Real Estate Investing

[jmjj215]

Is anyone here an active real estate investor? My long-term financial plans include real estate as an investment option. I'd like to know if there're some forum members out there who have taken this road, and what your experiences have been?

Right now (since I'm still in school full-time), we're just saving as much as we can towards our own house down payment. But I can see in maybe 5 years that I'll want to start making a move towards picking up an investment property. My plan is to only carry one mortgage at a time - i.e. low risk.

[34saving]

Well, I don't know if I'd consider myself "active", but instead of selling our last house we decided to rent it out (actually a lease-option). I've been a landlord for about a year and a half now. The best part of this plan is that if you live in a house for at least 2 of the last 5 years capital gains are excluded from your taxes when you sell. There are also lots of tax advantages while you're doing it. We had our first house paid off when we decided to buy a new one, so we only have one mortgage. So far it's been a profitable experience (I guess we won't really know until we sell). Our tenants have all been very nice people who generally pay on time, but we have had a few minor "don't know how to take care of a home" issues.

[jmjj215]

Thanks 34. That would be my plan too - pay off the home first, then either move and rent the old one, or just find a rental. That 2-year-500k tax free capital gains rule is oh so sweet!

[Tree0164]

Jesse,
How about buying a 2 family as your first home. That way you get have your first renter and hopefully they are paying a good portion of the mortgage with their rent.

My parents did this with their first home, bought a second (single family) home with some equity from it and eventually purchased another dozen multi family homes over the years.

My future brother in law is into real estate investing too. He bought a 3 family with his brother. He then sold the two other units as condos which is sort of the rage here in Boston now. He used the money from that to pay off a huge portion of his current mortgage and then went out and bought another multi-family.

I think you have to be a special (patient) person to be a landlord. My parents could tell you horror stories of different people that moved in. I think it helps to be handy as well to keep repair costs down.

[jmjj215]

Thanks Tree0164, I've thought about that. Maybe I should look into it a bit closer. That would definitely get me there a bit faster (because I'd be leveraged more) but wouldn't stretch me if I could have a tenant 80% of the time.

I'm not too handy really, but I hope to become that way by way of necessity.

I've also heard some whore stories about tenants (my father is attorney for tons of different property management companies) and it's true - it's amazing what people will do (or not do) at times. I guess I'd like to be in a position where it would be nice to have a tenant, but I'm not going to be thrown out on the street if I don't. That way I can be patient and wait for the "right" tenant to come along.

[mom-from-missouri]

They advantage to buying a multi family home (duplex or more) is that you live on the site--so things that go on you see and can control somewhat.

[Cautious Spender]

I rent three houses. I bought my first place about 12 years ago and the same tennant is living there. She pays her rent on time. We have an agreement that if something needs fixed she will get a repairman pay the bill (always made out to me) and I will reimburse her immediately. The other two places are similar. All three pay their rent on time. Only once did one of the tennants not pay on time BUT called me four days before the rent was due to explain they would pay the rent 6 days late and wanted me to know. They wanted me to take their check postdated. I did -- ... I did not penalize them since they are good tennants and just had one too many emergencies that month. All keep their places in good order. Perhaps, I am just lucky.

[jmjj215]

CS, what type of LTV to you have on those properties? How did you select them? It sounds like the cash flow and everything for you.

Mom-from-Missiouri,
My only hang up with the duplex or more is that they're usually in neighborhoods that I don't really want to live in! I was checking out a few online and the schools they were in were absolutely scary. That makes me wonder what kind of tenants I would be attracting. (Although I've heard you can have just as many horror stories from "upper-scale" type neighborhood tenants also).