Hands off real estate investing

[corn18]

Still thinking about how to get into RE. Is it possible to do it hands off? That is, once I pick the investment and buy it, can I just hire a management firm like TH to rent it and deal with the renters? My day job leaves me with no time so I would not be able to be a hands on landlord.

Where I am right now is I have $270k in taxable accounts and when the next RE bubble happens, would like to buy. Don't know when that will be but want to do the research now to be ready.

[Jluke]

are you interested in residential real estate? commercial real estate? vacation homes?

based on what fishindude has said in the past, I think commercial real estate would be less hands on...

guessing you want to hear from TH, 97guns, and fishindude on this one. apologies if I missed anyone who is big on real estate.

[97guns]

The amount of hands off will be determined by the property manager, if you get a good one there will be very little hands on with maybe 10 minutes of telephone time per month. That being said, in my experience a trustworthy manager is hard to find. I've gone through numerous property management companies from large corporate type to start ups that are still going today and they all were in it to pad their bottom line.

I could have bought 4 or 5 single family homes with 270k at the last downturn, 3/2 single family homes were 75k and you could have picked up 3/1 single family homes for 35k, I kept bugging my buddy to buy one for 30k but he couldn't bring himself to pull the trigger, payments were like $200, now it's valued at 250k and he still rents.

[Kaoru]

Isn't that called a REIT?

[Fishindude77]

If you want to have somebody else do all of the work, then you may as well just be a passive investor in something like the stock market. The return you get on real estate is typically a direct reflection of the effort you put into it.

I do commercial and farm stuff.
Commercial gets a great return, I'm averaging around 16% pre-tax and pre-expenses (expenses aren't much). Took a whole lot of time and effort putting the deal together upfront; finding client, making deal, design, construction, permits, etc. Now in a triple net, ten year lease where tenant takes care of everything so very little time and effort required, might have 8 man hours a year in it now.

Farm is easy, but only get 3-4% returns. Buy a farm, rent ground to a farmer seasonally for an agreed upon cash rent price. Collect a check once a year and keep the taxes paid.

A vacation home rental could be relatively easy. Buy the place and get it set up and furnished to your liking. Do your rentals through VRBO or similar, then have some local people to do the cleaning, maintenance, snow removal, mowing, etc. My neighbor at the lake tells me 7 weeks of renting his lake home is paying his mortgage and taxes, plus he writes off his travel there and quite a few related expenses. Bet you would'nt have 8 hours per week in something like this.

Good luck !

[LivingAlmostLarge]

I think $270k is more than enough to invest in some areas and make great returns. Probably have to know what you are doing.

[TexasHusker]

If you want to invest in real estate for income, a REIT (kind of like a mutual fund, except it holds various real estate investments instead of equities) is a good option.

However, with a REIT, you are not taking advantage of the power of leverage (using other peoples' money) to buy shares. Certainly the REIT is leveraging, but you are not.

The way I look at rentals - commercial, residential, vacation is this:

It is a capital appreciation play, with built-in income to not only increase your overall return, but offer some insurance against the occasional downdraft in the market.

If a $200K house, renting for $2000 a month, suddenly becomes a $150K house, it's still renting for $2000 a month.

I have paid too much for a couple of homes, but the rent was so substantial, that it still turned out to be an outstanding investment. And if you have a long-term horizon, the values return and go above and beyond where you bought.

One more tip: Don't look at real estate on a national level. It doesn't work that way. There isn't a universal good time to buy or sell.

Real estate is local. Just because the entire country is in a recession, doesn't mean that there a not fantastic opportunities to buy - or sell - in a specific market. Conversely, just because the country as a whole is in an expansion, doesn't automatically mean that real estate everywhere is expensive.

[bjl584]

There probably is no such things as total hands off. At least not in the beginning. You will be at least partially hands on even with a property manager on your first few deals. Hands off won't happen until you have enough scale to push off the day to day stuff.

All the time can be a good time to get into real estate. Don't wait for a recession. Start looking now. Work the numbers, and if you are at an acceptable level of cash flow positive, then you might have found a good deal.

How much of your 270K are you willing to invest? You can use leverage and pick up several properties with that money if you wanted to.

A REIT can be a good option, as already pointed out, for a total hands off approach. But, a REIT is like buying a stock, and there are no tax advantages to owning a REIT. A rental can be treated as a business. You will be able to write off a lot of the expenses and take depreciation.

[Mikehills101]

If you want to invest in real estate for income, a REIT (kind of like a mutual fund, except it holds various real estate investments instead of equities) is a good option.

However, with a REIT, you are not taking advantage of the power of leverage (using other peoples' money) to buy shares. Certainly the REIT is leveraging, but you are not.

The way I look at rentals - commercial, residential, vacation is this:

It is a capital appreciation play, with built-in income to not only increase your overall return, but offer some insurance against the occasional downdraft in the market.

If a $200K house, renting for $2000 a month, suddenly becomes a $150K house, it's still renting for $2000 a month.

I have paid too much for a couple of homes, but the rent was so substantial, that it still turned out to be an outstanding investment. And if you have a long-term horizon, the values return and go above and beyond where you bought.

One more tip: Don't look at real estate on a national level. It doesn't work that way. There isn't a universal good time to buy or sell.

Real estate is local. Just because the entire country is in a recession, doesn't mean that there a not fantastic opportunities to buy - or sell - in a specific market. Conversely, just because the country as a whole is in an expansion, doesn't automatically mean that real estate everywhere is expensive.

Big thanks for this. I agree I think that real estate is effective if doing it locally. Unless you have big company connections that can give you the opportunities to market it internationally or in a national level.