I'm seriously considering purchasing a multi-family rental property to expedite my early retirement aspirations. Any one out there doing this? Any hints/tips?
I'm been thinking about this for over a year, but am hesitant because I have no experience. I'd hate to make a purchase and end up losing money as these type of investments are pretty expensive.
Thoughts?
Real Estate
Reasons why I find real estate risky:
*inefficient, illiquid market with complex laws, fees, realtors, tax requirements coming into play when you buy/sell
*historically a market utterly fueled by [easy] credit. Which leads to inflated prices.
*lack of diversification. I try to avoid anything that could wipe out a significant portion of my worth (especially when I can't quickly exit the position).
*associated costs and necessary knowledge. I don't really want to spend any money or effort learning how to tile floors (at least now).
*dealing with renters doesn't always sound like it's fun.
*inefficient, illiquid market with complex laws, fees, realtors, tax requirements coming into play when you buy/sell
*historically a market utterly fueled by [easy] credit. Which leads to inflated prices.
*lack of diversification. I try to avoid anything that could wipe out a significant portion of my worth (especially when I can't quickly exit the position).
*associated costs and necessary knowledge. I don't really want to spend any money or effort learning how to tile floors (at least now).
*dealing with renters doesn't always sound like it's fun.
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Concojones
- Posts: 117
- Joined: Fri Jul 23, 2010 6:57 am
Do you live in the US? There are deals to be had among foreclosures. Make sure the rent is significantly greater than the mortgage payments and other taxes/fees. Yes, I said mortgage - don't invest your own money, or at least as little as possible. House prices will fall further but that's irrelevant as long as rents don't fall. If they fall further you can buy more properties.
This is what I would do if I lived in the US and if I knew I was going to stay put in the same place for a couple of years (unless you want to outsource everything).
Check the following blog post about the ERE guy who said he'd get a whole apartment building if he could do it over again. It's the same idea. http://earlyretirementextreme.com/when- ... ge-35.html
This is what I would do if I lived in the US and if I knew I was going to stay put in the same place for a couple of years (unless you want to outsource everything).
Check the following blog post about the ERE guy who said he'd get a whole apartment building if he could do it over again. It's the same idea. http://earlyretirementextreme.com/when- ... ge-35.html
Are you familiar with the rental market in the area? Is it stable; are there always a good source of renters? Would you live in one of the units and provide the maintenance yourself?
I own a single family home in the DC area which is rented and have considered flipping it to a multifamily home, but it does seem fairly complicated unless you plan on living in or near the property.
I own a single family home in the DC area which is rented and have considered flipping it to a multifamily home, but it does seem fairly complicated unless you plan on living in or near the property.
See ERE REIT post too - working it out to make things happen.
I've been looking at "cheap" plexes further north of the bay. It has to be within "visiting" distance. Right now tho, "visiting" is expanding to a reasonably flight length, and within the same time zone.
Things like this is why I suggested an ERE REIT, even if you don't live there, the investment cost is cut down. To get a loan from any bank tho, you need to put 30% down, that's the lowest anyone will go - already did the research. 30% of 400k is quite a bit. The highest personal loan available is for about 100k, meaning you'd need 20k still. And you'd have two loans no less.
I've been looking at "cheap" plexes further north of the bay. It has to be within "visiting" distance. Right now tho, "visiting" is expanding to a reasonably flight length, and within the same time zone.
Things like this is why I suggested an ERE REIT, even if you don't live there, the investment cost is cut down. To get a loan from any bank tho, you need to put 30% down, that's the lowest anyone will go - already did the research. 30% of 400k is quite a bit. The highest personal loan available is for about 100k, meaning you'd need 20k still. And you'd have two loans no less.
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JustChristine
- Posts: 19
- Joined: Wed Jul 21, 2010 11:01 pm
I've been a landlord for the past 4 years. I'm by no means an expert but I'll throw my 2 cents into the pot. If you are talking about buying a property strictly for investment (ie you won't live there) then I wouldn't do it without at least 50% down...preferably buy the property out right in cash. Why? because your cashflow isn't worth the headaches otherwise. You can get equal or better returns in other investments with alot less sweat and headaches.
If you are talking about buying a multi-unit and living in one because you want to own instead of rent, then I say give it some consideration. If you have a good rental base and you plan to live in the area for a while, it's a pretty decent way to own a home particularly if you are first starting out or single. I decided to buy a duplex because I was fed up with renting and liked the idea of having the extra income to help with the mortgage. It hasn't been easy but the extra work has been worth the security of knowing that if I lose my job, I can still pay my mortgage.
One thing to note, alot of things cost more for rental properties vs single family properties...even if you do live there. Financing is a little tighter and you have to pay more up front (down payment and points) these days. Don't even get me started on the extra fees for refinancing. Insurance and home inspections also cost more.
If you are talking about buying a multi-unit and living in one because you want to own instead of rent, then I say give it some consideration. If you have a good rental base and you plan to live in the area for a while, it's a pretty decent way to own a home particularly if you are first starting out or single. I decided to buy a duplex because I was fed up with renting and liked the idea of having the extra income to help with the mortgage. It hasn't been easy but the extra work has been worth the security of knowing that if I lose my job, I can still pay my mortgage.
One thing to note, alot of things cost more for rental properties vs single family properties...even if you do live there. Financing is a little tighter and you have to pay more up front (down payment and points) these days. Don't even get me started on the extra fees for refinancing. Insurance and home inspections also cost more.
Yes, but rent can and is going down. Examples:
http://www.bostoncondoloft.com/rent-going-down/
http://www.twowiseacres.com/real-estate ... out-rents/
Supply and demand. Vacancy is high, more people per dwelling to deal with financial hardship... Foreclosures are up, more ARM pain coming... With all that vacancy, increased supply, prices must go down.
http://www.bostoncondoloft.com/rent-going-down/
http://www.twowiseacres.com/real-estate ... out-rents/
Supply and demand. Vacancy is high, more people per dwelling to deal with financial hardship... Foreclosures are up, more ARM pain coming... With all that vacancy, increased supply, prices must go down.
People can not afford their house and need a place to live. If you had rentals available you should be able to rent to them for less than their mortgage amount offering them shelter. Real Estate is one of the few investments people pay you for. No one is going to pay you to buy a stock, or to put money in your savings account. If you can get the right deal on the property its worth it in my opinion. Sure you can have a terrible tenant, but you can paint and steam clean and rent to someone else.
Putting little money down is best in my opinion but it can go either way. I would not put all my eggs in one basket though, have a variety and be real. Do not run out and get 20 rental properties in a year. Build slowly, look for deals and learn as you go.
Putting little money down is best in my opinion but it can go either way. I would not put all my eggs in one basket though, have a variety and be real. Do not run out and get 20 rental properties in a year. Build slowly, look for deals and learn as you go.
You must have a good management plan. When the water heater bursts and floods the property, you pay for it. In market rate properties, you may not be able to get a tenant evicted in a timely manner costing you money. Does your location's laws favor landlords or tenants? Tenant trips over water hose or tools your using and sues you. How will you handle say a drug lab in one of your units? Can you run background checks and credit checks? Will you pay the water and trash? Those go up annually. Will you have a list of rules and regulations that are applied, and not just a joke? Can you handle hot checks and late rents? How much will you have in cash reserves? Will you have a mold policy to protect you from lawsuits? Will you be the lawn guy, the maintenance man, the pest control guy? Plumbers cost $65 an hour thru the week, and $78 on holidays and weekends. How are you in handling confrontations? Will you drop your eyes or blink first? You blink you lose. How about parking? You must provide handicapped signs by law if the tenant is eligible. Will you do quarterly inspections? You will need your state's Landlord/Tenant handbook. In most cases we are talking here about greater than four (4) unit properties. That is where the Feds and State steps in with rules. Will you accept HUD? Section 515 Elderly? Will you have an attorney on retainer (recommended).. Will you do month to month or leases? And on and on and on.................
@HSpencer: That is quite a list. I'm going to be a landlord by accident (because we'll move overseas) and I'm aware with some of your concerns, but it shouldn't be much headache (hopefully) because we'll have a RE agent managing our property (obviously we can't manage it from a different country) and we'll have landlord insurance and building insurance. Landlord insurance covers unpaid rent, malicious damage or theft by tenant. It will even cover the legal cost incurred if you have to evict your tenant (up to $5000). That's in Australia though, not sure about US 
.
If you only have 1-2 investment properties locally, and if you don't work full time, it's probably ok to manage it yourself. Other than that, I would personally use RE agent and negotiate the fee. I would rather make more money somewhere else and pay the RE agent to deal with the tenants.
.If you only have 1-2 investment properties locally, and if you don't work full time, it's probably ok to manage it yourself. Other than that, I would personally use RE agent and negotiate the fee. I would rather make more money somewhere else and pay the RE agent to deal with the tenants.