Originally Posted by
SonicFlyer
I'm curious about this, do you mind sharing some numbers?
What kind of numbers are you interested in?
Originally Posted by
poor pilot
Where do you invest?
Texas. Laws are very landlord-friendly, barriers to entry are low (ie. houses are cheap, relatively speaking), market prices and economy are relatively stable, renters are plentiful and if you decide to incorporate your business, the income tax rate on corporations is extremely low (usually less than 1%).
Originally Posted by
Name User
Real Estate can make sense if you purchase at the right numbers. Remember it's not just the profit you make monthly but also paydown of the mortgage that makes you wealthier. The typically rule of thumb is look for deals where you can rent for 1% of purchase price. Obviously in many of the hot markets these days that is impossible, but here are areas where it does exist. Typically midwestern cities but the downside there is they generally are stagnant or in decline.
Bingo! Great rule of thumb that has served me well. Don't look for the flashy condo in the trendy neighborhood in the sexy town. The ROI just isn't there (unless you want to go upscale AirBnB-type situation, but that's a whole 'nother conversation). If you wanna talk numbers: My first rental property I paid $135K (3BR, 2BA in a good subdivision on a nice lot). Currently rents for $1500/mo with my total cost being $800/mo (mortgage, insurance, taxes, HOA fees, management company fees). I've stuck to single-family homes and try to rent to families or young couples. The turnover tends to be lower which means lower costs and fewer headaches.
Everything I make goes straight into an account that I use only for business expenses (repairs, move-in/move-outs, taxes, pay down debt, etc). Whatever funds that accrue are then available to purchase additional properties when opportunities arise, repairs and upgrades to existing properties or cover expenses during periods of vacancy. Bad renters happen and stuff breaks so it's nice to not have to sweat it when you need to buy a new A/C unit, repair a busted door or just let a property sit vacant for a month while you wait for the right tenant to come along.
Like I said in my original post, it ain't glamorous or "cool" but the steady cash flow is nice, the equity is even better and for the most part, it's pretty headache-free. My advice to anyone looking to get into rental property would be this:
- Flashy properties in trendy neighborhoods are not for the small-time investor. Start small and be reasonable.
- Have a plan and be prepared for those inevitable unplanned expenses or extended vacancies. If you can't afford to let a property sit vacant for a month or two without sweating bullets, then you are probably over-extended.
- Be picky with tenants. Late/unpaid rent, damages or evictions are far more expensive than letting your property sit vacant for an extra month.
- If you don't live within an hour or two of your property, save yourself the headache and get a manager. It'll cost you a little bit but will save you a ton of headache and inconvenience. No one wants to have to cut a day at the lake short or try to find a handyman at the last minute just because your idiot tenant put a potato down the disposal (ask me how I know
).
- Even if you do live nearby, a good manager/management company will take care of a lot of the tedious, back-end "office stuff" like listing your property in MLS, showings, screening tenants, running background checks as well as keeping track of expenses and income for you which comes in very handy at tax time.