Author Topic: Real Estate Ty-cats  (Read 2648 times)

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Offline catastrophe

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Real Estate Ty-cats
« on: July 19, 2018, 10:26:48 PM »
Anyone in the home rental game? People talk about it like it's simple but seems like you need to know 100 different things about at least a dozen other things.  Let's crowdsource this so we can all get rich.


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Offline steve dave

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Re: Real Estate Ty-cats
« Reply #1 on: July 20, 2018, 09:38:08 AM »
believe we have a thread on this and rick daris is the moderator. good tips in it iirc.

Offline catastrophe

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Re: Real Estate Ty-cats
« Reply #2 on: July 24, 2018, 10:21:27 PM »
Couldn't find it, so I'm gonna have to start from scratch.

We'll start with the steps to a successful real estate empire:

1. Limited liability.   Definitely need to set up some kind of an entity to hold the property.  I've heard that a Series LLC is the way to go.  Could be some alternatives.

2. Finance.  Typically makes zero financial sense to pay for a property out of pocket.  Apparently loans for investment properties work different than typical home loans?  Need to figure this one out.

3. Selecting a property.  Tons of "turn key" real estate websites out there that show you all kinds of stats on properties.  Need to figure out how to decipher this code.

4. Selecting a property manager.  Obviously you could try to do this yourself in order to get more bang for you buck, but it seems like a lot of pain unless you're already good at it.  No thanks.

5. Rental relationship.  Haven't read anything about this yet, but it sure seems like the actual lease is an important aspect of all this.

6. Tax breaks.  Even loser properties can make you money in the long run if you take advantage of all the tax breaks available.  Definitely the secret sauce to using rental income as an alternative to other investing.

7. Profit. Right?

Offline steve dave

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Re: Real Estate Ty-cats
« Reply #3 on: July 25, 2018, 09:01:42 AM »
it may have been on ksufans in hindsight. either way @ him.

Offline chum1

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Re: Real Estate Ty-cats
« Reply #4 on: July 25, 2018, 09:55:00 AM »
I don't do it personally, but my dad did. Here's what I learned:

1. Buy properties within a block of your house. Because tenants won't have big, wild parties and trash the place when they know you've got your eye on them.
2. Drop by unexpectedly fairly often. Because tenants won't let the place get to the point where it looks too terribly trashy if they know you might see it looking trashy.
3. Have a contract that says you can kick them out at any time for any reason. Because you don't want tenants who trash the place to continue trashing it until the end of a lease.
4. Have your kid do the mowing.

Offline 8manpick

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Re: Real Estate Ty-cats
« Reply #5 on: July 25, 2018, 09:57:07 AM »
Isn't dropping by w/o 24 hours notice illegal? Going inside anyway...
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Offline chum1

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Re: Real Estate Ty-cats
« Reply #6 on: July 25, 2018, 10:00:01 AM »
Isn't dropping by w/o 24 hours notice illegal? Going inside anyway...

I'll probably see my dad this fall. I'll follow up then if I remember.

Offline 420seriouscat69

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Re: Real Estate Ty-cats
« Reply #7 on: July 25, 2018, 10:01:51 AM »
I was going to say, dropping by unannounced frequently sounds pretty shitty.

Offline chum1

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Re: Real Estate Ty-cats
« Reply #8 on: July 25, 2018, 10:06:58 AM »
Isn't dropping by w/o 24 hours notice illegal? Going inside anyway...

I'll probably see my dad this fall. I'll follow up then if I remember.

I sort of think my dad once said something on this issue. It was of the form: "Well, you can't do such and such, but here's what you CAN do..."

Offline catastrophe

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Re: Real Estate Ty-cats
« Reply #9 on: July 25, 2018, 10:55:32 AM »
Did your dad rent to college students? Cause I’d think most small families are not going to be a major “wild party” threat just because they don’t own the place.

Offline catastrophe

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Re: Real Estate Ty-cats
« Reply #10 on: July 25, 2018, 11:04:53 AM »
it may have been on ksufans in hindsight. either way @ him.

Paging @Dr Rick Daris

Offline wetwillie

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Re: Real Estate Ty-cats
« Reply #11 on: July 25, 2018, 12:24:51 PM »
What kind of ROI do you expect to see on this borrowed money catastrophe?
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Offline chum1

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Re: Real Estate Ty-cats
« Reply #12 on: July 25, 2018, 12:47:37 PM »
Did your dad rent to college students? Cause I’d think most small families are not going to be a major “wild party” threat just because they don’t own the place.

He once had a 30-something non-college student tenant who you'd never expect to trash a place. But while she was there, a bathroom sink broke off the wall because her friend was sitting on it like it was a chair. There are all kinds of ways to trash a place.

Offline LibDerp7BubbleBoy

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Re: Real Estate Ty-cats
« Reply #13 on: July 25, 2018, 12:51:31 PM »
Maybe she just didn't approve of the oscar weber hire
Hyperbolic partisan duplicitous hypocrite

Offline catastrophe

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Re: Real Estate Ty-cats
« Reply #14 on: July 25, 2018, 01:11:22 PM »
What kind of ROI do you expect to see on this borrowed money catastrophe?

Haven't gotten that far.  The number I've often heard is to strive for 10%, but if you do it the lazy way (paying property managers and others) I would expect lower.  I am a big believer in diversifying investments, though.  Real estate rentals scare me less than they used to cause even if you end up with a small or negative cash flow, you can still "profit" by offsetting tax money you would otherwise be paying from your day job.

Offline wetwillie

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Re: Real Estate Ty-cats
« Reply #15 on: July 25, 2018, 01:27:53 PM »
That seems like a really poor return
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Offline catastrophe

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Re: Real Estate Ty-cats
« Reply #16 on: July 25, 2018, 01:32:16 PM »
You're going to feel really silly when I get to step 6 of this plan.

Offline Dr Rick Daris

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Re: Real Estate Ty-cats
« Reply #17 on: July 25, 2018, 01:45:16 PM »
I had a couple of rentals for awhile. my advice for someone in catastrophe's boat is don't. just don't. they are a pain in the ass and not worth it. small exceptions I guess could be if you live close to the rental and like dealing with people, things that go wrong with said people and doing handyman type stuff on whatever craphole it is that you end up with. if that's you and you're just incredibly bored with lots of spare time then knock yourself out. it doesn't sound like it though so i'd pick a different hobby. two cents.

also, it's neat to see that the whole "@" thing actually works. I was like wow I have a notice about something!  :excited:
« Last Edit: July 25, 2018, 01:48:20 PM by Dr Rick Daris »

Offline catastrophe

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Re: Real Estate Ty-cats
« Reply #18 on: July 25, 2018, 01:49:04 PM »
Ok, thought experiment with some made up numbers that I think are legit.

Say you buy a $200,000 house, paying 20% down ($40,000).

Mortgage is $160,000. Let's say 5% interest and to be conservative just keep it that way throughout the year ($8,000/year, $667/month).

Most halfway decent rental properties will get at least 0.7% rent compared to the price of the house.  So rent is $1,400/month.

I've heard property managers typically work at 1% of rent collected.  Let's be conservative again and say 2% = $28/month.

So you're bringing in $1,400 (rent) - mortgage interest ($667) - property management ($28) = $705/month.  Over the course of a year that's $8,460.

What is a normal repair budget for a year?  $3,000 to fix just the necessary stuff?  So $5,460 you take home per year.  That's on $40,000 you put down.

ROI for the year: 13.65%

Now you might say, the mortgage is going to be bigger cause you're making principal payments on top of the interest.  That's true, but that's not money that goes away.  It is just getting reinvested into the property itself in the form of equity.  Sure, the property might not appreciate but stocks might not either so that's a wash in my book.  Both tend to go up over the long term if you pick wisely.

Offline pissclams

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Re: Real Estate Ty-cats
« Reply #19 on: July 25, 2018, 01:51:49 PM »
What kind of ROI do you expect to see on this borrowed money catastrophe?

your lack of a comma wasn't lost on me


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Offline pissclams

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Re: Real Estate Ty-cats
« Reply #20 on: July 25, 2018, 01:53:23 PM »
I've heard property managers typically work at 1% of rent collected. 

:lol: 

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Offline Dr Rick Daris

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Re: Real Estate Ty-cats
« Reply #21 on: July 25, 2018, 01:57:33 PM »
Ok, thought experiment with some made up numbers that I think are legit.

Say you buy a $200,000 house, paying 20% down ($40,000).

Mortgage is $160,000. Let's say 5% interest and to be conservative just keep it that way throughout the year ($8,000/year, $667/month).

Most halfway decent rental properties will get at least 0.7% rent compared to the price of the house.  So rent is $1,400/month.

I've heard property managers typically work at 1% of rent collected.  Let's be conservative again and say 2% = $28/month.

So you're bringing in $1,400 (rent) - mortgage interest ($667) - property management ($28) = $705/month.  Over the course of a year that's $8,460.

What is a normal repair budget for a year?  $3,000 to fix just the necessary stuff?  So $5,460 you take home per year.  That's on $40,000 you put down.

ROI for the year: 13.65%

Now you might say, the mortgage is going to be bigger cause you're making principal payments on top of the interest.  That's true, but that's not money that goes away.  It is just getting reinvested into the property itself in the form of equity.  Sure, the property might not appreciate but stocks might not either so that's a wash in my book.

a 160,000 home loan at 5% (which i'm not sure you could get because it will be a rental) monthly payment would be $859 not $667. then you also have insurance and taxes which will be another $200-$300 a month. also, a property manager takes more than 1%. these aren't your biggest issues though. your biggest issue right now is that you are treating this like a math problem on a sheet of paper. it won't be. pick a different hobby.

Offline catastrophe

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Re: Real Estate Ty-cats
« Reply #22 on: July 25, 2018, 02:13:03 PM »
Good points on the insurance, taxes, and property manager.  I must have misremembered and thought 1% where the going rate is closer to 10%.

And I don't understand you point about the maintenance being an issue.  Why should it take that much of your time if you're already paying a property manager?

Offline wetwillie

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Re: Real Estate Ty-cats
« Reply #23 on: July 25, 2018, 02:26:32 PM »
You're going to feel really silly when I get to step 6 of this plan.

Considering you think someone will manage your property for $28 month and you didn’t consider taxes or insurance I’m not holding my breath.
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Offline catastrophe

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Re: Real Estate Ty-cats
« Reply #24 on: July 25, 2018, 02:37:16 PM »
You know what guys, this thread is about trying to figure out some questions.  Not to pile on poor catastrophe for not already knowing the answers.  :shakesfist: