turbo_pwr

I currently own 3 properties. 1 in NYC and 2 in AZ that are rented out and I guess I am lucky because in the 10 years doing this I haven't had any shitty tenants that have trashed the places. The one in NYC pays for the mortgage with a little pocket change left over that goes toward maintenance and repairs. But I'll be done paying that off in another 5 years at this rate and it has appreciated nearly 3 fold from when I purchased it in 1994. I'm actually looking to get a couple of more in AZ where housing market is picking up and you can get nearly new homes (less then 10 years) in the 100 to 150k range (due to supply) and rent is going at $800 to $1000 a month depending on location and if it has a pool. These same homes were in the $250 to $300k range at the peak. I did flip a property a couple months ago that was trashed. We bought for $65k went in and fixed up all the holes, new carpets, etc and was able to get in and out in 45 days with a $20k net.

Scot

i think the general rule for minimum rent is 1% of the purchase price unless you are relying on appreciation.... ghetto of harrisburg for me is pushing 3%... i think i averaged between $15-$25k for my shit houses and they generally rent for $700...

I am actually in the process of getting rid of what i thought was a quick $10k which turned into about a $5k loss since there are no buyers. my city is in bankruptcy... so the house i am selling for $45k 3 years ago would have sold for $80k... doh...

goodluck to all involved in real estate... i will most like start again once I move from the rust belt of central pa..

thelemur

Didn't read all the posts, if you need help PM me.

Be careful trusting a partner to manage. Management is the 2nd hardest part. Buying right is the hardest.

Keep your fixed expenses (usually just your PITI, but may include HOA and water in some situation) to at least HALF of your market rent. You must follow this rule, unless you have a very large and stable W2 income. Do a good job estimating rents, don't wing it, check craigslist, property managers, other signs on similar houses, be CONSERVATIVE and set rent slightly low to minimize vacancy and expensive turnover costs.

Subtract a loss of at least 10% of your gross rent per year for vacancy. Estimate at least 10% of your gross rent to maintenance every month. Keep 6 months fixed expenses in the bank because when you have tenant turnover you'll need it.

Join your Reia if you plan to survive at this.

EDIT: Never buy for appreciation, unless you are getting cash flow. Cash flow is king. Cash flow is king. Cash flow is........

clarkster009

I found a lot of informative information (hmm, that's redundant) other than the above post . This is something I am looking to get into. Does everyone who has done it pay the 20% up front to avoid the extra PMI expense? Is there any place to search for entire duplexes, condos, apartment buildings, and other commercial property for sale, rather than individual units? Are they also on the MLS?

thelemur

Yeah, mostly useless information I provided.. Best of luck to you.

Will

Clarkster009... 20% down is traditionally required for NOO (non-owner-occupied) properties. 25-30% down is traditionally required for multi-unit properties. These properties are searchable on MLS. PMI will only be paid on owner-occupied properties because that is really the only time you'll be able to make a downpayment of less than 20%.

Also, the post above yours had 100% relevant info. Not really sure what you were talking about...

clarkster009

Sorry lemur, I meant "above" as in the post that I had quoted..the one about investing in stock. Yours was helpful.

Thanks Will, that's what I figured, unfortunately. I am working on some other ways to increase my income so I can get some investment capital..I know it isn't going to happen working 9-5 for the man.

Are you guys creating an LLC and purchasing in it's name, rather than your own name?

clarkster009

And I agree shouldn't buy for appreciation, but since the market is relatively deflated, at least there is less risk of depreciating property value.

Lemur, are you a fan of Rich Dad, Poor Dad? Just wondering, judging by your mantra..

thelemur

I think Kiyosaki is a good starting point for someone just getting going, but I wouldn't spend more then a few hundred bucks on his materials. It's good to get you into the self-employed/investor mentallity if you've not been exposed to much of it. For more specific strategy I would get courses from people like Lou Brown, Ron Legrand, etc.. They teach a lot about creative financing, rather than bank financing. If you've got bank financing ability you may want to use it, but eventually you'll have a hard time getting more loans unless you start going with cross collateralized commercial loans with 5 year balloons. With owner financing the sky is the limit. I have enough property to support me without a job, and I have no bank financing.

clarkster009

Thanks, I will have to check them out! I am 30 now and have been "working for the man" for 9 years and am getting tired of it. I cannot imagine another 35 years, so I am looking for ways to increase my financial education and knowledge. I listened to his "Conspiracy of the Rich" book and it was eye-opening. I was raised in a conservative mentality of "No debt, save your money, and invest in a well diversified portfolio."

If I may ask, what is a good starting point for someone wanting to get into investment property? When you have owner financing, do you still get > 80% of the property financed, or do you build a partnership? Do you present a business case/proposal and do the research and get a percentage of the income?


Do you use property management companies for all your properties?