Han Solo

We inherited it in early 2001. The property is worth a LOT less now than when it was inherited . So the cost basis is upon inheritance and not purchase date?

FL370esq

If it was conveyed to you via will or intestate succession yup, your cost basis is established as the value at date-of-death.

Gunfighter

One opinion out of many... Leverage your investments and spread it out over several. That may actually be safer than having just one when you consider vacancy and repairs.

Hypothetical example.
100,000 property, 12,000 annual rent, 4,500 operating expenses (property tax, insurance, repairs, replacement reserves, vacancy cost, management fees, etc.) 7,500 profit = 7500 in cash flow, potentially 3% increase in value based on historical inflation rates yields another 3,000 of capital gains.

net profit plus appreciation = 10,500

100,000 invested in 4 properties at 75% LTV 5% interest 30yrs
48,000 annual rent, 18,000 operating expenses, 30,000 gross profit, 19,500 debt service, 10,500 cash flow and 4,500 of principle reduction (15,000 profit), potentially 12,000 of capital gains based on 3% inflation.

net profit plus appreciation = 27,000

Second year all cash (3% inflation), rent increases 360, expenses increase 135, cash flow increases 225, potential 3,000 appreciation.

Second year leveraged, rent increases 1440, expenses increase 540, cash flow increases 900, potential for 12,000 appreciation.

If you have a vacancy with one property, your income drops to 0, vs 75% if you have four properties.

Bottom line, if you can get a 7.5% return and borrow money at 5%, you are making a 2.5% spread. When you add in appreciation for historical inflation, the leverage boosts that portion of the return from 3% to 12%. It is a little more work with more properties, but not 4x the work, especially with a good team in place.

DYODD, returns are hypothetical, seek your own legal and financial advice, etc...

Trip7

Seeing how many us in our profession are accredited investors, does anyone have experience with real estate syndications? So far my research has shown syndications providing similar returns to direct investments but with significantly less work. I've been looking into purchasing my first property this year but will likely hold off and reevaluate my options when I become an accredited investor Jan 1st

tunes

honestly, i'd wait until this bubble pops to start buying...now when that will happen who knows. I'd just be ready with cash on hand.

gloopy

Agreed. Especially in the hot markets. The free money has been flowing for far too long pumping it up full of malinvesting.

crewdawg

What they said! Stockpile cash and be ready to jump on deals.

Gunfighter

I've reviewed many syndications and have always chosen to be a direct investor. There is far more control over the investment that way. You control the timing of long term gains, have the option of equity stripping via cash out refi, preserve the option for a 1031 down the road, etc. I'm also more confident in my own due diligence than that of a syndicated offering. If you are looking for a hands off approach while preserving the direct investment advantages, evaluate a NNN property vs a syndication.

JMHO, DYODD, disclaimer, etc.

Gunfighter

Investing in a linear market like IND, MEM, HOU, ATL, etc. with good rent to value ratios on a consistent basis is more predictable than timing the market. You could find yourself sitting on the sidelines for a few years and missing out on some good returns, while waiting for the crash.

Staying away from the cyclical markets like NY and CA is wise.

tunes

i had thought about MEM rentals but the increasing crime rates there have me shying away.