Author Topic: Rental Properties?  (Read 12503 times)

LC

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Re: Rental Properties?
« Reply #10 on: January 07, 2018, 06:51:57 PM »
Exactly. The entire RE industry is based around transaction frequency. Buy judiciously and do as much of the work yourself, if possible.
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bookie71

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Re: Rental Properties?
« Reply #11 on: January 07, 2018, 07:27:24 PM »
One thing to keep in mind is that one bad tenant can destroy years of  good tenants. 
Always remember, Pigs get fat and hogs get slaughtered.

BG2008

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Re: Rental Properties?
« Reply #12 on: January 09, 2018, 09:37:33 AM »
My few rules

1) Determine what kind of market you're in
   a) Land Constraint with lots of growth? NYC, SF
   b) No land constraint yet shrinking?  Detroit
   c) No land constraint but growing?  Austin
2) What kind of city are you in? Does it seems to always dig itself out?  Does it have international appeal?  Think NYC, SF etc.  People just flock to them. 
3) Where in the market are you looking to buy?  Residential is the easiest.
4) Buying a single unit or multi? 

My recommendation

1) Learn how to read people.  I usually have open house and I have people come.  The people who complains right off the bat you don't want to rent to them because they will continue to complain and be a pain regardless.  Don't rent to a bunch of young people who are waiters/waitresses, they party non-stop and will destroy your place.  Learn to identify the people who have good work ethics and just want to be left alone.  In NYC, it's predominantly Mexican and Ecuadorian immigrants.  I don't do credit checks. I just talk to them about their jobs and how long they've been there.  If the guys has worked at a job for more than 2 years, he's usually okay.  You develop a "feel" for people and I have dodged a few bullets.  I've had 99% occupancy since I closed on the multi-family unit in March of 2008.  The high occupancy is also largely attributed to it being NYC and I own the cheapest housing stock.           
2) Learn how to fix broken stuff because cap rates are very low, the return you earn is from you doing the property management yourself
3) Section 8 is a tricky thing - Yes government is paying your rent, but I've heard too many horror stories.  Tenants just seems to know how to game the system.  It's perverse incentives.  I've heard of people stealing heating oil etc. 
4) Try to finance the property with 30 year fix rate mortgage that is Fannie and Freddie compliant.  Then you pretty own an asset that in theory should go up in value overtime while your liabilities gets shrink away with inflation.   

Location/Location/Location - If you don't know what's a good vs bad location, you're the patsy.  In NYC, it means being close to the subway station. 

Demographics - In certain area, gentrification can be a really big deal.  If you're buying into an area that is gentrifying, you could do really well.  If the area doesn't, you can be stuck holding an asset in a crummy area. 

Timing - Interest rates are going up - Maybe wait a bit?

Remember it's a local business and you need to build up expertise over time yourself.   

netnet

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Re: Rental Properties?
« Reply #13 on: January 10, 2018, 04:25:11 PM »
Since it's location, location, location in RE, where is a good location?

Some argue that buying any middle class area in the Bay Area is a good investment at any price. I can't believe that.  (On the other hand how could a suburban Palo Alto ranch house go from overpriced 15 years ago to ridiculously overpriced today, like 1.5 million plus.)

In the Bay Area, were I a RE person, I would look to buying lots or existing structures near the fire area.

Edited for clarity. thanks Fareast
« Last Edit: January 11, 2018, 11:56:30 AM by netnet »

fareastwarriors

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Re: Rental Properties?
« Reply #14 on: January 10, 2018, 04:26:41 PM »
Since it's location, location, location in RE, where is a good location? And I do not believe that any middle class area say in the Bay Area is a good location. (In the Bay Area, were I a RE person, I would look to buying lots or existing structures near the fire area.)

Why not?  I'm in the Bay Area and own rentals...

premfan

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Re: Rental Properties?
« Reply #15 on: January 10, 2018, 05:59:51 PM »
My few rules

1) Determine what kind of market you're in
   a) Land Constraint with lots of growth? NYC, SF
   b) No land constraint yet shrinking?  Detroit
   c) No land constraint but growing?  Austin
2) What kind of city are you in? Does it seems to always dig itself out?  Does it have international appeal?  Think NYC, SF etc.  People just flock to them. 
3) Where in the market are you looking to buy?  Residential is the easiest.
4) Buying a single unit or multi? 

My recommendation

1) Learn how to read people.  I usually have open house and I have people come.  The people who complains right off the bat you don't want to rent to them because they will continue to complain and be a pain regardless.  Don't rent to a bunch of young people who are waiters/waitresses, they party non-stop and will destroy your place.  Learn to identify the people who have good work ethics and just want to be left alone.  In NYC, it's predominantly Mexican and Ecuadorian immigrants.  I don't do credit checks. I just talk to them about their jobs and how long they've been there.  If the guys has worked at a job for more than 2 years, he's usually okay.  You develop a "feel" for people and I have dodged a few bullets.  I've had 99% occupancy since I closed on the multi-family unit in March of 2008.  The high occupancy is also largely attributed to it being NYC and I own the cheapest housing stock.           
2) Learn how to fix broken stuff because cap rates are very low, the return you earn is from you doing the property management yourself
3) Section 8 is a tricky thing - Yes government is paying your rent, but I've heard too many horror stories.  Tenants just seems to know how to game the system.  It's perverse incentives.  I've heard of people stealing heating oil etc. 
4) Try to finance the property with 30 year fix rate mortgage that is Fannie and Freddie compliant.  Then you pretty own an asset that in theory should go up in value overtime while your liabilities gets shrink away with inflation.   

Location/Location/Location - If you don't know what's a good vs bad location, you're the patsy.  In NYC, it means being close to the subway station. 

Demographics - In certain area, gentrification can be a really big deal.  If you're buying into an area that is gentrifying, you could do really well.  If the area doesn't, you can be stuck holding an asset in a crummy area. 

Timing - Interest rates are going up - Maybe wait a bit?

Remember it's a local business and you need to build up expertise over time yourself.

Excellent framework. Listen to this gentlemen. 

  Before purchasing a property it would be wise to have a network of maintenance people and i highly suggest a in house manager. Also there needs to be a value add  like turning a commercial property into a multi use property or
even turning a hotel into a apartment building.

Real estate means four walls be creative if the city/town approves  Much more could be said. That said, BG layed out a good primer on entry level thinking.  I hope my value add is reframing real estate as four walls. Its all four walls and knowing what your community needs well will help generate creative ideas on how to serve them with your four walls.

netnet

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Re: Rental Properties?
« Reply #16 on: January 11, 2018, 11:49:54 AM »
Since it's location, location, location in RE, where is a good location? And I do not believe that any middle class area say in the Bay Area is a good location. (In the Bay Area, were I a RE person, I would look to buying lots or existing structures near the fire area.)

Why not?  I'm in the Bay Area and own rentals...
I meant the obverse of what I think you think I meant-ouch that recursion is too much before lunch.  Anyway, there are people who argue that basically, buying anywhere in Bay Area at any price is a good investment, I was trying to counter that argument. I did not mean that buying anything in the Bay Area is bad. I have corrected my post.

bookie71

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Re: Rental Properties?
« Reply #17 on: January 11, 2018, 01:52:40 PM »
In the 1970's and early 1980's the mantra in Alaska was "Buy Anchorage real estate, it has never gone down and is going up at 1-2% per month" Then the oil prices dropped and we went into a huge recession. Over 1/2 the banks and credit unions failed. We lost almost 25% of our population. You could buy a house in decent shape for less than the lot cost originally.
Be very careful.
Always remember, Pigs get fat and hogs get slaughtered.

AzCactus

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Re: Rental Properties?
« Reply #18 on: January 12, 2018, 09:23:40 AM »
As a general rule do you prefer buying properties in better areas, but higher prices or lower prices but maybe not the best area?

Broeb22

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Re: Rental Properties?
« Reply #19 on: January 17, 2018, 12:05:16 PM »
Iíve only purchased vacant residential land, and my ďstrategyĒ was to buy in areas in Charlotte, near where I live, where some development was happening, I.e. houses being flipped new homes being built, etc.

This area Usually includes some less sophisticated owners (sellers) and people who are happy to get a little pop on a property that had been stagnant for many years.

So, I guess I tend to look for tweeners in terms of quality.

Another little goal of mine has been to buy a property with a lot of land attached. If you can work it so that you get a mortgage on the whole value of the house plus land(acreage), you own a levered investment financed with leverage.

Why is land leveraged? Think about a $100,000 house. The rule of thumb that Iíve read about a few places is that the land under a property is worth typically 20% of the total value. Thatís a rule of thumb, so in cities land will be worth more as a % and in rural areas the land will be worth less. Additionally, the structure is itself a depreciating asset. So, when people say home prices are going up, itís primarily the value of the land going up.

But in short, if home prices increase 2-3% per year, that $100,000 house is up to $102-103,000 and $20,000 is up to $22-23,000, a 10-15% increase.