anybody own a rental property

[FutureDCTundra]

ok just wondering if anybody owns a house/duplex/ or something along those line...

just had a couple of question as i was thinking buying a house/duplex with the intention of renting it out....

1) whats the best thing to buy... a house, duplex, 6-plex etc....

2) what kind of a down payment works out the best.. 10% , 20 %, more or less.....

3) for those of you that have them are you making money on them... or is this morre of a long term investment with the intention of unloading it in 10 or more years...

thanks

[ausk9-0]

Originally Posted by FutureDCTundra

ok just wondering if anybody owns a house/duplex/ or something along those line...

just had a couple of question as i was thinking buying a house/duplex with the intention of renting it out....

1) whats the best thing to buy... a house, duplex, 6-plex etc....
Preferably something that will show positive and not have maintenance fees, unless you're looking for a write off.
2) what kind of a down payment works out the best.. 10% , 20 %, more or less.....
In general, 20% but it boils down to what you can afford
3) for those of you that have them are you making money on them... or is this morre of a long term investment with the intention of unloading it in 10 or more years...
I had a rental that could have been positive but I decided to sell. I chose to sell because the market is crazy right now. I bought a 1/1condo for $174K about 4 years ago and just sold it for $320K. I took the cash and now the wife has a brand new Sequoia.

I am by no means an expert on rental properties but I did fare well on this transaction

[Toasted Coastie]

My cousin (Pete) is the president/owner of Castle Rock Realty in Mass/New Hampster. He owns some ungodly number of properties, and like you want to do, he started with one. He calls his 2 and 3 family homes his cash cows. Why? Because in most cases they are less expensive than single family homes, and the rent from one side of the house can usually cover the mortgage for the property. He looks for units that have a low turnover rate from the last owner (which is rare now due to low mortgage interest rates) and keeps the tennents that are already in place. The reason why he keeps tennents is the years he raises the rent, he usualy will give the tennents a break on the December rent (doesnt charge them december) so the families dont have to worry about that month, and doesnt get overextended through christmas season with shopping for the kids and the like. This yields great bennifits, as he keeps his tennents happy, yet still raises the rent for the year. this only happens once every 2 years.

Of course there is also maintanance of the units and such, but he uses the money from the other 1 or 2 sides for any work that needs to get done. So as I see it;
1. Three familly house is the way to start.
2. Use 1st units rent for mortgage (and portion of 2nd unit)
3. Put aside $300-$400 aside in an account that can be accessed for improvements/problems
4. Bank the rest, but be mindful of real estate tax and the like.

But I could be wrong, we are usually playing golf when he is explaining to me how his system works (and it must work well, he owns like 75 properties, and he's 33 years old) and I'm usually trying to beat him.

[romar]

Originally Posted by Toasted Coastie

My cousin (Pete) is the president/owner of Castle Rock Realty in Mass/New Hampster.

That's the KEY here. I was looking into a joint venture with a buddy of mine. What we found was that many if not all of the profitable proporties get sucked up by real estate agents as soon as they hit the market. The proporties that remain usually require lots of work or thier present income will not turn a sufficiant profit for a new buyer. My advice, make friends with an agent. Best of luck to you!

[Simias]

FutureDCTundra...me and the wifey are thinking the same too, but the only thing i fear about buying another house right now to rent is the current cost of homes. it's at an all time high (at least in the areas that i'm looking) and i fear not being able to recover in the future if i decide that i want out. it looks like homes are dropping slightly too. i know that i can write off losses and what not and it's a long term investment, but i'd rather buy an investment property when the properties are a little less pricey. so you might want to think about this as well.

all in all real estate is a risk, but if you get in at the right time you're good to go. i'm still on the fence as to if we're gonna buy, but i'll continue to do my research.

you are on the right track tho. almost everyone i know that is really well off has an investment property. i'm hoping to do the same!

good luck and keep us posted!!

[pacjr]

We currently have 6 rentals, 3 are condos, 3 are single family homes.
We got started by buying a condo to live in than kept that and bought a house to live in, kept that and bought our big house. We waited a year before getting more. Since then we have bought one from an estate sale, and two from the bank. The last one we bought was bigger and more expensive than the house we live in, this was bought from the builder with great builder rates.
The track to take on long term vs. cash flow needs to be made on each property. We are planning on holding the condos until the kids need money for school all three should be paid off within 20 years using the rental income only. The single familys I plan on cash flowing and flipping every two or three years. This give us an extra $1,500 cash every month from the cash cows. Look at different loan types and companies, some will let you put down as little as 5%.

[ElDiabloJoe]

I bought a 650 sqft condo in South OC back in April 03 for just under 200K.

It was only empty 2 months between tenants. I sold in April 04 for 285K.

Currently, condos like it in the same area are on the market for $230K, so when the newspaper columnists start asking whether or not there is a bubble, that's a good time to sell. The market peaked at $335K for what I'm selling, but I didn't sell fast enough. It is a gamble, FWIW.

I learned several things I'd be happy to share.

1. Don't buy an investment condo. It's one thing if you buy one, live in it, then take out a line of credit to use as a down payment on a single-family house for you to live in and then keep the condo to rent out. It's another to deal with HOA fee increases, and it can be difficult to sell if over 50% of the complex is non-owner occupied. Banks don't like to give mortgages in this situation, so selling can be difficult.

2. Four plexes are good as you can get one now for about 750K. With rent at approximately $1000/month, your income is $4000 while your mortgage with 20% down is about $3000. (depending on what loan rate, etc. you get)

Instant positive cash flow of $500 in your pocket and $500 into a maintenance/repair account. Keep in mind, you will sometimes have vacancies, so with a bunch of effort and time, you should break even year-to-year. You're hoping for equity gains. It'll take years until there's a good solid upside to your cash flow, but the equity gains will let you pull another line of credit out in about 5 years and you can really start building your little empire. A few decades into it and you will experience good cash flows as your mortgage stays constant, but rents slowly increase.

3. The best bets are multi-unit investment properties in neighborhoods that are largely full of single-family homes. I don't recommend buying into an area that is fulla nothing but four-plexes. These neighborhoods rapidly go down hill.

4. Be certain you are NOT buying in a rent controlled area (LA, West Hollywood, Etc.)

5. I *highly* recommend the NOLO Press books on Landlord's Rights And Responsibilities (nolopress.com or amazon, etc.).

6. Before you do anything, educate yourself. Talk to people doing this in YOUR area. Clean up your own finances so you can pre-approve for a sufficient amount for a property (not including the traditionally expected 20% down).

7. Along those same lines, pencil the numbers very carefully. Determine EXACTLY what your cash flow will be (postitive or negative), and conservatively estimate vacancy rates, maintenance needs (is there any deferred maintenance from previous owner, how old is the roof, what is the condition of the plumbing, etc.), and find out the 5 year trends and patterns of rent in your area. Determine the direction of current trends and determine if your risk comfort-zone and financial position will allow you to absorb any immediate downward trends in rent if the economy goes that direction.

Real estate investment/speculation is not for everyone. If your comfort zone with the risk level associated with direct investment doesn't allow for it, there are REITs that you can invest in. They are like mutual funds that invest in real estate (Real Estate Investment Trust). You buy shares in the trust, and the trust buys real estate like shopping centers and malls (SIMON is one, they own the Brea and Mission Viejo malls, among others).

HTH,

EDJ