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Real Estate Investing

Zog

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Anyone here invest in real estate? I've been thinking about it as a method for possible early retirement. Maybe buy a triplex or quadplex and live in one unit to see how it goes, have the renters of the other units pay for my mortgage and if things go well after a year or two, see about buying another property to expand.

It certainly doesn't seem like a get rich scheme, but equity can be built in the property to sell after some years of having renters pay for your mortgage, and once paid off, it would be straight cash flow minus maintenance and real estate taxes.

How did you get started? Pros/cons vs. just putting the money in the stock market?
 

gourimoko

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Anyone here invest in real estate?
Yep..

I've been thinking about it as a method for possible early retirement. Maybe buy a triplex or quadplex and live in one unit to see how it goes, have the renters of the other units pay for my mortgage and if things go well after a year or two, see about buying another property to expand.

It certainly doesn't seem like a get rich scheme, but equity can be built in the property to sell after some years of having renters pay for your mortgage, and once paid off, it would be straight cash flow minus maintenance and real estate taxes.

How did you get started? Pros/cons vs. just putting the money in the stock market?
I can't tell you jack about stocks; I'm.. not the guy, although I want to learn more about it.

I started my first rental about 11 years ago actually... I was young and bought a triplex in Cleveland (City of) in an area that, as a Heights kid, I wouldn't wanna live, but there's still people that wanna live there. My brother and I cleaned the place up, fixed it up, and renovated it the best we could over 3-4 months. We both had full-time jobs and spent most of our disposable income on repairs and booze.

We turned around and rented that place out for very little, and ended up turning a slight profit. But the equity in the home that we'd built up by renovating it and also paying the mortgage on it over time, allowed us to establish a line of credit with the bank and to also borrow against. We used that money to buy another property in the Heights (a duplex), and did the same thing.

My brother manages all of this and it's just residual income for me.

I recently bought my parents house with an aim to have my brother flip it.

Other than that, I have my condo back home in Honolulu (Waikiki).. It's about 2 blocks from the beach, and we're renting it out now for $1600/mo as a vacation rental. The building manager maintains the place fairly well, and while it's not super profitable, again, we're building equity.. The unit is an asset, and an investment, and it's an amazing fucking place to be IMHO... Absolutely love it there; the views are absolutely unreal.

We're looking to buy 1-2 units in Kaanapali on Maui which is, IMHO, the most beautiful beachfront on Earth.. The units there can be had for a LOT cheaper than you might think, many of them need renovations, but these places have interesting rental policies. Essentially you buy the unit as you would buy a condo, but the building is maintained by a hotel management group.. Where we're looking to buy is where we normally vacation, which is the Aston Maui Resort at Kaanapali. But there's much better deals up and down the coast, we just have a sentimental attachment to this place... Anyway, in these kinds of places, the Aston management group rents out the unit for you to people looking for a vacation rental (they advertise these as normal hotels on places like Expedia, and the Aston name gets people to stay there).

There's other cheaper alternatives in Waikiki; IIRC there's the Skyline Hotel Group (I'm not sure if that's the name, but I can find out for you), and.. a few others... Essentially, you own the room, and the management group treats them as hotel rooms; you make a cut...

Like you said, it's definitely not a get rich scheme... but, somewhere down the road we're hoping to spend a bit more money on buying an apartment complex, likely in the San Diego area... I've just had too much money tied up in other projects right now to really be serious about that kind of expense.. But I think it's a great business to get into, personally.
 

David.

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Yep..



I can't tell you jack about stocks; I'm.. not the guy, although I want to learn more about it.

I started my first rental about 11 years ago actually... I was young and bought a triplex in Cleveland (City of) in an area that, as a Heights kid, I wouldn't wanna live, but there's still people that wanna live there. My brother and I cleaned the place up, fixed it up, and renovated it the best we could over 3-4 months. We both had full-time jobs and spent most of our disposable income on repairs and booze.

We turned around and rented that place out for very little, and ended up turning a slight profit. But the equity in the home that we'd built up by renovating it and also paying the mortgage on it over time, allowed us to establish a line of credit with the bank and to also borrow against. We used that money to buy another property in the Heights (a duplex), and did the same thing.

My brother manages all of this and it's just residual income for me.

I recently bought my parents house with an aim to have my brother flip it.

Other than that, I have my condo back home in Honolulu (Waikiki).. It's about 2 blocks from the beach, and we're renting it out now for $1600/mo as a vacation rental. The building manager maintains the place fairly well, and while it's not super profitable, again, we're building equity.. The unit is an asset, and an investment, and it's an amazing fucking place to be IMHO... Absolutely love it there; the views are absolutely unreal.

We're looking to buy 1-2 units in Kaanapali on Maui which is, IMHO, the most beautiful beachfront on Earth.. The units there can be had for a LOT cheaper than you might think, many of them need renovations, but these places have interesting rental policies. Essentially you buy the unit as you would buy a condo, but the building is maintained by a hotel management group.. Where we're looking to buy is where we normally vacation, which is the Aston Maui Resort at Kaanapali. But there's much better deals up and down the coast, we just have a sentimental attachment to this place... Anyway, in these kinds of places, the Aston management group rents out the unit for you to people looking for a vacation rental (they advertise these as normal hotels on places like Expedia, and the Aston name gets people to stay there).

There's other cheaper alternatives in Waikiki; IIRC there's the Skyline Hotel Group (I'm not sure if that's the name, but I can find out for you), and.. a few others... Essentially, you own the room, and the management group treats them as hotel rooms; you make a cut...

Like you said, it's definitely not a get rich scheme... but, somewhere down the road we're hoping to spend a bit more money on buying an apartment complex, likely in the San Diego area... I've just had too much money tied up in other projects right now to really be serious about that kind of expense.. But I think it's a great business to get into, personally.
I've been thinking about your Chicago story lately..

I have 20-30. Talk to me about buying something terrible in a bad place = profit in as much detail as you can, if you would
 

bob2the2nd

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I flip and do rentals. But im drunk on vacation. Long story short its a lot of very hard work and at the end of the day you don't make a ton of money. But it is some nice vacation money
 

Zog

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Yep..



I can't tell you jack about stocks; I'm.. not the guy, although I want to learn more about it.

I started my first rental about 11 years ago actually... I was young and bought a triplex in Cleveland (City of) in an area that, as a Heights kid, I wouldn't wanna live, but there's still people that wanna live there. My brother and I cleaned the place up, fixed it up, and renovated it the best we could over 3-4 months. We both had full-time jobs and spent most of our disposable income on repairs and booze.

We turned around and rented that place out for very little, and ended up turning a slight profit. But the equity in the home that we'd built up by renovating it and also paying the mortgage on it over time, allowed us to establish a line of credit with the bank and to also borrow against. We used that money to buy another property in the Heights (a duplex), and did the same thing.

My brother manages all of this and it's just residual income for me.

I recently bought my parents house with an aim to have my brother flip it.

Other than that, I have my condo back home in Honolulu (Waikiki).. It's about 2 blocks from the beach, and we're renting it out now for $1600/mo as a vacation rental. The building manager maintains the place fairly well, and while it's not super profitable, again, we're building equity.. The unit is an asset, and an investment, and it's an amazing fucking place to be IMHO... Absolutely love it there; the views are absolutely unreal.

We're looking to buy 1-2 units in Kaanapali on Maui which is, IMHO, the most beautiful beachfront on Earth.. The units there can be had for a LOT cheaper than you might think, many of them need renovations, but these places have interesting rental policies. Essentially you buy the unit as you would buy a condo, but the building is maintained by a hotel management group.. Where we're looking to buy is where we normally vacation, which is the Aston Maui Resort at Kaanapali. But there's much better deals up and down the coast, we just have a sentimental attachment to this place... Anyway, in these kinds of places, the Aston management group rents out the unit for you to people looking for a vacation rental (they advertise these as normal hotels on places like Expedia, and the Aston name gets people to stay there).

There's other cheaper alternatives in Waikiki; IIRC there's the Skyline Hotel Group (I'm not sure if that's the name, but I can find out for you), and.. a few others... Essentially, you own the room, and the management group treats them as hotel rooms; you make a cut...

Like you said, it's definitely not a get rich scheme... but, somewhere down the road we're hoping to spend a bit more money on buying an apartment complex, likely in the San Diego area... I've just had too much money tied up in other projects right now to really be serious about that kind of expense.. But I think it's a great business to get into, personally.
Those condos appear to be something like $400-500k in most cases. What do they rent for monthly?

Investment/purchase price vs. monthly income seems like it would be an important factor if you're looking to buy multiple properties over the course of say 5 years.

I flip and do rentals. But im drunk on vacation. Long story short its a lot of very hard work and at the end of the day you don't make a ton of money. But it is some nice vacation money
Enjoy your vacation... do you look for certain things when determining what properties to buy and rent? Do you aim for cash flow or just appreciation?

From what I have gathered so far, multi-families like triplexes or quadplexes will cash flow better but potentially have more problems (tenants not as good lots of times) while single family houses will generally appreciate in value faster but won't have much cash flow.
 

gourimoko

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Those condos appear to be something like $400-500k in most cases. What do they rent for monthly?
If you're talking about at Kaanapali, the average night there is around $200 for a studio unit with an expected rental period of 80% of nights monthly. Just keep in mind you also have HOA and you've also got the management fees (they get a large percentage), plus maintenance and monthly utilities. For Waikiki, I got that unit for ~$200k FHA (I lived there), it was a studio that was redone into a one bedroom apartment. Best purchase I've ever made.

Investment/purchase price vs. monthly income seems like it would be an important factor if you're looking to buy multiple properties over the course of say 5 years.
Indeed.. I'm not really a real estate expert, but I can only tell you what I've done and what's worked for me. It's definitely not replacing my full-time job with respect to income.
 

bob2the2nd

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Those condos appear to be something like $400-500k in most cases. What do they rent for monthly?

Investment/purchase price vs. monthly income seems like it would be an important factor if you're looking to buy multiple properties over the course of say 5 years.



Enjoy your vacation... do you look for certain things when determining what properties to buy and rent? Do you aim for cash flow or just appreciation?

From what I have gathered so far, multi-families like triplexes or quadplexes will cash flow better but potentially have more problems (tenants not as good lots of times) while single family houses will generally appreciate in value faster but won't have much cash flow.
Exclusively deal with foreclosures. Then mostly look for a good spread to get a good amount of equity. If its a rental it's all townhomes. Flips just sfh. Your area is different im sure, but i aim for rental townhouses that are worth 130 that you can buy for 80-85 with 5-10k of work. Cash flow isnt fantastic but equity is already set
 

Zog

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If you're talking about at Kaanapali, the average night there is around $200 for a studio unit with an expected rental period of 80% of nights monthly. Just keep in mind you also have HOA and you've also got the management fees (they get a large percentage), plus maintenance and monthly utilities. For Waikiki, I got that unit for ~$200k FHA (I lived there), it was a studio that was redone into a one bedroom apartment. Best purchase I've ever made.
How large is a large percentage? 80% rental rate and 200 a night is $58k/year basically. Of course then you have the expenses you listed. Do they take 20% or something more like 50%?
 

Zog

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Exclusively deal with foreclosures. Then mostly look for a good spread to get a good amount of equity. If its a rental it's all townhomes. Flips just sfh. Your area is different im sure, but i aim for rental townhouses that are worth 130 that you can buy for 80-85 with 5-10k of work. Cash flow isnt fantastic but equity is already set
Do you have a realtor that's on the lookout for foreclosures?

If you have $90k in a property (after purchase + reno) what do you hope it rents for?
 

gourimoko

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How large is a large percentage? 80% rental rate and 200 a night is $58k/year basically. Of course then you have the expenses you listed. Do they take 20% or something more like 50%?
That depends largely on the management group, their name brand, etc... Some places only take 15%, others up to 50% per night. They all have reps you can talk to though.
 
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bob2the2nd

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Do you have a realtor that's on the lookout for foreclosures?

If you have $90k in a property (after purchase + reno) what do you hope it rents for?
Yes i do, but I'm on top of things. I check in the morning and afternoon on redfin.


1100-1150 a month.
 

Zog

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Yes i do, but I'm on top of things. I check in the morning and afternoon on redfin.


1100-1150 a month.
So would you say anything where the price of the home is more than 100x what rent would be, you would stay away? Or is that not necessarily a consideration in all cases?
 

bob2the2nd

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So would you say anything where the price of the home is more than 100x what rent would be, you would stay away? Or is that not necessarily a consideration in all cases?
so i hate generalizations like this. mostly as the the market im in is the only market ive ever dealt with.

I browse online forums and read about the 50% rule, the 100x rule, or whatever that specific forum calls it. But at the end of the day the bottom line is, does it make sense.

so i know my mortgage is 400/month, its 50/month for insurance, its 200/month in repairs, 200/month in taxes, 100/month in other. that leaves me at 150/month in profit. Thats not a great margin of profit. But if i start at 40k up in equity. It makes it a bit more worth while.

Do your research, ask the questions, piece things together. Is it worth it to have 50% equity in a property you dont make rent on? Or would you rather have 20% equity in a property you make 1k/month on?

really the choice is yours. At the end of the day i prefer flips. Rentals are a complete pain in the ass.
 

The Wizard of Moz

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I've been looking into this a lot lately. I'm tired of renting and just throwing away $12000 a year towards someone else's mortgage.

I can tell you one of the biggest attractions of real estate opposed to the stock market is the insane leverage factor. You can margin trade with stocks but it's a lot of risk and if you get margin called at a shit time there's not much you can do. You invest 100,000 into the stock market and you've got 100,000 in assets.

For a rental property it's the long game. Let's say you put down $30,000 on a $300,000 house. You probably aren't going to want to rent at a loss so let's just use bob's experience and say you're making 150/month in profits on that house after MI, taxes, mortgage, repairs. That's 1800 per year for 30 years is 54,000. Now it's extremely likely you will be able to steadily increase rent over those 30 years while the mortgage payments stay fixed but honestly that isn't even the fucking point

You put down $30,000. People paid off your mortgage for you by renting your place. You made a profit on top of that. And now you own the entire house. And guess what, that house isn't worth $300K at the end of that period... didn't even take into account appreciation of the home.

That's the attraction. You don't get that from the stock market.

Now look I oversimplified the shit out of this but I'm just trying to illustrate where the allure is over the stock market. No one is going to pay to rent your stocks while you still maintain ownership.

Now imagine reinvesting the Monthly profits into more rental properties... there's a reason the market is pretty competitive right now.

You won't rake in the cash flows in the short term, but in the long game you're building a nice chunk of equity on another dudes dime

Reasons people don't do it is the vast majority of Americans don't have even close to 10K in savings and really aren't very financially literate.
 

getBUCKED

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Biggerpockets.com is all you need to learn. Read up, ask questions, and jump in if you're serious. Cleveland is a hot area right now, but certainly more affordable and easier to get started in than Columbus (where I'm at).
 
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