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Unread 2015-05-19, 06:33 PM   #51
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Interesting responses. I am going to have my first rental this summer that will have been my previous primary residence. My rent will be about 50% more than my monthly payment that includes after taxes, insurance, etc (typical mortgage). Our home is in a quiet block with high end finishes which justifies the rent price. We have already been contacted about potential renters at that rate and our home is 2 months out from renting. The first two yrs will be used to build a significant nest egg for maintenance repairs and the future yrs will be invested diversely.

I am amazed by the poor renters being so common and wonder how much goes into the amount of effort to locate a tenant properly. Are you guys not requiring background checks on you applicants (paid by potential renter) and references? I am lucky to have a family member who is the operations director at a large property management company on my side to provide a strong lease. Our tenant will be required to carry renters insurance, no smoking, pet restrictions, follow HOA and many other things.

A simple way to check on your property condition is to give them the 24 hr notice and come change the furnace filter. It gives you a chance to do a walkthrough in most homes.

IMO I dont think it's necessary to pay in full with cash. You can use that money in the market for many other ways. You can also think of a rental not just as monthly income but if you buy right essentially they are paying off an asset for you. Anything above the mortgage is great but long term someone else is paying all of that interest and principle for you. Even if you don't make it to pay off you are going to build equity based on appreciation and them paying the principle.
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Unread 2015-05-19, 07:08 PM   #52
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Interesting responses. I am going to have my first rental this summer that will have been my previous primary residence. My rent will be about 50% more than my monthly payment that includes after taxes, insurance, etc (typical mortgage). Our home is in a quiet block with high end finishes which justifies the rent price. We have already been contacted about potential renters at that rate and our home is 2 months out from renting. The first two yrs will be used to build a significant nest egg for maintenance repairs and the future yrs will be invested diversely.

I am amazed by the poor renters being so common and wonder how much goes into the amount of effort to locate a tenant properly. Are you guys not requiring background checks on you applicants (paid by potential renter) and references? I am lucky to have a family member who is the operations director at a large property management company on my side to provide a strong lease. Our tenant will be required to carry renters insurance, no smoking, pet restrictions, follow HOA and many other things.

A simple way to check on your property condition is to give them the 24 hr notice and come change the furnace filter. It gives you a chance to do a walkthrough in most homes.

IMO I dont think it's necessary to pay in full with cash. You can use that money in the market for many other ways. You can also think of a rental not just as monthly income but if you buy right essentially they are paying off an asset for you. Anything above the mortgage is great but long term someone else is paying all of that interest and principle for you. Even if you don't make it to pay off you are going to build equity based on appreciation and them paying the principle.
Finding a good tenant is a lot harder than you might think. It also depends on the range of rent you are looking to get. It sounds like you are going to just be dealing with someone who is of a higher tier than most that rent. But nothing is perfect. For some owners, it doesn't pay to let a property sit for 6 months to find the "perfect tenant". But that also depends on what you're looking at in the opportunity cost of letting it sit. Obviously the lower your nut, the better spot you're in.
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Unread 2015-05-19, 08:20 PM   #53
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I am very familiar with the possible problems locating but we have quite a few rentals on both sides of the family. I was just curious if people are doing the due diligence... the minimum things like background/credit checks and references. It seems that most of these problems occur when people bypass the standard application steps and don't have a tight lease. We have our horror stories as well and can/will happen to anyone.

Renting a higher end home in Lawrence won't be an issue finding a tenant. Look at what's on the market here and you will see prices are high for junk
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Unread 2015-05-20, 12:49 AM   #54
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Lawrence doesn't often have deals that makes investors jump. I looked for a few years for properties that could meet my 2% requirement. (vs 1% rule) Nothing worth while presented itself so I looked elsewhere and found the project above.

To your question above I used a real estate agent to find my tenants. They did all the background and credit checks.
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Unread 2015-05-20, 08:50 AM   #55
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Right on. I just don't want to pay them that big of a % especially with the property mgmt history in our family. I am lucky to be in this position.

We have many guys on the dept that rent in the collegiate area and make a killing on small houses. My area is far more family driven and will generate a different type of tenant for sure.

I haven't looked too much personally at rental properties here but my realtor has sold more than a few this year to investors. I think there is a market here but maybe just doesn't fit the model you are following.
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Unread 2015-05-20, 10:57 AM   #56
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Where are you guys looking for properties at and what requirements are you looking for?
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Unread 2015-06-23, 04:01 PM   #57
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I gave renter some cash off his rent if he painted some siding. I gave him seafoam green paint thinking it would look pretty funny/rediculous, I wasn't wrong:

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Unread 2015-11-02, 11:41 PM   #58
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Unread 2016-01-11, 09:14 AM   #59
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I decided the best thing for me to do as a long term investment would be to put 25% down on four rental houses, each on a 15 year note. In scenario one (paying cash) I would have one house owned free and clear that likely appreciated about 2% per year or so. If I used the same $150K in cash for my four 25% down payments with debt, in 15 years I would own FOUR houses free and clear, each appreciating at the same 2%.



Bottom line is this:



Scenario 1 - In Year 16 I own one house worth approximately $201,880, but more annual income



Scenario 2 - In Year 16 I own four houses free and clear worth approximately $807,521

Man, that would scare me being 600k in debt. I know it's an investment, but it's still terrifying having that huge of a number sitting over my head.

What would you do with the 4 houses in 15 years? Dump them for cash and invest? Or enjoy the additional $4k+ additional income a month?
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Unread 2016-01-11, 09:50 AM   #60
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Man, that would scare me being 600k in debt. I know it's an investment, but it's still terrifying having that huge of a number sitting over my head.

What would you do with the 4 houses in 15 years? Dump them for cash and invest? Or enjoy the additional $4k+ additional income a month?
I would probably sell them, unless they were easy to rent and maintain. However, the more I have thought about being a landlord, the less I think I will get involved. Plus, there are SO MANY people who have been doing this for years, it is really hard to find the right property at the right price.
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Unread 2016-01-11, 10:01 AM   #61
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Man, that would scare me being 600k in debt. I know it's an investment, but it's still terrifying having that huge of a number sitting over my head.

What would you do with the 4 houses in 15 years? Dump them for cash and invest? Or enjoy the additional $4k+ additional income a month?
Most people I see doing this, are typically in an income bracket where they are stable enough to sustain the $600k payment each month without issue, as long as they are at least 50% full.

On what to do with them once paid off is more of a personal preference. Do you want the cash? Or are you ok managing the properties through your retirement.
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Unread 2016-01-11, 10:22 AM   #62
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I would probably sell them, unless they were easy to rent and maintain. However, the more I have thought about being a landlord, the less I think I will get involved. Plus, there are SO MANY people who have been doing this for years, it is really hard to find the right property at the right price.
From my little time doing it I noticed that the professionals that do it full time almost always pickup the properties before a formal sale or are the first to pickup the best deals.

They pick up the properties that are 30% ROI and leave the 20% ROI properties for others.
I'm perfectly happy with that.

I will say that the risk level I am comfortable with is that if any of the properties go south I can always pay them off with cash.

Going into debt for more cash that you have on hand is a recipe for disaster.
All too often this happens where an investor gets into trouble for trying to move too fast and reaching for more. They then have to unload their properties and fire sale prices to get a hold of cash.
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Unread 2016-01-11, 10:30 AM   #63
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I am wondering who here owns 1 or more rental houses.

I am looking at getting into it with a town home and had some questions.
Currently own a home that is under a Lease to Own contract.
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Unread 2016-01-11, 10:40 AM   #64
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From my little time doing it I noticed that the professionals that do it full time almost always pickup the properties before a formal sale or are the first to pickup the best deals.

They pick up the properties that are 30% ROI and leave the 20% ROI properties for others.
I'm perfectly happy with that.

I will say that the risk level I am comfortable with is that if any of the properties go south I can always pay them off with cash.

Going into debt for more cash that you have on hand is a recipe for disaster.
All too often this happens where an investor gets into trouble for trying to move too fast and reaching for more. They then have to unload their properties and fire sale prices to get a hold of cash.
In my scenario, with 25% down on each house, I will only owe $112,500 on a $150K house, so liquidating shouldn't be an issue.

On the debt side of things, the loans/payments wouldn't be a concern. The only reason l would get a loan is for the use of leverage, which would offset some risk, and allow for a higher ROI.

At the end of the day, this was all just how I would do things. I have since decided not to go down this path.
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Unread 2016-01-11, 11:35 AM   #65
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Any particular reason why?

My wife and I are on a 5 year plan to pay off our house and be 100% debt free. That would put us at 30 years old with a paid for house worth about 80k. There have been several foreclosed homes in our neighborhood that went insanely cheap (like 20-25k). My inlaws have enough money to loan us cash to buy a couple of houses to buy, fix, and rent. My thought is that we could have 3 additional houses paid for worth 50-70k each and have my inlaws paid back from renting them for 5 years. So then at 30 years old we own 4 homes collectively worth about 250k, and we could dump them all then or just keep buying properties as they would generate about 25k (between the three rentals) in income every year. Slowly buy the whole neighborhood, so not only do we have the ability to control our rentals, we have the ability to control the scope of the neighborhood.

Reading freek's story does worry me, as I know we would be renting to people who couldn't afford a "nice" house. I liked the furnace filter idea. Check on each house every two months for the cost of a few filters is fine with me.
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Unread 2016-01-11, 12:29 PM   #66
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Any particular reason why?

My wife and I are on a 5 year plan to pay off our house and be 100% debt free. That would put us at 30 years old with a paid for house worth about 80k. There have been several foreclosed homes in our neighborhood that went insanely cheap (like 20-25k). My inlaws have enough money to loan us cash to buy a couple of houses to buy, fix, and rent. My thought is that we could have 3 additional houses paid for worth 50-70k each and have my inlaws paid back from renting them for 5 years. So then at 30 years old we own 4 homes collectively worth about 250k, and we could dump them all then or just keep buying properties as they would generate about 25k (between the three rentals) in income every year. Slowly buy the whole neighborhood, so not only do we have the ability to control our rentals, we have the ability to control the scope of the neighborhood.

Reading freek's story does worry me, as I know we would be renting to people who couldn't afford a "nice" house. I liked the furnace filter idea. Check on each house every two months for the cost of a few filters is fine with me.
If this is aimed towards me, I would say its just our personal situation (time, dealing with tenants, and our overall direction of our long term financial plan).

I wouldn't advise you against your plan at all. I am all about being debt free/no debt so if I were you I would make sure you get your house paid for first (or at least stay on that plan) and rentals should be secondary. However, if the deal are there then there is no better time than the present! If you are able to borrow cash, and not have a ton more debt, I feel pretty good about your plan. Plus, even if you do have some debt (paying off the in-laws) if you are in an equitable position in the houses you buy, the house is still a positive asset due to the equity.

I am 99.9% against debt....I hate it and I don't ever want it. However, if debt can be used as leverage to increase your ROI, or if it is absolutely necessary to get into an investment/home, then as long as you aren't getting carried away, it can be a useful.

At your age, you have plenty of time. The sooner you start, the better off you will be in the long run!
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Unread 2016-01-11, 12:31 PM   #67
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Any particular reason why?

My wife and I are on a 5 year plan to pay off our house and be 100% debt free. That would put us at 30 years old with a paid for house worth about 80k. There have been several foreclosed homes in our neighborhood that went insanely cheap (like 20-25k). My inlaws have enough money to loan us cash to buy a couple of houses to buy, fix, and rent. My thought is that we could have 3 additional houses paid for worth 50-70k each and have my inlaws paid back from renting them for 5 years. So then at 30 years old we own 4 homes collectively worth about 250k, and we could dump them all then or just keep buying properties as they would generate about 25k (between the three rentals) in income every year. Slowly buy the whole neighborhood, so not only do we have the ability to control our rentals, we have the ability to control the scope of the neighborhood.

Reading freek's story does worry me, as I know we would be renting to people who couldn't afford a "nice" house. I liked the furnace filter idea. Check on each house every two months for the cost of a few filters is fine with me.
On a side note, are you still with P1?
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Unread 2016-01-11, 12:35 PM   #68
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On a side note, are you still with P1?

I sure am. Working construction is what got me thinking about investment properties and being able to fix houses.

I'm having a hell of a good time plumbing. Never thought I'd say that. Lol
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Unread 2016-01-11, 12:44 PM   #69
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I sure am. Working construction is what got me thinking about investment properties and being able to fix houses.

I'm having a hell of a good time plumbing. Never thought I'd say that. Lol
Awesome, I am glad it worked out!
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Unread 2016-01-11, 12:55 PM   #70
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It's almost comical when people ask me who I know that's a plumber or what relatives I have in local 8. When I say I'm the only one they have to pick their jaw up off the floor. You helped me get an opportunity that will change my family tree, and I cannot thank you enough.
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Unread 2016-01-11, 12:58 PM   #71
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It's almost comical when people ask me who I know that's a plumber or what relatives I have in local 8. When I say I'm the only one they have to pick their jaw up off the floor. You helped me get an opportunity that will change my family tree, and I cannot thank you enough.
Not a problem at all, I am just glad I was able to help out

I am SOOOOOOOOOOO happy it worked out for you.
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Unread 2016-01-11, 11:30 PM   #72
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I am 99.9% against debt....I hate it and I don't ever want it. However, if debt can be used as leverage to increase your ROI, or if it is absolutely necessary to get into an investment/home, then as long as you aren't getting carried away, it can be a useful.

At your age, you have plenty of time. The sooner you start, the better off you will be in the long run!
I like your conservative approach and not wanting to extend very far.
Definitely sense some wisdom in your approach.
Do you mind me asking your age?
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Unread 2016-01-12, 10:46 AM   #73
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I like your conservative approach and not wanting to extend very far.
Definitely sense some wisdom in your approach.
Do you mind me asking your age?
37....I am getting old

I was once told "if you can finance it you can afford it" and I lived by that from about 18-25. I quickly learned that is NOT the right way to do things (I was so upside down in a new Vette I bought I had to borrow money to get out from under that loan). I am pretty darned conservative now. We decided to go with a no debt approach, and we have planned pretty well for the future. I've learned that a good nights sleep, and not stressing about finances is far more valuable than a Lambo sitting in the garage.
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Unread 2016-01-12, 11:05 AM   #74
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^^^ this is my train of thought with borrowing money from my inlaws. It could totally backfire, and then my wife would be incredibly upset, even though they probably wouldn't care very much. It would be a lot less stressful to just max Roth's and toss everything else we can into a mutual fund for a few years, then maybe dabble in stocks a little bit to try and hit big quick. No mortgage will free up so much money to invest, the compound interest just gets silly.

And I'm not even taking into account how much we will likely inherit from her parents, who are worth seven figures I would guess.
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Unread 2016-01-12, 11:34 AM   #75
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It all depends on long-term strategy.

I'm actually trying to plan for the day that my position is obsolete, due to advancing technology, which will very likely happen in the next 15 years or so. My goal is to at least have 4-5 rentals generating income. IF I am knocked out of the workforce, at least I could begin to spend time managing the properties and doing the upkeep. Insurance will fall under my ol lady forever, so luckily I shouldn't have to worry about that.
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