School me on rental properties

[The motor guy]

So I guess the idea is you buy a property and you get someone else to pay for it? Then you eventually have a house that's worth the same amount or more that you paid in the first place? What I don't get is how people get like 5 or 6 houses that they rent out? Do they just have a ton of disposable money that they can invest?

 

[barkingspider]

If they don't have disposable income, they borrow against the property(s) they do have to purchase more property. It's a gamble, but some people time it right and are smart about it

 

[sciphi]

Originally Posted By: motor_oil_madman
So I guess the idea is you buy a property and you get someone else to pay for it? Then you eventually have a house that's worth the same amount or more that you paid in the first place? What I don't get is how people get like 5 or 6 houses that they rent out? Do they just have a ton of disposable money that they can invest?


A friend of mine rents houses near a large military base. There's pretty much always demand for rental houses. He bought a bunch of run-down houses around him, fixed them up nicely enough to rent out, and got folks in. The rent more than covers the note and any reasonable wear/tear. He's pretty leveraged, though. Although with the rental income from the other properties, the local banks haven't said anything about the number of mortgages he's holding. He's big enough where the income from the others can cover the note on a property or two going vacant for a few months.

 

[2cool]

It's not that simple, unless one HAS lots of cash. There are many of videos on YT concerning how to finance a rental and how to inspect properties. A short answer is that you buy the first, get some cash flow going, and as you make payments you build up equity and then piggy back that to a second house. It's much more complicated, but that's the overall idea.

 

[Rudy1999 250]

i have some 8 houses that were all of my father in laws. he did well and did it as a side job till he built it up. he died and my wife got them and i run them. these are not in a bad area just no the best. homes are 25-70 k now he bought any of these 35 -50 years ago. i enjoy it because i am in control and call the shots. i have everyone on a 30 day rental agreement. any others questions let me know.

 

[spasm3]

IIRC most lenders want 25% down to buy as a rental property. You could live there a year then rent it i suppose.

 

[ArrestMeRedZ]

Right now there is an inversion in a lot of locations between rents and house payments. Rents are significantly lower than payments on a 30 year mortgage, and in a lot of cases, even lower than payments on a 15 year mortgage. If you can come up with 20% down, manage it yourself, do the maintenance yourself or have someone who works cheap, you can have a money making machine. You need some money, but the beauty of this is with today's very low rates, you can leverage what you have if you qualify.

If done right, you can be a millionaire in a few years. If done wrong, you can be "land poor", and end up losing all.

 

[KrisZ]

It's another form of business and as with any business or worthwhile career it requires knowledge, sacrifice, planning, perseverance and ability to accept great risks.

 

[The motor guy]

Originally Posted By: ArrestMeRedZ
Right now there is an inversion in a lot of locations between rents and house payments. Rents are significantly lower than payments on a 30 year mortgage, and in a lot of cases, even lower than payments on a 15 year mortgage. If you can come up with 20% down, manage it yourself, do the maintenance yourself or have someone who works cheap, you can have a money making machine. You need some money, but the beauty of this is with today's very low rates, you can leverage what you have if you qualify.

If done right, you can be a millionaire in a few years. If done wrong, you can be "land poor", and end up losing all.



I thought renting was more than a payment if you mortgaged the house. They want to cover the insurance, the mortgage payment and a little bit more for wear and tear.

 

[AZjeff]

OP, no disrespect to those here who own rentals and are successful but there are probably hundreds of sites where this is their job, hobby, and passion...like oil is here. Search them out if you're serious.

I was in a position a few years ago to buy some houses and try the rental game, probably have the skill set to make it work, but I know I couldn't disconnect my attachment to "my stuff" and would have a hard time with renters not taking good care of the property so I stayed away. In my neighborhood there are a fair number of rental houses, about half the time when the people move out a dumpster appears in the driveway and carpet, doors, etc. are hauled away and the house is refurbed. No thanks.

 

[Pop_Rivit]

Originally Posted By: motor_oil_madman
What I don't get is how people get like 5 or 6 houses that they rent out? Do they just have a ton of disposable money that they can invest?


There are a number of ways it can be done. There are conventional methods such as bank financing, and there are unconventional methods such as finding private investors who are willing to invest. There are also tools such as self directed IRAs that can be used for real estate. An existing property can also be leveraged to purchase additional properties-for example, if you inherit a property from a parent, you can leverage that to invest in a second property. Flip them and make a profit or rent both out and start generating a positive cash flow and you suddenly have two rental properties that can be leveraged to invest in a third property, etc.

And there are people who have investment capital; it can come from a number of sources such as smart financial planning, stock sales, inheritance, sale of a business, etc. Just like any other business there has to be some startup capital. Once that's in place, you can use earnings to continue to invest in the business and keep it growing.

Originally Posted By: motor_oil_madman

I thought renting was more than a payment if you mortgaged the house. They want to cover the insurance, the mortgage payment and a little bit more for wear and tear.


There are too many variables to look at it with a myopic view like that.

 

[tomcat27]

I have a couple of friends who do this - the biggest problem is finding reliable renters that don't stiff you on rent and destroy the house. pets, among other things, can ruin a house very quickly if they start using the house as a bathroom.

 

[Lyman]

Years ago I had a landlord that had 14 rental homes. He owned a pest control company too. He told me that he didn't make much on them but was in it for the end result. That is selling them all off and retiring. He was a great guy and the best landlord I ever had.

 

[390pi]

If you have some seed money (used my HELOC) to start, anyone can do it as long as you are willing to do some work yourself and see through people's [censored]. But, it isn't for everyone.

Works best in appreciating markets.

I started with houses, then multifamily and now commercial.

It isn't rocket science.

No one gave me a handout to start and I do not have an advanced college degree.

Great way to get ahead on your own terms.

 

[Win]

Depreciation.

 

[gfh77665]

Originally Posted By: 390pi


Works best in appreciating markets.



This^^^. I bought my rentals during the market crash 5-6 years ago, and I targeted buying them in a preferred school district. Now, all I have to do is put a sign in the yard, and it rented later that day. Crazy.

 

[97K15004WD]

I had several rental properties. Ended up selling them because of the unforseen low mortgage rates that put me in competition with home ownership costs instead of rental. In other words, I had homes that were renting for more than some people could buy their own for.

Then, the school district redrew the zoning lines and cut out my properties and sent the kids to lower quality schools. On top of that, the tax rate was increased for rental properties compared to ownership (6% rental versus 4% for ownership - we have property taxes here so that has to be paid every year or the county seizes the property and sell it for back taxes).

Those three things threw me out of the rental market. Hurt when selling those properties too (due to the school rezoning - lost a lot of money just because of the change).

Bottom line: I no longer am interested in this area of speculation. Invest in an index fund of your choice and your return will likely be better in the long run. That's the route I took.

 

[Dave Hess]

Originally Posted By: 97K15004WD

Bottom line: I no longer am interested in this area of speculation. Invest in an index fund of your choice and your return will likely be better in the long run. That's the route I took.


I can afford to buy 4 rental houses cash, but why do I need the stress and damage to my properties ?
To evict the bums I need a court order and repair all the damage they did knowing the police will eventually show up and remove them.

This year will be over $60K in dividends with zero stress as a landlord.

 

[Win]

Originally Posted By: Mr Nice
Originally Posted By: 97K15004WD

Bottom line: I no longer am interested in this area of speculation. Invest in an index fund of your choice and your return will likely be better in the long run. That's the route I took.


I can afford to buy 4 rental houses cash, but why do I need the stress and damage to my properties ?
To evict the bums I need a court order and repair all the damage they did knowing the police will eventually show up and remove them.

This year will be over $60K in dividends with zero stress as a landlord.


Would you rather pay income taxes or legally avoid much, most, or all of them?

RE is a long term play, it's not a get rich quick scheme, although grand slam home runs can certainly be hit.

 

[Oldtom]

I have two rental properties and have done well with them. There are a couple rules to follow if you want to survive: 1) Join a local landlord group 2) Screen tenants like you are hiring for the CIA. 3) Assume that tenants are like normal people who were bitten by a zombie. At some point the scum will go full zombie and attack you. Evict fast when they go sour. My biggest mistake was taking TWO YEARS of extreme insults from a "gone sour" tenant before ending the lease. The reason for the tenant going sour? I was tired of late rent payments and asked for a five dollar late fee if the full rent was not paid on the first. 4) DO NOT become friendly with a tenant, treat them like a rabid wolverine, since they will eventually go for your jugular without warning.

I used to be a liberal and pity poor people. Now, I hate the poor and believe they are poor because they are STUPID and have zero money management skills. Being a landlord may change you in ways you may not like.