Is it a good time to buy an investment property

[coolweb]

Quote from blackjack007:

notice the only real estate cheerleaders on ET are those who've never owned or managed real estate. their knowledge is based on what they're read.

i bought a number of investment properties early last decade, and all those stories about tenants are true. you're gonna get sleaze bags who don't pay, those who raise 40 stray cats, those who burn down the kitchen because they fvcking cooked bacon in the toaster oven and went to do their laundry and forgot about it.

i wanted to round up all my tenants and shove them onto the freeway blindfolded.

i made money off my properties but it wasn't worth the ROI.

lol agree on the resedential part, I only have one resedential rental.. Very good location, 1 block from the subway , Not too much headache, but I can see that * 40 = not a fun time.

I enjoy renting out my commercial properties more
Rent it or don't? Or get out. simple
Nothing inside to break.

 

[drcha]

Quote from peilthetraveler:

I disagree, with inflation coming soon, real estate is a better option. Rents generally double every 15 years or so, so if you put down 100k on a 500k apartment complex its safe to say that not only will you have paid down a little chunk of that but you will have that extra income in 15 years, plus your apartment is most likely worth 1 million. Of course it might be a little sooner if their is lots of inflation, or later if the economy keeps sinking, but sooner or later, real estate goes up. As long as we are on fiat money, its a sure thing. Short term it doesnt always go up, but long term it does. So that 100k invested will most likely return 5 fold,plus the money that was paid off by the tenants. Where in the stock market can you make 10 times your money in 15 years? If that complex had gross rents of 5k per month, you would make about 500-1k per month in cash flow.

So you need to make 17% per year in the stock market to equal what you would get with real estate, plus a stock that pays a dividend equal to what your cash flow would be on the apartment complex (which in this scenario would be 10% divys!!) That kind of deal would be very hard to find, not to mention, stocks can go down alot easier than real estate.

Here are just three of my real estate experiences:

1) Rent out a condo for a year, then the HOA passes a rule that no one can rent out their condos. Sell the condo in a falling market after it has been vacant for almost a year. Yes, I know the HOA was probably doing something illegal but lawsuits are potentially more expensive than just getting out.

2) Put 300K down on a property, then end up with an unexpected $100K repair two years later. Spend the next eight years of cash flow to fix the problem.

3) Get sued by someone who fell on a property. Yes, I had insurance, but it's still a pain in the ass. And your insurance company can drop you.

Do not make the mistake of looking only at the positives. The problem with real estate is that the negatives are unknown, unexpected, and sometimes very large. That's okay, if you are prepared to deal with them.

If I buy a stock or an option spread, all I can do is lose money, and I already know at the outset exactly how much I can lose. I prefer that scenario.

 

[Ghost of Cutten]

Quote from Stosh:

I've owned lots of rental property of all kinds (Fort Worth, Tx.). I hated it, but it served me well financially....esp. during inflationary times. Management companies aren't that good unless you own enought units to afford the best......and when you are personally involved it is very stressful. I had many great tenants.....but a few bad ones will make you a seller. Stosh

Interesting - could you tell more?

 

[Ghost of Cutten]

Quote from blackjack007:

notice the only real estate cheerleaders on ET are those who've never owned or managed real estate. their knowledge is based on what they're read.

i bought a number of investment properties early last decade, and all those stories about tenants are true. you're gonna get sleaze bags who don't pay, those who raise 40 stray cats, those who burn down the kitchen because they fvcking cooked bacon in the toaster oven and went to do their laundry and forgot about it.

i wanted to round up all my tenants and shove them onto the freeway blindfolded.

i made money off my properties but it wasn't worth the ROI.

Heh, interesting stories. Was this in a cheap, normal, or expensive area?

 

[Eliot Hosewater]

Anyone know of any REITs out there who buy property outright and just collect/pass on the rents?

 

[sumfuka]

Any homeowners here dealt with section 8 tenants?

 

[dandxg]

Quote from KINGOFSHORTS:

Not yet, another 6% discount is coming up. Wait till mid 2011

If you have cash, do covered combos, covered calls on SPY and short put positions. (50/50)

You will get a better return than the hassles of overpriced property and pain in the ass tenants.

Condos you have HOA fees that can increase quickly, surprise fees to cover issues, taxes,repair costs,the time you have to spend managing the whole deal, dealing with pain in the ass people etc..

Not worth it.

It was shocking to see how some in South Florida had HOA fees equal to mortgages on some developments in default. Extreme examples sure.

 

[dandxg]

Quote from ashatet:

Thanks to all for some great points. My reason for wanting to make this investment is the lack of better opportunities elsewhere. I am also ready with the possibility that I will just keep the property to myself. I already have quite a bit of investments in foreign bonds, equities, agriculture and metals.

I understand that rental property is a catch 22. You want good tenants, but good tenants are sensible people, but sensible people generally own homes and not rent them. So a good renter is an oxymoron.

A good rental income does not hurt in retirement either. Just about all my friends have suggested me to stay away from being a landlord. I will see how it goes and start one at a time.

Not necessarily true. I was a renter for years and never thrashed a place. We just found tenants for my Mom's second home and manage it for her. We took the advice of our deceased family friend, RIP Richard, a 30 year millionaire next door RE investor. It's all about the upfront checks, credit, background, etc. If they are late serve them immediately and let them know you mean business. We decided to take a slighter smaller income on the rental in favor of A + tenants with exemplary credit. They pay 3 days in advance.

 

[Father Branigan]

My general feeling is that now is a good time to buy with prices relatively low and interest rates absolutely low. There may be another 5-10% drop in the next year or even 20%, but I would not try to exactly time the RE market any more than I try to exactly time the stock market.

Some things to consider if you are going to buy an investment property and rent it out:

1) Don't spend more than you can afford. It seems like a no-brainer, but that's how a lot of people got into trouble in the last 10 years. Spending $500k instead of $350k is a LOT of extra money.

2) Rent a condo near a college campus where the smarter kids go rather than next to the party school. No guarantees, but they are more likely to take care of the place.

3) Even better, market your rental property to visiting professors. They will tend to take better care of the place (you could still get stuck with someone who likes to do naked yoga or something, but like I said, there are no guarantees).

4) Do some simple mortgage payment calculations based on current prices and interest rates. Then compare them to some hypothetical estimates based on prices rising or falling and/or interest rates rising and falling. Understand what position you could be in 5 years down the road if and when conditions change.

 

[dandxg]

Quote from unretired:

I suggest buying tax liens. (Actually loaning state governments moneys for 12% - 24% annually) You have little risk. You can be picky on the property. There are no tenant hassles and you have high interest earnings. You are the first person on title ... even before the banks ... so possession of the property is a slim possibility. Loan term is short. Functionally you are investing in real estate and are guaranteed by position on title ... without the hassles. A friend of mine has done all the homework and shared it with me in a "whiteboard" meeting.

I liked it.

I have actually looked at several times. The challenges seem to be

1. Purchasers will take neg % almost to hopefully foreclose
2. In some states, you are responsible for "issues" with the property.
2A. I mention it because a trader friend of mine acquired a foreclosure, yes different for sure, and it turned out their was a toxic spill on it he was sued, sued the neighboring chemical company at fault and years later got lucky and made a lot of money from the suit.
3. A variety of laws from state to state and region to region governing the intricacies.

If I am wrong please say so as the best bank CD I can get is 3.85%