever they clog the kitchen sink, and don't or won't know how to clear it.

[LWJ]

Ok. I am in the same boat as the OP. My folks did very well on residential single family and duplexes. I bought some. Sold high. Have one left and despise it. I am active with the rental industry due to my career. I think apts are in a bit of a bubble in Oregon. I am VERY interested in over 55 mobile home parks. I can't seem to find to many folks that know about them. I think they are lower yield and lower overhead. Also, lower risk. I think the demographic to fill the parks is there. Lots of lower income folks ready to retire. I hear the baby boomers didn't save much. Any thoughts? My MIL and Grandparents both lived in 55+ parks. Both loved it.

Larry

[notfarnow]

I was going to explain my thoughts on commercial vs residential, but Dantilla sums it up perfectly:

Originally Posted by Dantilla

I have some experience in both residential and commecial property management.

With residential properties, there are many small problems.
With commercial property, there are far fewer problems, but they tend to be bigger problems.

It is more fun to deal with commercial tenants. People who are willing to rent high-quality commercial space, roll up their sleeves and work long hours at building their business are energetic go-getters that solve small problems on their own, and are just plain sharp.

A stark contrast to the typical person renting a one-bedroom apartment who makes a maintenence call whenever they clog the kitchen sink, and don't or won't know how to clear it.

I'll add:
-Hurry up and wait: Get your ducks in a row NOW (financing, downpayment funds, research) and then WAIT for the right property. Most of the $hit situations I see are from people who got all excited about buying a property, then ran out and bought one ASAP, instead of waiting months, years for the RIGHT one. The RIGHT one will set you up nicely for the 2nd, 3rd etc buildings. The WRONG one will take you out of the game

-Network: Call strong agents and tell them what you're looking for (once you figure that out). You want to get in on buildings before they list. Around here, the good buildings are gone in days, and sometimes before they hit MLS, because good agents have a list of buyers waiting for properties. I'm working with a client on a $1.5m 15 unit residential building that won't ever hit MLS. He called me 2 weeks ago looking for a building, so I put feelers out. You need to either network, or have someone network for you

-Distressed residential rentals: They're still great value if you can get a good solid building that needs work that you're comfortable/confident doing or overseeing. Vacant buildings and bank repos still often go cheap, because banks won't finance empty buildings so they're left dealing with cash (rare) buyers. If you can renovate & rent and generate cashflow, you can resell or refinance to fund your next building. I helped a guy buy a vacant 6 unit last winter for 90k, he put 45k into it, rented all 6 units at $650. Bank now has it appraised at 225k, giving him enough equity for a downpayment on another building... which we're shopping for now.

[Christien]

Originally Posted by notfarnow

-Hurry up and wait: Get your ducks in a row NOW (financing, downpayment funds, research) and then WAIT for the right property. Most of the $hit situations I see are from people who got all excited about buying a property, then ran out and bought one ASAP, instead of waiting months, years for the RIGHT one. The RIGHT one will set you up nicely for the 2nd, 3rd etc buildings. The WRONG one will take you out of the game

Yep. I need to talk to the bank - I'm looking at putting the better part of 100 down, maybe less depending on the rate the bank offers, and taking a mortgage for another 50-100, plus another 10-20k out of pocket in renos (if residential). But I'm in absolutely NO rush. This is in addition to my leasing portfolio, which isn't pulling in the numbers it once did. But it's a transition thing, not an emergency thing. My plan is to spend the next couple months researching all the ins and outs (hence the initial question of what type of property generates the most income) and make a move in the early winter, if indeed I do decide to move in this direction.

Sounds like I really need to be speaking to an agent, especially if I'm going to explore the commercial side. I know for sure, after doing sub-prime leasing for the last decade, that I am absolutely unwilling to consider a low-rent building, whether residential or commercial. I just don't want to deal with those people anymore. Thing is, I'd probably be good at it, because I've heard every story, I know what red flags to watch out for, I'm a hardass when it comes to getting payments in on time, despite whatever family member is on death's door, etc. But I don't want to do it any more. Those people drain way too much positive energy.

[recycled sixtie]

Yes Christien as the above posters say don't rush into it. Something to consider is renting out the basement of a house separately from the main floor but you should make it legal by having a separate entrance. Problem is that with the more tenants u have the more vehicles parked outside. Tenants seems to have a tendency to park outside more and have too many vehicles. Don't forget if neighbours complain about the tenants they call the City who in turn calls the landlord.

Another poster above says watch what u pay for the property. We paid too much for a condo 5 years ago and has decreased in value by 20%. It seems that houses have appreciated here in the last 5 years probably because we have only 3% unemployment.

Don't expect to make a killing in real estate. You have to be so patient. Watch out for leaky basements. If the basement has been renovated and the main floor has not, that is a possible clue. Home inspections are no guarantee of a trouble free house either. Get references for tenants. Get 1st class ones - be patient and wait till u feel
comfortable with the prospective tenants. Make the legal agreement perfect. You don't want to be running over there to fix plugged toilets(been there done that).
Make sure your property is close by so u can keep an eye on genuine repairs.Absentee landlord is more work and more expense. Now I have bent your ear off. If u need any more info/help re. this area I have sent a pm with my email.
Cheers!

[Christien]

Basement apartments and/our houses divided up into multiple units are pretty much out of my consideration, because the vast majority is low-rent. If I go residential, I want to deal with families, decently employed couples, single professionals, folks like that. No riff-raff. I deal with them every day already.