Looking to get into real estate. What to do?

[Z5 FILMS]

I have some cash that I have been sitting on and not sure what do do with it. I currently have it managed by someone who's getting me about 4% returns. I was thinking of testing the real estate investing waters and see if I can do better. I don't like having to sweat out the markets, and don't like having my future in someone elses hands. Im trying to think of a way to get more control over my money and transfer that power to me.

Im currently renting a house who's appraised value is about $200K and I pay $1660 a month in rent. My thought was "Why don't I start by buying one of these $200K houses with cash that for sale in my neighborhood and rent it out and see what happens?"

My main interest at this point is to get monthly income from them. I figure the worst thing that could happen would be I could go live in it if things did not work out.

Would it be smarter to pay $200K cash for a house and rent it out for $1660 for example, or put $40K down on 5 houses to try rent out? My main goal right now is monthly income. These houses in my neighborhood are upper middle class with. So these are not beater slumlord houses that will need fixing up.

Again, my main goal right now is monthly income and get my money out of the market. What would you do or any ideas? I know nothing about real estate investing or buying houses. I have always been a renter.

Thanks.

 

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[Runum]

There are a large number of variables here before you can answer your questions.

Rental properties are not "hands off investments". You have the option of managing the property with the tenants or managing the property manager that manages the property and tenants. It depends on your temperament and desires.

The properties also have to be analyzed numerically to see what your return projections would be. Then you could decide cost/benefit analysis so you could make an educated decision.

 

[ruzara5]

Depends on the region. Many options. Many variables. Control the variables. Manage the options. And you can find one that will work for you. Foreclosures can be good. Rental plans can be good. Do the research.

 

[Bozigian]

Im looking into real estate as well. I will be watching this thread.

But if you have a property manager wont that mean you get less money?

 

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[Trent]

Exactly...less work for you, but also less pie

 

[Runum]

MAYBE less work for you, definitely less pie. Depends on how good the PM is.

 

[Bozigian]

I have seen foreclosed homes in Apple Valley.
For around 60,000 US

Would this be a good way to start off?
I mean by buying the home and then renting it out, but I also would not know what to do if I was called because the pipe broke or whatever, could I just send a plumber to fix the pipe instead of driving 150+ miles away?

What If i died but I was owner of the home, would my parents now own the home?

 

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[Runum]

I have seen foreclosed homes in Apple Valley.
For around 60,000 US

Would this be a good way to start off?
I mean by buying the home and then renting it out, but I also would not know what to do if I was called because the pipe broke or whatever, could I just send a plumber to fix the pipe instead of driving 150+ miles away?

What If i died but I was owner of the home, would my parents now own the home?

Well the answer, as always is....it depends.

As far as buying a $60,000 SFH being a good buy. It could be if every other house was going for $100,000 or it would be a bad buy if every other house was valued at $40,000.

Another consideration, are you paying cash or financing? This will affect your cash on cash return.

Also, with a SFH you are either 100% occupied or 100% vacant. Tough if you have a mortgage to pay and repairs to make.

In the beginning I did all of my work and repairs myself. I do hire out more work now. I keep my list of repairmen in my phone and ready to go at all times. Several electricians and several plumbers and several roofers.

As far as who owns the property at your death... that's between you and your estate(will) and the finance company. You control some of that decision. When you get married it is usually your spouse.

 

[Runum]

https://www.thefastlaneforum.com/re...ly-buying-your-first-investment-property.html

I posted this 3 years ago.

 

[Rickson9]

$1,660 a month, assuming 50% for expenses and vacancy, is $9,960 a year. On an investment of $200K, this is a 5% yield. Pull out taxes and you'll probably make less than what you're getting currently.

Best regards.

 

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[MonTexan]

Z5 - As Runum says there are too many unanswered variables to give you a black and white answer on which investment is "best." Personally, I like the "5 cheap houses" option much better than "one expensive house."

There are definite advantages to owning a portfolio of rental property rather than a single house. When you own one house and it's vacant, your vacancy rate is 100%...that tends to hurt cash flow. When the a/c unit goes out, your entire year's cash flow is most likely wiped out. If you hire a property manager, you're certinaly not going to get any discounts. If a tenant tears up your house then leaves you not only have 100% vacancy but you've got extensive repairs with no offsetting income. It's also pretty tough to keep a reliable contractor/handy man busy with just one property so you'll never have much continuity or get good deals on repairs. etc, etc.

After running numbers on lots of properties in the Houston area, I decided that the cash flow and cash-on-cash return on cheaper properties was the much better option. Since you say that monthly cash flow is your #1 goal, I would think this route makes sense for you. If you want to play the $200k rental property game, I would make certain that you get great deals and bank on appreciation because the cash flow most likely won't be there. Best of luck.

 

[Bozigian]

After running numbers on lots of properties in the Houston area, I decided that the cash flow and cash-on-cash return on cheaper properties was the much better option.

Hey MonTexan.

Like z5 films said, is it better to put 40k down on 5 houses?

So you saying it will be better to have multiple cheap properties instead of just one expensive one?

 

[MonTexan]

Yes, that is what I am saying. In my area and from my experience, multiple cheap properties will provide better cash flow than one more expensive one. Whether you pay all cash or leverage via financing will certainly affect your ROI and is more of an individual decision that must be made.

 

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[Double M]

Great idea, why not by a two or four family and collect rent from all of the tenants? One building, 4 people contributing to your monthly income. Also, if one of the tenants drops the ball and doesn't pay rent, your not screwed because the other three can cover while you settle the issue with the guy not paying. In addition, any type of real estate is a great tax shelter. Good luck!

 

[Runum]

Great idea, why not by a two or four family and collect rent from all of the tenants? One building, 4 people contributing to your monthly income. Also, if one of the tenants drops the ball and doesn't pay rent, your not screwed because the other three can cover while you settle the issue with the guy not paying. In addition, any type of real estate is a great tax shelter. Good luck!

Yep, quads go for $150k - $250k around here. I would stay away from 2 story units if you can. If you go for 2 story units try to get units where one tenant has both the upper and lower rooms on top of each other. It's a real pain if an upper floor tenant develops a plumbing problem and the water naturally goes downstairs. Now you have 2 tenants not happy. Ask me how I know.....frustrating.

 

[GlobalWealth]

Pull out taxes and you'll probably make less than what you're getting currently.

With a hell of a lot more work.

 

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[Bozigian]

Originally Posted by Rickson9
Pull out taxes and you'll probably make less than what you're getting currently.

With a hell of a lot more work.

Guys, what do you mean by this?

I looked up on some foreclosed homes and saw some homes for 40,000-60,000 but they are out of state.
Do you guys recommend a person to buy homes from out of state and rent them out or is it better to buy homes and rent them out within a 100< mile radius of your home?

 

[Inphinity]

Guys, what do you mean by this?

I looked up on some foreclosed homes and saw some homes for 40,000-60,000 but they are out of state.
Do you guys recommend a person to buy homes from out of state and rent them out or is it better to buy homes and rent them out within a 100< mile radius of your home?

They mean the ROI based on a $200k purchase price and the $1660/month rent, minus expenses, vacancy periods, tax etc i probably going to be worse than just putting the $200k in a term deposit or w/e at a fixed %, with a lot more effort.

 

[GlobalWealth]

They mean the ROI based on a $200k purchase price and the $1660/month rent, minus expenses, vacancy periods, tax etc i probably going to be worse than just putting the $200k in a term deposit or w/e at a fixed %, with a lot more effort.

bingo.

Guys, what do you mean by this?

You can make money in RE for sure. But like most other ways to make a lot of money, it takes a lot of work - at least at the beginning like Runum stated.

IMO RE investing is not really passive. The only way to make it passive is to get such a great deal on the purchase price, you can hire a property manager and still be cash flow positive. While this too is possible, it is also about as elusive as the abominable snowman.

One idea you may consider is to use your $200k as a down payment on an apartment building. If you consider 30% down, you have buying power of about $660k, assuming you can get financing.

For $660k you should be able to find a decent 8-10 unit building. With a quick search on Loopnet, I found 2 pages of multifamily properties for sale in Austin ranging from 2 unit duplexes up to a small 20 unit apartment building - all under $700k.

You could live in one and be your own in-house PM and save on the fees and learn the ropes while living on site.

 

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[Rickson9]

Speaking for myself. My only experience in real estate is rentals.

For myself, with regards to rentals, real estate is an average investment. Approximately 10% net returns per year.

I use rentals to produce some cash on a monthly basis.

For me, unless I create a limited partnership or use leverage, it will be an average investment.

I don't care if the property is located <100 miles of where I live. My purchase price needs to be attractive enough to hire a PM company. I have no trade skills and don't intend to learn any.

I have experienced better returns riding the coattails of entrepreneur-run businesses so that continues to be my main focus.

Best regards.

 

[David01]

Hello there , I think that the real estate investment has never been a bad idea to follow, Definitely it depends upon your location and area. Please visit some commercial and rentals areas to get known about the real estate and the money return through the already running businessmen .
General feed back and survey is compulsory at all.

 

[hatterasguy]

If your paying that much to rent a $200k house the first thing I would do is buy one to live in, why the heck are you paying someone else? Paying other people is not how you get rich.

Secondly how much money do you have to invest?

Real estate investing is hardly passive, and quite frankly its difficult. But the money is quite good if you have a passion for it and do it right.

 

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[CEBenz]

bingo.




You can make money in RE for sure. But like most other ways to make a lot of money, it takes a lot of work - at least at the beginning like Runum stated.

IMO RE investing is not really passive. The only way to make it passive is to get such a great deal on the purchase price, you can hire a property manager and still be cash flow positive. While this too is possible, it is also about as elusive as the abominable snowman.

One idea you may consider is to use your $200k as a down payment on an apartment building. If you consider 30% down, you have buying power of about $660k, assuming you can get financing.

For $660k you should be able to find a decent 8-10 unit building. With a quick search on Loopnet, I found 2 pages of multifamily properties for sale in Austin ranging from 2 unit duplexes up to a small 20 unit apartment building - all under $700k.

You could live in one and be your own in-house PM and save on the fees and learn the ropes while living on site.

Speed ++ Global. Very well put.

I would also add, that as a general rule, smaller homes will appreciate somewhat faster than larger homes/units. Simply because the smaller (i.e. theoretically cheaper properties) are more easily attainable for some. Ramblers and single floor units have the added appeal to older folks due to not having stairs to climb.

 

[bflbob]

IMO RE investing is not really passive. The only way to make it passive is to get such a great deal on the purchase price, you can hire a property manager and still be cash flow positive. While this too is possible, it is also about as elusive as the abominable snowman.

Speed for that one Bobby!

I've been telling folks that I'm almost making enough in internet marketing now to support my RE habit!

Notice...

I said almost.

 

[CEBenz]

Speed for that one Bobby!

I've been telling folks that I'm almost making enough in internet marketing now to support my RE habit!

Notice...

I said almost.

speed for bob. I got a good laugh out of that. I need more income to support my Jeep habit and my real estate habit.

 

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[Bozigian]

Guys. I would like your opinion on this idea of mines.

On this link I have a list of homes in apple valley
Apple Valley Real Estate - Apple Valley, Homes for Sale - Realtor.com®

Their is a small mobile home (2 bed, 2 bath) priced at 5,000.
The next mobile home (2 bed, 2 bath) is priced at 10,000.

If a person had money and wanted to start in RE investing. Would it be a good idea of the person bought the two mobile homes and then rented it out? It would only come to about 15,000. I dont know about the taxes and etc.

I also do not know how much a person should pay rent depending on the size but if I bought these two mobile homes and got tenants and they would pay $500 each month. Then I would get 6000.00 a year. And I would break my original investment price of 15,000.00 in 2-3 years.

What do you guys think?

Im sorry but I do not know about the taxes and insurance and all that so maybe I have things on the wrong picture since I have no experience in RE.

 

[David01]

Hello there , I think that the real estate investment has never been a bad idea to follow, Definitely it depends upon your location and area. Please visit some commercial and rentals areas to get known about the real estate and the money return through the already running businessmen .
General feed back and survey is compulsory at all.

Chandler luxury real estate for sale

 

[Runum]

Guys. I would like your opinion on this idea of mines.

On this link I have a list of homes in apple valley
Apple Valley Real Estate - Apple Valley, Homes for Sale - Realtor.com®

Their is a small mobile home (2 bed, 2 bath) priced at 5,000.
The next mobile home (2 bed, 2 bath) is priced at 10,000.

If a person had money and wanted to start in RE investing. Would it be a good idea of the person bought the two mobile homes and then rented it out? It would only come to about 15,000. I dont know about the taxes and etc.

I also do not know how much a person should pay rent depending on the size but if I bought these two mobile homes and got tenants and they would pay $500 each month. Then I would get 6000.00 a year. And I would break my original investment price of 15,000.00 in 2-3 years.

What do you guys think?

Im sorry but I do not know about the taxes and insurance and all that so maybe I have things on the wrong picture since I have no experience in RE.

I have a couple of those mixed into my RE holdings. Your numbers are close to my numbers. I don't insure them for loss but I do insure for liability. Taxes are around $10 a month for me. It is definitely a strategy for increasing cashflow but you do lose appreciation. Also, renting single units is tough to scale.

 

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[kwerner]

Bozigian - you should pick up the book "making money with mobile homes" by Lonnie Scruggs. Great book on this topic. If I ever get back into RE, it will definitely be with mobile homes, not renting them out but owner financing them.

...which reminds me, I need to check on that domain again for you Runum.

 

[Metrix1234]

Hey Z5!

New to the forum, thought I would offer my suggestions. First of all I would like to say that Austin is a great area! One of the first things you could do is talk to a property manager and/or Realtor in your area. Try to getting a better idea on how quickly houses are selling and renting out in different subdivisions in town - ask about the amount of days on market houses are selling for in a few areas. This information could come in handy if you ever choose to sell your investment property later down the road. When it comes to property management, as many have said, there are up and down sides to renting under a property manager and doing it yourself. If you do it yourself obviously, you will need to take a more hands on approach. Deal with problems your renters have, collecting rent, marketing your vacant rentals, ect. If you look into property managers and find it economical, I would recommend going that route. They take care of finding most of your needs and do the leg work for you.

I think that Austin is a very rental rich area. I would look near the university for properties as I am sure college students would be glad to live in your rental property over an apartment complex. In might be a good idea to check apartment rental costs to get an idea of what would be a good amount to charge per bedroom in your rental property . Another good gauge is the one percent rule - whatever 1% of the total value of the house should be the rent. Having done some market research, I am positive you will be able to buy some nice rental properties in the Austin area and rent at competitive and profitable prices!

If you have any more specific questions feel free to PM me.