Thoughts on Real estate? any landlords? risks of starting?

by anthm
7 replies
  • |
I am starting to seriously consider this. I don't know the future but real estate has come down a lot and renting is more popular now than ever. I think what happened in the US market caused a lot of people to fear real estate and it may take some time for this to go away. I have heard that due to more renters, it can be easier to keep it rented (of course depends on local market).
What do the warriors think? Anyone think real estate is still a great source of passive income and worth building? The way I see it, it takes a few years before you can get enough cash flow to start supplementing your income, and it requires several units. But I am thinking if the numbers work, would it be a good idea to acquire a condo unit to start with, and perhaps in a year or two try to add a second unit, etc...
open to everyone's opinion and experiences on this.
  • Profile picture of the author homesinfo
    Hello Anthm,
    I happened to be in the business and I can tell you that if you run your numbers, YES Real Estate still a great vehicle for passive income. You just need to build some sweat equity with a couple of fixers to be in the position to start getting (units) 1-4 to begin with since they are easier to manage and with today's prices and interest rate in the 3%'s is crazy not to.
    Check the units vs. a single family for an investment and you will notice that the price per unit will drop the highest you go in the number of units. If you find a duplex in a nice area (not too much density on apartments) but more like residential area that can be a good start. Make sure you go for not less than 2 bed and over. This will give you a better tenant (stay way from studios and condos) simply becuase the have HOA (home owner association fees) that can escalate due to poor management and there goes away your positive cash flow. With the approach for a duplex or even a Triplex (good mix will something like 2/1 on each unit minimum) and even a better mix something like 3/2-3/1-2/1 also good parking space is a key not less than 2 spaces per unit (due to there size) and the winner will be something with at least 1 (cover) garage per unit.
    Last but not least when looking for units always include (multiple homes on a single lot) there are some gems out there, if you were to find a good lot size with a Duplex as a separate dwelling and a house in the same lot you can occupied the house and with the rent from the Duplex you can literally live rent free. The next step should be to take the same amount of money that you were paying on rent before and apply that to principal it will do wonders to your principal (balance) reduction. Any extra money should go into a separate account (one that you will open for the rents only) and month after month you will build a savings account for any future repairs and maintenance on the property. This way you will always have the units to pay for their own maintenance and occasional vacancies Which is not the case in the current market. Last but not least I assumed you will be occupying one of the units, this will give you the best possible loan program an interest rate. If you need any further assistance please send me a PM. I am in California San Francisco Bay Area but might be able to connect you with a good agent in Connecticut when you are ready. I hope this message will open some new possibilities for you. Good luck to you and happy home hunting.

    {{ DiscussionBoard.errors[6424776].message }}
  • Profile picture of the author infomaniacs
    Hi Anthm
    we own several rental properties here in Australia, ours are negatively geared for tax purposes. One thing you need to be as a landlord is very tolerant, and have nerves of steel
    We have been lucky and had mostly good tenants, but we have had one house trashed twice, by different tenants, thank goodness for landlord insurance.
    Make sure you are covered properly, don't get 'emotional' about your properties, and get a good property manager.
    {{ DiscussionBoard.errors[6424791].message }}
  • Profile picture of the author Halcyon
    The key to making a real estate investment work is to not over extend your resources acquiring the property. The market is still too volatile and you may not be able to recoup the losses later. To be comfortable, you need to be able to support the property for at least 6-12 months without a tenant. That's not saying it will be that long before you find a tenant, only that you don't want the pressure of renting to just anyone to get some money coming in.

    I started as a warrior and will always be one at heart but our rental property is our steady bread and butter. I was fortunate (savvy) enough to make enough money in 2008 to take advantage of the rock bottom housing market - Banks were unloading houses like hot VCRs from Guido's truck. So we bought a few. Also because I'm pretty handy with a hammer, I didn't mind buying fixer uppers.

    But it's not for the faint of heart.
    There are so many things to watch out for and you'll have to decide early how much sweat you're willing to put into it. The less sweat, the more money you'll need.

    Real estate is a bad investment ONLY when you've poorly leveraged your resources. People still need places to live, work and shop.
    {{ DiscussionBoard.errors[6424858].message }}
  • Profile picture of the author thunderbird
    I'll tell you who I envy. Whoever buys land, waits until the price goes up, then sells it. There are folks in my neighborhood who did exactly that. Made a fortune buying land with inherited money, doing absolutely nothing with it, then selling it for several times the amount they invested. Lots of money, no work. Good times. Picnics on the lake. Noodle salad.

    Project HERE.

    {{ DiscussionBoard.errors[6425089].message }}
  • Profile picture of the author Ernie Lo
    Please don't buy real estate especially if you're not experienced.. The econonmy is on the brink of collapse and who knows it may take 5 years but things arent healthy. Now I know US real estate dropped a lot from 2008 so the risk may be less for you but I still think its extrmely risky and many analysts do as well. Please do a favor and search youtube for "peter schiff", He is an economist who predicted the 2008 crash with excellent accuracy many years before the GFC. While everyone else was laughing at him he stuck do his guns and was correct.

    Real Estate will be a great investment one day but I think we are in for some huge trouble still. At worst you may have a property that doesnt drop much further but could take many many years to start increasing in price. Price isnt everything anyway. If your house goes up by 20%, but all your petrol and groceries double, not exactly the best investment.

    Anyway just do a lot of research and don't rush into this. GFC 2 is coming, we just don't know when. I'd stay out of as much debt as possible and be careful.
    {{ DiscussionBoard.errors[6425110].message }}
    • Profile picture of the author thunderbird
      Originally Posted by Ernie Lonardo View Post


      Real Estate will be a great investment one day but I think we are in for some huge trouble still. <snip>
      When it is great investment, it'll be too expensive to buy, lol. I'm not particularly big on real estate right now, myself, owning properties in known earthquake zones. That said, even in the worst of times, as Halcyon said better than I, people do still need to live somewhere, businesses still need to set up shop somewhere.

      Project HERE.

      {{ DiscussionBoard.errors[6425159].message }}
  • Profile picture of the author anthm
    thanks for all the replies. I am a fan of Peter Schiff, I voted for him when he ran for the Senate here, I knew he was a long shot but I wanted to give him some votes.
    I too think the trouble is not over, but I was looking for ideas to start building passive income even if I didn't see the return for years. However I am not sure I have the money to take the risk, my own house that I bought 8 years ago with a large down payment and paid into with a standard mortgage is even now "under water" so I agree that I may be too over leveraged even if I have been saving a lot of cash. But I think it is something to think about and keep in mind in the coming years, in case something comes along and the time is better. Thanks again for all the info.
    {{ DiscussionBoard.errors[6437750].message }}

Trending Topics