Thread Rating:
  • 0 Vote(s) - 0 Average
  • 1
  • 2
  • 3
  • 4
  • 5
RE: right time to invest or not?
#11
(07-01-2019, 11:18 PM)rayray Wrote: I can only speak for myself...I was a reluctant landlord due to the fact we bought our current home before we sold the previous home--hated being a landlord--had to kick one person out which I did not like doing but had to be done.

My father was a landlord off and on for 20 plus years--he said even the good tenants were a pain in the ass.

A step-fathers friend was a very successful landlord, made millions. And when he sold he acted as the bank, sometimes getting the property back and selling it again. Rental income was close to 200k per year, add in another 175k in salaries between him and his wife, then his stock investments? forgetaboutit....when he buys stocks it's in 1000 lots ...worth millions....and what does he do now, with all his millions? Sells hot dogs and beer at a ballpark--he gets paid to exercise. I asked him if he could do it all over again, would he be a landlord? He said, yes...but no apartments only rental storage facilities.

A guy I worked with was a landlord his whole life, his father was too. Made a small fortune. He hated it but the money was too good to pass up. He had this great tenant, never late for over 20 years, never complained. Then one day, late, no rent check...couldn't get a hold of him...thought the guy died so he went over to the apartment.. no answer..oh oh...he's dead!! No, he stole everything, completely gutted the apartment, stole everything, literally the whole kitchen was gone, cabinets, sinks, fixtures....the toilet!! Yes the Toilet was gone too. I think he spent close to 40k redoing the apartment. His father died from a heart attack sleeping with his much much younger wife--she walked away with all the money and a 10k square foot house--no will. The guy I worked with? Killed over self-medicating with online meds.

I like REITS
This are great stories, thank you for sharing them. Off course there is some risk in rental lroperties. Bayarea rents are $3500 plus for a nice town home. People who are in stealing business can't rent these usually. Plus I will be renting to folks with a specific critiria with financial background n all so I am.not worried about all that.
Reply
#12
(07-01-2019, 11:42 PM)vbin Wrote:
(07-01-2019, 11:18 PM)rayray Wrote: I can only speak for myself...I was a reluctant landlord due to the fact we bought our current home before we sold the previous home--hated being a landlord--had to kick one person out which I did not like doing but had to be done.

My father was a landlord off and on for 20 plus years--he said even the good tenants were a pain in the ass.

A step-fathers friend was a very successful landlord, made millions. And when he sold he acted as the bank, sometimes getting the property back and selling it again. Rental income was close to 200k per year, add in another 175k in salaries between him and his wife, then his stock investments? forgetaboutit....when he buys stocks it's in 1000 lots ...worth millions....and what does he do now, with all his millions? Sells hot dogs and beer at a ballpark--he gets paid to exercise. I asked him if he could do it all over again, would he be a landlord? He said, yes...but no apartments only rental storage facilities.

A guy I worked with was a landlord his whole life, his father was too. Made a small fortune. He hated it but the money was too good to pass up. He had this great tenant, never late for over 20 years, never complained. Then one day, late, no rent check...couldn't get a hold of him...thought the guy died so he went over to the apartment.. no answer..oh oh...he's dead!! No, he stole everything, completely gutted the apartment, stole everything, literally the whole kitchen was gone, cabinets, sinks, fixtures....the toilet!!  Yes the Toilet was gone too. I think he spent close to 40k redoing the apartment. His father died from a heart attack sleeping with his much much younger wife--she walked away with all the money and a 10k square foot house--no will. The guy I worked with? Killed over self-medicating with online meds.

I like REITS
This are great stories, thank you for sharing them. Off course there is some risk in rental lroperties. Bayarea rents are $3500 plus for a nice town home. People who are in stealing business can't rent these usually. Plus I will be renting to folks with a specific critiria with financial background n all so I am.not worried about all that.
Just project the math out about five years and do the math conservatively.  You're smart enough to compute the R.O.I.  I've had 4 tenants in 19 years.  The school district keeps them around.  One tenant left a big mess to clean up.  The other three were good.  They paid the house off for me in about 14 years.  I took little cash profit during that time.  I'm left with a 15 bagger investment if I sell now.  The past four years it pays the property taxes, insurance and utility bill on the house I live in.  A little cash left over after that.  There were surely some days when it was a hassle to be a landlord.  I don't have any 15 bagger stock picks so no regrets overall.  I can rent the house in 48HRs when I need too.  It wouldn't take 30 days to sell it in a bad economy so I can quit when I want.  I don't want to pay the capital gains tax right now, and it's paying my largest bills.

On a side note the most landlord excitement I've had lately was last week. An old man basically died at the wheel, clipped the telephone pole in front of the house and then flew around the property without ever attempting to slow down. Bounced off a big tree and mowed the garden shed over. Insurance already sent a check for all that, but it was pretty sobering it happened on my property.
Reply
#13
I can't give you any advice when it comes to actual real estate investments. But I'll still happily share my thoughts on this matter on a more general perspective.

It seems to me like you've decided that you want a new home. So in that case, yes it definitely sounds like you should move. And from what I can tell, this very first property you mention is what you want. If it's what you want, you can afford it, and it's a great place for your family (you did mention safety and good schools) then it sounds like a good choice! I'd definitely say that a good home, and it's location, are very important when discussing quality of life.

I'd say make this "dream home" your priority. It may be a good investment, it may not, but if it makes you and your family happy then it's worth doing.


I'd also keep selling the current place on the table. Being a landlord may be profitable but it's also a pain in the ass when things don't go right. I have a family member who has always been wary of other investments and put everything into real estate. One of them totally backfired, one was a good investment but definitely brought a lot of head aches with a bad tenant, and the third one is a vacation home that is financially quite bad but overall a pretty decent move as he and other family members spend quite a bit of time there every year. Real estate can be profitable but it does come with "dealing with people" which is not always easy.

Main point with the above is that you if you want the property number one but you're a bit skeptical about the timing, selling the old places leaves you with significantly less mortgage and with less exposure to the housing market in that specific area. Personally I would be absolutely terrified of having a large amount of my capital tied up in real estate investments simply because diversification seems non-existent. I have no idea how much your current house is worth but it sounds like it would go a long way (even after taking care of the rest of the mortgage) into financing the new property or simply using it for investments.

Long story short: get the house that makes you and your family happy. But keep all of the options on the table. And I wouldn't bet on the rate cut happening, I just see no reason for it at this point.
Reply
#14
Most people who struggle with being landlord did not realize it is a PEOPLE business. If one is not good with people they will chafe at being a landlord.

Broker, appraiser, landlord successfully since 1987. Do it all over? No, I would go heavier in the DGI direction.

Good luck.
Reply
#15
(07-02-2019, 06:36 AM)NilesMike Wrote: Most people who struggle with being landlord did not realize it is a PEOPLE business. If one is not good with people they will chafe at being a landlord.

Broker, appraiser, landlord successfully since 1987. Do it all over? No, I would go heavier in the DGI direction.

Good luck.

Mike is correct.  It is absolutely about customer service. (and not getting conned with excuses).  If I was paying VBIN $3500/mo rent, he damn well better be taking care of my problems with a smile when it inevitably happens.  If you can't, then you hire a property manager and give up some of the profit.  

I have a few friends that did the multi-family rental in lower income areas.  They definitely made more money faster, and I was NOT at all jealous.  No chance I want any part of that if I have a day job.

I used to tell my friends............ "Everybody that rents does not suck, but everybody that sucks has to rent". Smile You gotta be somewhat selective.
Reply
#16
You said this property is down 100k since the peak. How much profit do you have in the house now? If it was your primary residence for 2 of the past 5 years, you can have a tax exempt gain of up to $500k if you're married. If you turn it into a rental, you can potentially kiss all that tax free gain good bye. If you're sitting on a big gain, it's hard to lose that.

If I was you, and there is a nice size gain in the house, sell it and get the tax free gain. If you still want a rental house, buy one and you've got the higher depreciation basis for the new rental house.
Reply
#17
(07-02-2019, 09:55 AM)ChadR Wrote: You said this property is down 100k since the peak. How much profit do you have in the house now? If it was your primary residence for 2 of the past 5 years, you can have a tax exempt gain of up to $500k if you're married. If you turn it into a rental, you can potentially kiss all that tax free gain good bye. If you're sitting on a big gain, it's hard to lose that.

If I was you, and there is a nice size gain in the house, sell it and get the tax free gain. If you still want a rental house, buy one and you've got the higher depreciation basis for the new rental house.
That's a fair statement, I did not consider the taxes. But I don't plan to sell my first home either a long time. Plus I can claim depreciation and fixture costs from taxes every year.

Can you please explain what you mean by "If you still want a rental house, buy one and you've got the higher depreciation basis for the new rental house."
Reply
#18
The key to real estate is to never (or nearly never) sell. The hardest time is the first few years of ownership.

When the property gets converted to income property you can then 1031 exchange it for another (hopefully larger) property w/o any taxes.

https://money.usnews.com/money/blogs/the...l-property

https://www.realwealthnetwork.com/learn/...finitions/
Reply
#19
You turn your current house into a rental, you start depreciating it at the price you paid for it. eg You bought it for $150k, that is what your depreciable basis is. If it is worth $250k, you don't get to depreciate that extra $100k. When you sell it years down the road, you pay taxes on the $100k of gain. Where if you sell it now, you get the $100k gain tax free and the new rental you buy for $250k you get to depreciate the rental at the $250k basis. And then when you sell it, you pay capital gains on the gain from $250k and not $150K (this is ignoring depreciation recapture). There by saving the taxes on the $100k capital gain.

The downside to the 1031 exchange is that you have to keep in the rental game. If you ever get sick of being a landlord or want to use the money for something else, you then have to pay the taxes. But yes, it is best to never sell real estate.
Reply
#20
(07-02-2019, 01:23 PM)ChadR Wrote: You turn your current house into a rental, you start depreciating it at the price you paid for it. eg You bought it for $150k, that is what your depreciable basis is.  If it is worth $250k, you don't get to depreciate that extra $100k.  When you sell it years down the road, you pay taxes on the $100k of gain.  Where if you sell it now, you get the $100k gain tax free and the new rental you buy for $250k you get to depreciate the rental at the $250k basis.  And then when you sell it, you pay capital gains on the gain from $250k and not $150K (this is ignoring depreciation recapture).  There by saving the taxes on the $100k capital gain.

The downside to the 1031 exchange is that you have to keep in the rental game.  If you ever get sick of being a landlord or want to use the money for something else, you then have to pay the taxes.  But yes, it is best to never sell real estate.

Very good advice here, along with NilesMike's.

All the people I knew who had rentals primarily stayed away from single units., they preferred multi-units, that way cash was always coming in when one or two units were empty. No money came out of their pockets, like ever, it was all rent money that paid for everything.

One guy, who had many many properties never sold a property outright, he always acted as the bank, i.e., held the mortgage. I remember he sold a five unit with a small coin operated laundry-mat, he told me he couldn't keep the machines empty and had bags and bags and bags of coins in his house--I don't think he declared the coins lol. Anyways, this was his first property he bought for 20k sold it in the mid 80's for 250k but held the mortgage. The guy paid this guy every month for almost 15 years, ran into money problems and defaulted. He got the property back, had it for a few years, sold it again, held the mortgage for 20 years until it was paid off. Another thing he did was non of his rentals came with appliances, nothing, he would tell me he's in the rental property business not the appliance and repair business. He didn't want to be getting 2am calls that some dishwasher, dryer, washing machine or fridge wasn't working.

Another guy who has massive amounts of rentals told me the success of a rental was double the mortgage, in-other-words, if your mortgage is 2k a month he wanted at minimum 4k in rent coming per month--if that was not possible then he said he wouldn't buy it. His favorites were 5 units or more, that a 5 unit put money in his pocket immediately.


I guess the answer is it doesn't matter what any of us tell you--that if you want to be a landlord and you're ready then do it--but don't do it half-ass, go all in and remember it's a business, treat it as a business. And don't rent to friends or family.
Reply




Users browsing this thread: 1 Guest(s)