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Old 07-18-2016, 02:10 PM
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Default How do I start investing in real estate?

For those that are doing it successfully, is there a goto book or website I can start learning how to do it right? We are thinking about taking the first step with a vacation home somewhere. Is that a good first step? Or should I dive right in with full time rentals? Appreciate your help. Tom
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Old 07-18-2016, 02:44 PM
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Tom

My only attempt at buying a vacation rental did not go through. It was during the real estate bubble and the property didn't appraise high enough.

So I am not one that is doing it successfully to give you any advice. However, I can give you a resource that I found quite beneficial. Articles, books, podcasts and most importantly a forum to ask questions and potentially make contacts.

There are added features for members that upgrade to a premium account, but I only had a FREE account and found a lot of useful information and got some good advice.

https://www.biggerpockets.com/
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Old 07-18-2016, 02:47 PM
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Is it a single family home or more of a condo? Also...where would your vacation home be?

I dont know jack about buying rentals but being someone who travels I use vrbo a lot when traveling. We almost always rent a condo/townhouse wherever we go.

I know places like hawaii have a lot of rentals on vrbo. I booked places on the big island and kauai earlier this year for october travel...and a lot of weeks were already booked up. Again I have no idea where your vacation home would be but a place like hawaii has travelers round year due to the warm weather. If you want to buy at a ski resort in CO then you may only be looking at 4 months of time that you can rent your home. I guess thats just something else to consider...the amount of rental traffic your place can generate due to seasons.
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Old 07-18-2016, 03:08 PM
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Quote:
Originally Posted by rennigade View Post
Is it a single family home or more of a condo? Also...where would your vacation home be?

<snip>
Don't know yet. My wife and I are discussing where we want to retire and haven't figured that out yet. If we do, maybe we could buy something there as a retirement home and rent it for the next 10 years. Seems like a gamble, but if we bought the right home, maybe we could change our minds and just keep renting it. I'm really clueless on all this.
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Old 07-18-2016, 08:16 PM
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Don't know yet. My wife and I are discussing where we want to retire and haven't figured that out yet. If we do, maybe we could buy something there as a retirement home and rent it for the next 10 years. Seems like a gamble, but if we bought the right home, maybe we could change our minds and just keep renting it. I'm really clueless on all this.
That was basically the approach we were taking. We weren't looking to purchase our future retirement home, but we were looking to build equity in the area we talked about retiring. The plan was to buy the vacation rental and upon retirement use that equity along with the equity in our primary residence to purchase something we would want to live in.

Two reasons we weren't looking for our future retirement home. 1. We couldn't afford what we would want to live in. 2. It would be easier to treat it as a business if we weren't worrying about people trashing our future residence.

I can tell you the ROI wasn't going to be nearly as strong as a traditional rental property would be in our own area. Even with prices down at the time, the annual rental income wasn't fantastic due to the estimated vacancy rate.
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Old 07-18-2016, 10:49 PM
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i have read the millionaire real estate investor, a very good read for the aspiring real estate investor
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Old 07-19-2016, 12:37 AM
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Quote:
Originally Posted by tomhole View Post
For those that are doing it successfully, is there a goto book or website I can start learning how to do it right? We are thinking about taking the first step with a vacation home somewhere. Is that a good first step? Or should I dive right in with full time rentals? Appreciate your help. Tom
I'm not sure about successfully, as our returns were pretty low (we didn't have to worry about cash flow since we don't carry mortgages on any except 1).

As for vacation/2nd home vs full time rental, the full time rental is a lot easier to deal with. For one thing, you've got long term tenants using their own furniture and making/cleaning up their own mess.

Just remember this: there are different types of rentals, which attracts different types of tenants. If you want professionals who always pay on time, get the more expensive houses (e.g. sometime you'd live in personally). Oh, and always include landscaping into the rents.

No matter how good the tenants (good tenants = pay on time, don't bother you); there's always things that seem to break much quicker. Sometimes, I think "oh heck, it's like I'm working for the tenants because my paycheck is covering repairs on their houses).

Rental (even with management) isn't what I'd call truely passive income. Maybe with good management, but from my experience, I'd rather not purposely go into that business. (Our rentals have been houses that we used to live in and couldn't sell when we moved out; except 2008 when we picked up a few purposeful rentals, which was really non-passive income because of the bother they created).
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Old 07-19-2016, 12:53 AM
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Don't know yet. My wife and I are discussing where we want to retire and haven't figured that out yet. If we do, maybe we could buy something there as a retirement home and rent it for the next 10 years. Seems like a gamble, but if we bought the right home, maybe we could change our minds and just keep renting it. I'm really clueless on all this.
We did this for a few years; we planned to keep 2 homes after retirement (due to the locations/weather). Turns out we can't use the 2 homes due to kid in school, so we rented one out. Renting give your problems/headaches generally associated with rentals, so we sold the place (I didn't really like the location). If we ever do it again, we'll probably just keep the other house empty.
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Old 07-19-2016, 02:49 AM
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There are a couple ways. A lot of successful investors I know started very small. Purchase a tiny/small place, fix it up, take the equity you've built up and then turn that into the next deal. People always want to start big, but work your way into it with progressively bigger deals. You don't need to hit a home run, but keep winning a little on each deal and it will add up. There's more room for error in small deals too. There's definitely a learning curve with investing.

Find a motivated seller, save up cash to pay for a down payment on a small property, and buy for 25-30% less that market value. Read as much as you can and look at real estate listings everyday to learn your market.
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Old 07-19-2016, 04:13 AM
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Pretty good advice by clatoden99.

Probably the easiest thing to get started in would be a single family or duplex residential rental. Something close to where you live will be easiest to manage, and having some skills to take care of some of the basic maintenance repair type stuff would be a huge plus. If not, you need good relationships with some reliable contractors.

Also, get a nice enough place where the rent is high enough to keep the riff raff out.
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Old 07-19-2016, 06:46 AM
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Originally Posted by clatoden99 View Post

Find a motivated seller, save up cash to pay for a down payment on a small property, and buy for 25-30% less that market value. Read as much as you can and look at real estate listings everyday to learn your market.
Just want to add (clarify) to this so there is no confusion for Tom.

You want to look at the listings (and closings) to get an idea of what people are asking & receiving for properties in the market you want to invest. As well as what properties rent for.

However, you won't typically find 25-30% below market properties among the listings. Those properties rarely hit the MLS. Investors seeking out below market properties will buy mailing lists and bulk mail letters to homeowners in bad situations. They also will plaster "We Buy Houses" on telephone poles in the areas they are interested in.

Whatever area you are looking to invest in, chances are there are dozens if not hundreds of investors working that area trying to uncover deals.

Last edited by DaveInPgh; 07-19-2016 at 06:47 AM. Reason: ETA comment about rentals
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Old 07-19-2016, 10:35 AM
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Originally Posted by tomhole View Post
For those that are doing it successfully, is there a goto book or website I can start learning how to do it right? We are thinking about taking the first step with a vacation home somewhere. Is that a good first step? Or should I dive right in with full time rentals? Appreciate your help. Tom
To what areas of the country do you enjoy traveling ?
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Old 07-19-2016, 10:39 AM
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Originally Posted by tomhole View Post
Don't know yet. My wife and I are discussing where we want to retire and haven't figured that out yet. If we do, maybe we could buy something there as a retirement home and rent it for the next 10 years. Seems like a gamble, but if we bought the right home, maybe we could change our minds and just keep renting it. I'm really clueless on all this.
Actually an excellent, conservative strategy. Let renters pay for your retirement home.
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Old 07-19-2016, 10:40 AM
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Originally Posted by DaveInPgh View Post
Just want to add (clarify) to this so there is no confusion for Tom.

You want to look at the listings (and closings) to get an idea of what people are asking & receiving for properties in the market you want to invest. As well as what properties rent for.

However, you won't typically find 25-30% below market properties among the listings. Those properties rarely hit the MLS. Investors seeking out below market properties will buy mailing lists and bulk mail letters to homeowners in bad situations. They also will plaster "We Buy Houses" on telephone poles in the areas they are interested in.

Whatever area you are looking to invest in, chances are there are dozens if not hundreds of investors working that area trying to uncover deals.
I've bought homes above appraisal that yielded 13-14%.

"Market value" might or might not have any correlation to the income yield. When looking to buy a vacation rental, you are looking for yield.
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Old 07-19-2016, 10:54 AM
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Originally Posted by TexasHusker View Post
I've bought homes above appraisal that yielded 13-14%.

"Market value" might or might not have any correlation to the income yield. When looking to buy a vacation rental, you are looking for yield.
That particular quote was speaking to the suggestion of looking for below market value properties and fixing them up. Not a vacation rental scenario.
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Old 07-20-2016, 06:03 AM
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I have a co-worker who is very successful in buying up properties around our university and renting them out to female students. We are about to partner up and pay him the management fee, while he produces us a return.

I have just invested into peerstreet, a crowdfunding way to invest into fixer upper houses. I have also signed up for the waitinglist at fundrise, which is direct REIT investing.

I frankly can care less about buying my own house and managing it. Done it before with only one house and it sucked. Too many people coming and leaving..not staying their full lease and etc.
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Old 07-20-2016, 09:57 AM
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what rental rate of return are you getting singuy?
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Old 07-20-2016, 07:08 PM
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what rental rate of return are you getting singuy?
Are you asking about my friend? He will produce about 18% rate of return after management fees. This includes equity of the houses we purchase PLUS extra profit left over. Renting to students=renting separate rooms so it is definitely more profitable than to rent to single families. Also with student loan money, defaulting on rent is extremely rare(never once for the past 4 years, renting to 70 plus different students now).

As for peerstreet, I am expecting a 8-10% rate of return.

Direct Reit investing, I should expect a 10-12% rate of return after fees (currently on the waitlist for approval).
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Old 07-22-2016, 09:57 PM
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How much are the houses you are buying Singuy? What's the rent on those houses?

I think Rachel the woman doing 5 years retirement bought her rentals off market with a realtor's help and private financing from the selling landlords. Very risky and very cool.

I'm curious tom if you do get into it please post details. I'd love to follow along for the ride.
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Old 07-23-2016, 04:04 AM
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SO far, no progress. I talked to my wife and she wasn't big on the idea of buying a vacation home and renting it out. She wouldn't mind buying one and just using it for ourselves. She's very tidy and particular, and I understand that. So any vacation home would be a buy and hold.

She wasn't averse to becoming a landlord, which surprised me. We will be empty nesters this fall and she has always beed a stay at home mom. Spent 100% of her time volunteering for the school and kid's activities. Now she is looking for something to keep her excited. She thought this might fit the bill. So it's still on the table.

Tom
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