Real Estate Investing

[kv968]

Here's a little article for all you out there looking to cash in on flipping some real estate due to the defaulting mortgages out there. Not as easy as it sounds:

Profit from the foreclosure boom

[jIM_Ohio]

Flipping RE is different, IMO than renting RE (as an investment).

Flipping is an occupation. You need to spend time rehabbing, selling and purchasing the land. I guess it's an investment for people... but not my thing.

Renting is something I am looking into and part of a longer term financial plan.

[crabbypatty]

My DH wants to do a flip, I want rentals. Passive income is what I'm after. I agree that a flip is a full time job, not something you do in the evenings or on the weekends. Plus he would renovate it to his standards, not just sufficient upgrades to make a profit.

A few years ago I knew the perfect neighborhood for rentals. But DH has the financial backing, not me (family money). He didn't want to do it then and now the location is priced at least double.

[Scanner]

In my state of NJ, they do tax lien sales. . .more my cup of tea - locking in an interest rate of 18% vs. trying to bid on a house that you can't even see.

[jIM_Ohio]

I have a Real estate plan... much short of a "business model", which I am starting to set aside money more.

Involves renting out townhomes/condos in our area.

Plan involves a group of ~5 people working together

a) 1 realtor to find properties/ know how much something is worth
b) 1 real estate attorney to handle lease agreements
c) 1-2 handyman for electric, plumbing, hvac work
d) 1-2 others which could do grunt work (painting, assist handyman, interview tenants, collect rent, other)

I am d)... I know how to make money and turn a profit with the best of them... but I realize I need help. If furnace went out, I'd have to hire someone to do this...

We could buy 1-3BR condos in area for ~$100,000 and I think we could rent a 2 BR for ~$900. The P&I is ~$660/mo. I THINK we could pay taxes and the people involved each month with remaining $240.

Assuming this group handled 3-7 properties, I think this would become quite profitable. ASSUMING there is demand to rent (there are not many apartments in our area). Schools are good, though... so that might be an appealing factor.

This would require a $25000 initial investment for property 1 (20% down), then we could leverage the first property for cash to acquire others.

Curious what numbers look like for others when playing landlord?

[crabbypatty]

Granted I am not curently doing this myself but it seems to me as though you have too many people on the payroll.

My parents have been landlords for many years. They do all of the jobs you listed with the exception of some major repairs like HVAC.

[LuxLiving]

jIM, does the little squiggle ~ line in your posts mean an estimated figure? Just curious.

[jIM_Ohio]

Originally Posted by crabbypatty

Granted I am not curently doing this myself but it seems to me as though you have too many people on the payroll.

My parents have been landlords for many years. They do all of the jobs you listed with the exception of some major repairs like HVAC.

I know I want the income... and have the resource to make the investment. But I cannot do all those repairs.

If we buy a condo, I can get on my hands and knees and clean. Not afraid of sweating or working... but if electric or plumbing needed fixing, I'd like to have a partner which can do this.

I can paint, hammer, do light fixtures... and other simple work. But I know my limitations.

[jIM_Ohio]

Originally Posted by LuxLiving

jIM, does the little squiggle ~ line in your posts mean an estimated figure? Just curious.

~usually~

[LuxLiving]

REITs and tax lien certificates = no sweat involved.

[jIM_Ohio]

The tax advantages of renting are appealing, and those advantages do not come from REITs.

[PennyPincher]

I can add my two cents on this one...

I have two rental properties. It just happened...it wasn't part of a business plan. When I was ready to move out of my first place after just 10 months, I decided to see if I could qualify for a loan without selling my old place...and rent it out. The monthly costs were $1200 - including EVERYTHING, and I was confident I could rent it out for $1500. So...I did! Of course...you need to be prepared for vacancy time...and have a solid lease. Unfortunately, my original loan was an ARM because I didn't think I would hold onto it, but I've survived the adjustment, and am still able to clear $295/month.

JIM - It really seems that you have too many hands in that pot. Would this group of people be splitting the profit? In my opinion, there is simply not enough income to go around...and then you could potentially lose the impact of the tax write-offs if they are shared as well. I am a 31-year old female...who is NOT a "handyman". However...my fiancee is good with stuff around the house, and I just decided that I would hire someone as needed. When I needed to replace the garage door opener, I found someone to do it for $100. It was much more worth it to me than sharing my monthly profit over and over.

My second rental does not actually earn a profit each month. It is a townhouse with 3 bedrooms - very nice, and only 3 years old. However, it wasn't cheap. So...even renting it out at $1575/month doesn't quite cover EVERYTHING. However...$400/month is paid toward the principal of the loan every month, and I earn the benefits from a tax perspective. The housing market had cooled in my area, and I didn't think I'd get much if I sold...so I rented instead. It was RISKY...I had both places vacant at the same time, but I was blessed. I made flyers, advertised, and had an angel looking over me.

I did not hire an attorney to draft lease documents either. There are so many good resources out there - at the libraries and online. I created a lease myself. There is a great landlord site that I've used for advice...it's Welcome to MR LANDLORD for free rental forms, management software, real estate books and landlord advice to better manage and lease rental property.. Check it out for ideas and support...

Also, my rental properties are part of condo associations. The monthly fees stink, but exterior maintenance is not an issue. Potential tenants also love the fact that there is a pool and small fitness facility in the clubhouse. For me, I wouldn't want to purchase a property that is too old and possibly in need of major repairs.

Right now I don't feel like I'm building a real estate empire because my money is all tied up. This is now part of a long-term plan. As long as possible, I'd like to manage them myself.

However - if you feel that you need someone to help you, you may want to consider a mangement company. They often charge 10% of the rent for their services, but they handle advertising, leases, retning, etc. It is an expense that can be written off, and it may be better than sharing the income with partners... Just a thought.

[jIM_Ohio]

Originally Posted by PennyPincher

I can add my two cents on this one...

I have two rental properties. It just happened...it wasn't part of a business plan. When I was ready to move out of my first place after just 10 months, I decided to see if I could qualify for a loan without selling my old place...and rent it out. The monthly costs were $1200 - including EVERYTHING, and I was confident I could rent it out for $1500. So...I did! Of course...you need to be prepared for vacancy time...and have a solid lease. Unfortunately, my original loan was an ARM because I didn't think I would hold onto it, but I've survived the adjustment, and am still able to clear $295/month.

JIM - It really seems that you have too many hands in that pot. Would this group of people be splitting the profit? In my opinion, there is simply not enough income to go around...and then you could potentially lose the impact of the tax write-offs if they are shared as well. I am a 31-year old female...who is NOT a "handyman". However...my fiancee is good with stuff around the house, and I just decided that I would hire someone as needed. When I needed to replace the garage door opener, I found someone to do it for $100. It was much more worth it to me than sharing my monthly profit over and over.

My second rental does not actually earn a profit each month. It is a townhouse with 3 bedrooms - very nice, and only 3 years old. However, it wasn't cheap. So...even renting it out at $1575/month doesn't quite cover EVERYTHING. However...$400/month is paid toward the principal of the loan every month, and I earn the benefits from a tax perspective. The housing market had cooled in my area, and I didn't think I'd get much if I sold...so I rented instead. It was RISKY...I had both places vacant at the same time, but I was blessed. I made flyers, advertised, and had an angel looking over me.

I did not hire an attorney to draft lease documents either. There are so many good resources out there - at the libraries and online. I created a lease myself. There is a great landlord site that I've used for advice...it's Welcome to MR LANDLORD for free rental forms, management software, real estate books and landlord advice to better manage and lease rental property.. Check it out for ideas and support...

Also, my rental properties are part of condo associations. The monthly fees stink, but exterior maintenance is not an issue. Potential tenants also love the fact that there is a pool and small fitness facility in the clubhouse. For me, I wouldn't want to purchase a property that is too old and possibly in need of major repairs.

Right now I don't feel like I'm building a real estate empire because my money is all tied up. This is now part of a long-term plan. As long as possible, I'd like to manage them myself.

However - if you feel that you need someone to help you, you may want to consider a mangement company. They often charge 10% of the rent for their services, but they handle advertising, leases, retning, etc. It is an expense that can be written off, and it may be better than sharing the income with partners... Just a thought.

thank you