Can i rely on rental property?

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Topic Author
Neus
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Can i rely on rental property?

Post by Neus » Mon Mar 11, 2019 11:58 pm

So i wonder how rental property fares in term of income reliability in case my etf stock holding jitters

So far the issue is:
1) I find it difficult to raise rent even to match inflation rate
2) The return hasn’t consider the depreciation of the building
3) I’m not sure how long the building will last before need to rebuild

But selling all rentals and went all paper (stock and bond) also doesn’t feel right

Any thoughts?

Thesaints
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Re: Can i rely on rental property?

Post by Thesaints » Tue Mar 12, 2019 1:38 am

Yes, income from (and appreciation of) rentals is not a sure thing. The one thing that is sure, though, is that they will require work on your part, as opposed as a Total Stock Market ETF, which will require virtually none.

Topic Author
Neus
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Re: Can i rely on rental property?

Post by Neus » Tue Mar 12, 2019 3:58 am

Thesaints wrote:
Tue Mar 12, 2019 1:38 am
Yes, income from (and appreciation of) rentals is not a sure thing. The one thing that is sure, though, is that they will require work on your part, as opposed as a Total Stock Market ETF, which will require virtually none.
ic.. so the consensus among bogleheads is none on rental property?

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4nursebee
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Re: Can i rely on rental property?

Post by 4nursebee » Tue Mar 12, 2019 4:15 am

Not enough information.
What is your ROI? What ROI did you expect when you started? Why did you buy a building you think might fall down?

If you want consensus from BH strangers, the consensus comes down against rentals. Over and over. Many former landlords, many too scared.

Returns are ENHANCED by depreciation...
I don't raise rents on paying tenants...
No building lasts forever.

My RE ROI is better than anything else.
4nursebee

Nissanzx1
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Re: Can i rely on rental property?

Post by Nissanzx1 » Tue Mar 12, 2019 5:36 am

I think most people are too lazy or just don’t want to fool with tenants. Prepping, screening, verifying, helping with maintenance issues, finding properties to buy, etc all takes time and it needs to be done right. And it’s work... I enjoy it, so I’ll be a landlord until I no longer enjoy it.

Pay in cash, buy healthy property in good condition, enjoy the process, collect the rent, keep it maintained, keep tenant happy. If you follow these steps, you will have little risk. I think a 50% paid for rental asset allocation, mixed with 50% stock equity (index funds) is not a bad way to go. If you are an effective manager of your rentals, you should do well over time...

Topic Author
Neus
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Re: Can i rely on rental property?

Post by Neus » Tue Mar 12, 2019 5:51 am

4nursebee wrote:
Tue Mar 12, 2019 4:15 am
Not enough information.
What is your ROI? What ROI did you expect when you started? Why did you buy a building you think might fall down?

If you want consensus from BH strangers, the consensus comes down against rentals. Over and over. Many former landlords, many too scared.

Returns are ENHANCED by depreciation...
I don't raise rents on paying tenants...
No building lasts forever.

My RE ROI is better than anything else.
Current ROI for managed rentals are 5%, but my expectation is that 5% is okay as long as i can increase rent yearly to follow inflation rate

I don't think the building might fall down, but time will cause the building to be worse off and out of date to maintain reasonable rental price

Can you point out the threats of another former landlords bogleheads? Would be interesting to see some of their experience

Apologies can you help me understand why returns are ENHANCED by depreciation...?

And how to make money if I don't raise rents on paying tenants, while the building management cost will continue to rise?

Nissanzx1
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Re: Can i rely on rental property?

Post by Nissanzx1 » Tue Mar 12, 2019 6:05 am

Neus wrote:
Tue Mar 12, 2019 5:51 am
4nursebee wrote:
Tue Mar 12, 2019 4:15 am
Not enough information.
What is your ROI? What ROI did you expect when you started? Why did you buy a building you think might fall down?

If you want consensus from BH strangers, the consensus comes down against rentals. Over and over. Many former landlords, many too scared.

Returns are ENHANCED by depreciation...
I don't raise rents on paying tenants...
No building lasts forever.

My RE ROI is better than anything else.
Current ROI for managed rentals are 5%, but my expectation is that 5% is okay as long as i can increase rent yearly to follow inflation rate

I don't think the building might fall down, but time will cause the building to be worse off and out of date to maintain reasonable rental price

Can you point out the threats of another former landlords bogleheads? Would be interesting to see some of their experience

Apologies can you help me understand why returns are ENHANCED by depreciation...?

And how to make money if I don't raise rents on paying tenants, while the building management cost will continue to rise?
If I was your tenant, and you raised rent every year- I would find a new place to live. Occupancy issues will wipe out your 5% ROI in a hurry.

5% is not enough ROI on rental real estate. You can get near that in a CD if you search hard. You either payed too much for the property, or management fees are smoking your bottom line.

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JoeRetire
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Re: Can i rely on rental property?

Post by JoeRetire » Tue Mar 12, 2019 6:48 am

Neus wrote:
Mon Mar 11, 2019 11:58 pm
So far the issue is:
1) I find it difficult to raise rent even to match inflation rate
That's a mistake.
2) The return hasn’t consider the depreciation of the building
That's a mistake.
3) I’m not sure how long the building will last before need to rebuild
That's a mistake.
But selling all rentals and went all paper (stock and bond) also doesn’t feel right

Any thoughts?
Dig in and learn what it is actually costing you to own and maintain these rental units long term.
Decide to charge accordingly.
Or, sell and do something else with the money.

Topic Author
Neus
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Re: Can i rely on rental property?

Post by Neus » Tue Mar 12, 2019 8:54 am

Nissanzx1 wrote:
Tue Mar 12, 2019 6:05 am
Neus wrote:
Tue Mar 12, 2019 5:51 am
4nursebee wrote:
Tue Mar 12, 2019 4:15 am
Not enough information.
What is your ROI? What ROI did you expect when you started? Why did you buy a building you think might fall down?

If you want consensus from BH strangers, the consensus comes down against rentals. Over and over. Many former landlords, many too scared.

Returns are ENHANCED by depreciation...
I don't raise rents on paying tenants...
No building lasts forever.

My RE ROI is better than anything else.
Current ROI for managed rentals are 5%, but my expectation is that 5% is okay as long as i can increase rent yearly to follow inflation rate

I don't think the building might fall down, but time will cause the building to be worse off and out of date to maintain reasonable rental price

Can you point out the threats of another former landlords bogleheads? Would be interesting to see some of their experience

Apologies can you help me understand why returns are ENHANCED by depreciation...?

And how to make money if I don't raise rents on paying tenants, while the building management cost will continue to rise?
If I was your tenant, and you raised rent every year- I would find a new place to live. Occupancy issues will wipe out your 5% ROI in a hurry.

5% is not enough ROI on rental real estate. You can get near that in a CD if you search hard. You either payed too much for the property, or management fees are smoking your bottom line.
I see, thank you for your input

Topic Author
Neus
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Re: Can i rely on rental property?

Post by Neus » Tue Mar 12, 2019 8:54 am

JoeRetire wrote:
Tue Mar 12, 2019 6:48 am
Neus wrote:
Mon Mar 11, 2019 11:58 pm
So far the issue is:
1) I find it difficult to raise rent even to match inflation rate
That's a mistake.
2) The return hasn’t consider the depreciation of the building
That's a mistake.
3) I’m not sure how long the building will last before need to rebuild
That's a mistake.
But selling all rentals and went all paper (stock and bond) also doesn’t feel right

Any thoughts?
Dig in and learn what it is actually costing you to own and maintain these rental units long term.
Decide to charge accordingly.
Or, sell and do something else with the money.
Thank you, will think about it over

renue74
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Re: Can i rely on rental property?

Post by renue74 » Tue Mar 12, 2019 9:07 am

5% return is pretty low for rental property. I know it's very geographically centered as to what returns you're getting. But, in my area, Charlotte, NC, I can see 10% to 20% COC ROI.

You should make sure you vet your rentals and not get hung up on a deal.

Let's don't go down the path of "are rentals better than investing in the market?" It's been beat to death here and probably over at Biggerpockets.com as well. They are two different income streams and shouldn't be compared.

Is real estate stable? Will there ever be another 2008? I'm not sure and nobody really knows.

What you shouldn't do is put all your eggs in one basket. Don't throw all your $ into real estate. Diversify.

You should build automatic increases into your lease. At the end of the lease there is a place for general terms. Just put in there, a nominal 4% increase in rent will occur. I typically communicate with my tenants via text and simply just tell them about the increase before they sign the new lease.

Many folks here don't understand the renter's dynamics. 1.) The rental market is pretty hot now. (Will not always be)....but that means if you are going up 4%, most likely your competitors are too and it can be really tough to even find availability, much less availability in your price range.

2.) It cost money to move. Really it does. Moving truck, boxes, manpower/friendpower/pizza/beer, deposits, change of address forms. Most people are lazy. They really don't want to move because it takes a lot of brainpower and money. So either you pay the 4% or you do the above.

I would agree that a healthy 25-50% of your worth in real estate would be OK. 50% seems a little high.

But I will say...the properties I buy are not like Miami condos that cost $500K and could lose $200K in value. When you buy a $45K house, there's not much room to go down. Lesson is choose your rentals appropriately.

dbr
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Re: Can i rely on rental property?

Post by dbr » Tue Mar 12, 2019 9:15 am

Thesaints wrote:
Tue Mar 12, 2019 1:38 am
Yes, income from (and appreciation of) rentals is not a sure thing. The one thing that is sure, though, is that they will require work on your part, as opposed as a Total Stock Market ETF, which will require virtually none.
For sure. Rental property is a perfectly reasonable investment and holding of assets. As suggested above it is also really a business that you have to run. There is risk to both the value of the assets and your ability to obtain income.

Probably the only use of money that is structured as reliable income would be a single premium immediate annuity which also is an insurance product that pools longevity risk. But that is a topic for a different conversation. There are pluses and minuses to annuities of this type. Social Security is an example of an annuity you may already eventually have.

Stocks and bonds have their own risks and their own assessment of how reliable the income that can be taken will be.

It might be good to do some reading in the Wiki and in some of the books available on the general subject.

pkjr
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Re: Can i rely on rental property?

Post by pkjr » Tue Mar 12, 2019 9:54 am

Take a negative advice about rental properties on this forum with a grain of salt. Most people will give you “theoretical” opinion. Rentals are good especially if you can manage yourself. It’s a perpetual income. Golden goose that will always lay some eggs. Just don’t overleverage it. Create portfolio of free and clear houses and enjoy your life.
Last edited by pkjr on Tue Mar 12, 2019 10:02 am, edited 1 time in total.

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leeks
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Re: Can i rely on rental property?

Post by leeks » Tue Mar 12, 2019 9:58 am

The choice is not all or nothing. You mentioned multiple rentals. Likely some are better than others. You could keep some, sell some.

chevca
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Re: Can i rely on rental property?

Post by chevca » Tue Mar 12, 2019 10:06 am

Neus wrote:
Tue Mar 12, 2019 3:58 am
Thesaints wrote:
Tue Mar 12, 2019 1:38 am
Yes, income from (and appreciation of) rentals is not a sure thing. The one thing that is sure, though, is that they will require work on your part, as opposed as a Total Stock Market ETF, which will require virtually none.
ic.. so the consensus among bogleheads is none on rental property?
For the majority here, yes, we'd be the none on rental property crowd. But, there are some on BHs that own rental property, do well with it, and are glad to own them. You will definitely get less support for owning rental property here than some other websites/forums.

If you don't feel right raising rents to match inflation, it would seem you let the personal side of things factor too much into being a landlord. You're a business owner being a landlord. Not a whole lot of room there for personal feelings, IMO. Especially if you're asking about if you can rely on rental properties and the income. You may want to take a hard look at if you should or want to be a landlord. No offense meant there.

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Sandtrap
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Re: Can i rely on rental property?

Post by Sandtrap » Tue Mar 12, 2019 10:19 am

Neus wrote:
Mon Mar 11, 2019 11:58 pm
So i wonder how rental property fares in term of income reliability in case my etf stock holding jitters

So far the issue is:
1) I find it difficult to raise rent even to match inflation rate
2) The return hasn’t consider the depreciation of the building
3) I’m not sure how long the building will last before need to rebuild

But selling all rentals and went all paper (stock and bond) also doesn’t feel right

Any thoughts?
It depends on your property. There's simply not enough info here to know for sure. The answers are not so simplistic.

Options to think about:
1. Use a well thought out investment portfolio to "diversify" your income stream. It is not just one or the other.
2. Consider doing a 1031 exchange, perhaps with added cash from operating capital to get a better building in a better location of appreciative value and rents.
3. What is your CAP rate now? What are your building liabilities? Are these SFH or Multi Unit Housing? How large? Know that there's more economy of scale when more units are under one roof.
4. Have you rethought your rental strategies? Lease durations. Target Market.
5. If possible, consider renovation and condo conversion if the area and zoning allows and you will end up in a better position to either purchase more properties and/or diversify to include an investment portfolio.
6. Know that you will not have the same tax advantages by moving completely to an investment portfolio.
7. Look at your overall financial position and the role of your rental properties in that. Anchor? Tax advantages? Income stream? Etc.
8. And so forth.

Again, there's simply not enough info to give sound suggestions within your unique financial scenario.
j :happy
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quantAndHold
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Re: Can i rely on rental property?

Post by quantAndHold » Tue Mar 12, 2019 10:21 am

Rental property can be a useful part of a diversified portfolio. But what I see from the threads on Bogleheads is that most people don’t understand how to run the numbers on their property (for example, if you’re not including the cost of the maintenance required to keep the building from falling down, you’re doing it wrong), which means they don’t know how to compare the returns from their rentals to returns from other sources.

Also, if you’re managing it yourself, you’re not just investing, you’re buying yourself a job. Which is fine, but you have to be willing and able to do the job. Owning stocks doesn’t require any ongoing effort.

One thing I would say is if your return is only 5%, and you’re not adding maintenance costs into the calculations (being worried about having to rebuild someday), I would worry that you’re not actually breaking even, much less earning any money.

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4nursebee
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Re: Can i rely on rental property?

Post by 4nursebee » Tue Mar 12, 2019 10:57 am

Neus wrote:
Tue Mar 12, 2019 5:51 am
4nursebee wrote:
Tue Mar 12, 2019 4:15 am
Not enough information.
What is your ROI? What ROI did you expect when you started? Why did you buy a building you think might fall down?

If you want consensus from BH strangers, the consensus comes down against rentals. Over and over. Many former landlords, many too scared.

Returns are ENHANCED by depreciation...
I don't raise rents on paying tenants...
No building lasts forever.

My RE ROI is better than anything else.
Current ROI for managed rentals are 5%, but my expectation is that 5% is okay as long as i can increase rent yearly to follow inflation rate

I don't think the building might fall down, but time will cause the building to be worse off and out of date to maintain reasonable rental price

Can you point out the threats of another former landlords bogleheads? Would be interesting to see some of their experience

Apologies can you help me understand why returns are ENHANCED by depreciation...?

And how to make money if I don't raise rents on paying tenants, while the building management cost will continue to rise?
5% is not a good ROI for RE, certainly it would not be enough for me to consider entering RE as an investment.
5% ROI does not allow much room for profit after maintaining a place (ie keep it from falling down)
No threats from other LL, just experience reading about RE here. You can use the search bar, not my job.
Depreciation info: https://www.investopedia.com/ask/answer ... iation.asp
I cant figure out how to help you make money in your situation as you have not shared enough info. Perhaps PM me, I would be happy to talk in person about our situation.

The BH way of investing involves keeping management fees for oneself, I practice the same for RE. It is not "buying a job". It is guaranteeing a lifetime residual income...

If you would like public help with this stuff, share what got you into this RE endeavor, what the costs were, what the financing is, what the customers are, what the management fee is, where the property is located (college town, country, city, etc..). Did you attend some team builind RE seminar from a TV guru? What were your role models? What books did you read to understand? What did you think you would make out of it? I think a lot of people in investing think they are doing the right thing but are actually without good aim, have not a worthy target, have not proper action to get what they want or need. Over time, one gains experience and insight and adapts more to the BH way.
4nursebee

michaelingp
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Re: Can i rely on rental property?

Post by michaelingp » Tue Mar 12, 2019 11:10 am

My parents never owned any stocks or bonds, just real estate. Might have had something to do with lasting effects of the 1930's crash. As others have said, it's a business, and they put in a lot of sweat equity and made plenty of mistakes. In addition to funding their own retirement, they provided a lot of assistance for their children's homes. They bought one house for me from a full-time real-estate investor. He told me, "Once you get 20 houses, you're set for life." So this may be the wrong forum, but there is precedent.

22twain
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Re: Can i rely on rental property?

Post by 22twain » Tue Mar 12, 2019 11:12 am

According to another thread, the Topic Author is in Indonesia, where the economics of rentals may be different than in the US. (Assuming the rentals are also in Indonesia, of course...)

For example:
Neus wrote:
Tue Mar 12, 2019 5:51 am
Apologies can you help me understand why returns are ENHANCED by depreciation...?
This is a matter of tax laws in the US. Someone else gave you a link to an Investopedia article. The general principles may or may not apply in your country. The specific details almost certainly do not.
Last edited by 22twain on Tue Mar 12, 2019 11:23 am, edited 2 times in total.
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Thesaints
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Re: Can i rely on rental property?

Post by Thesaints » Tue Mar 12, 2019 11:15 am

The same applies to “Once you get 10 millions”, except that investing those millions in the financial markets requires a lot less blood, toil, sweat and tears, as you correctly pointed out.

StandingRock
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Re: Can i rely on rental property?

Post by StandingRock » Tue Mar 12, 2019 11:24 am

Neus wrote:
Mon Mar 11, 2019 11:58 pm
So i wonder how rental property fares in term of income reliability in case my etf stock holding jitters

So far the issue is:
1) I find it difficult to raise rent even to match inflation rate
2) The return hasn’t consider the depreciation of the building
3) I’m not sure how long the building will last before need to rebuild

But selling all rentals and went all paper (stock and bond) also doesn’t feel right

Any thoughts?
1) You don't have to raise it every year, should be able to raise it occasionally though.
2.) Are you using depreciation to reduce taxes? That can be a big deal, it's a significant tax savings.
3.) I would hope whatever you are renting out is structually sound and fit for living.

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FelixTheCat
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Re: Can i rely on rental property?

Post by FelixTheCat » Tue Mar 12, 2019 11:52 am

I suggest you go to the Bigger Pockets website if you are thinking about owning property rentals.
Felix is a wonderful, wonderful cat.

Thesaints
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Re: Can i rely on rental property?

Post by Thesaints » Tue Mar 12, 2019 1:30 pm

Depreciation is a great advantage, until it turns into capital gains, or maintenance costs. It is called "depreciation" for a reason, right ?

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K72
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Re: Can i rely on rental property?

Post by K72 » Tue Mar 12, 2019 2:48 pm

My wife and I have had rental property for about 30 years with mixed results. We started out being our own property managers, which was a fair amount of work (it's a pain to get a call from a tenant with a plumbing problem while you are on summer vacation or have a deadbeat tenant leave a mess w/o paying rent), but for the last several years we've used a property manager and have generally been satisfied. On the other hand, it is extremely satisfying to have your mortgage paid off by someone else while the home value (hopefully) goes up. In another case we had a negative cash flow for several years but my wife wouldn't budge for sentimental reasons. The key is to be clear about your motives, understand what you are getting into, and treat the venture as a business.

NYGiantsFan
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Re: Can i rely on rental property?

Post by NYGiantsFan » Tue Mar 12, 2019 3:13 pm

Neus wrote:
Tue Mar 12, 2019 5:51 am
Current ROI for managed rentals are 5%, but my expectation is that 5% is okay as long as i can increase rent yearly to follow inflation rate
For 5% return, you can buy safe commercial properties with long term lease (Example, Bank, Drug Store (CVS, Walgreen) or Franchise locations (Starbucks etc).

randomguy
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Re: Can i rely on rental property?

Post by randomguy » Tue Mar 12, 2019 3:17 pm

renue74 wrote:
Tue Mar 12, 2019 9:07 am
5% return is pretty low for rental property. I know it's very geographically centered as to what returns you're getting. But, in my area, Charlotte, NC, I can see 10% to 20% COC ROI.

You should make sure you vet your rentals and not get hung up on a deal.

Let's don't go down the path of "are rentals better than investing in the market?" It's been beat to death here and probably over at Biggerpockets.com as well. They are two different income streams and shouldn't be compared.

Is real estate stable? Will there ever be another 2008? I'm not sure and nobody really knows.

What you shouldn't do is put all your eggs in one basket. Don't throw all your $ into real estate. Diversify.

You should build automatic increases into your lease. At the end of the lease there is a place for general terms. Just put in there, a nominal 4% increase in rent will occur. I typically communicate with my tenants via text and simply just tell them about the increase before they sign the new lease.

Many folks here don't understand the renter's dynamics. 1.) The rental market is pretty hot now. (Will not always be)....but that means if you are going up 4%, most likely your competitors are too and it can be really tough to even find availability, much less availability in your price range.

2.) It cost money to move. Really it does. Moving truck, boxes, manpower/friendpower/pizza/beer, deposits, change of address forms. Most people are lazy. They really don't want to move because it takes a lot of brainpower and money. So either you pay the 4% or you do the above.

I would agree that a healthy 25-50% of your worth in real estate would be OK. 50% seems a little high.

But I will say...the properties I buy are not like Miami condos that cost $500K and could lose $200K in value. When you buy a $45K house, there's not much room to go down. Lesson is choose your rentals appropriately.
A 45k property might not go down much but you might find getting tenants who pay is harder😁 There are people the push low income rentals and others that push professional rentals. Either can work. The thing with real estate is that like stock picking, everyone can't be good. There will be great investors that make 15%. There will be poor investors that lose 15%. And a lot in the middle making 7-12%. The risk is hard to evaluate. A crash like 2008 is pretty rare. Local crashes like NE in the 90s or Texas in the 80s are more common. You probably aren't geographically diversified.

That being said, I believe you can add more value with real estate picking than stock picking AND running a real estate company is a lot easier than just about any other type of company.

Topic Author
Neus
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Re: Can i rely on rental property?

Post by Neus » Tue Mar 12, 2019 8:27 pm

renue74 wrote:
Tue Mar 12, 2019 9:07 am
5% return is pretty low for rental property. I know it's very geographically centered as to what returns you're getting. But, in my area, Charlotte, NC, I can see 10% to 20% COC ROI.

You should make sure you vet your rentals and not get hung up on a deal.

Let's don't go down the path of "are rentals better than investing in the market?" It's been beat to death here and probably over at Biggerpockets.com as well. They are two different income streams and shouldn't be compared.

Is real estate stable? Will there ever be another 2008? I'm not sure and nobody really knows.

What you shouldn't do is put all your eggs in one basket. Don't throw all your $ into real estate. Diversify.

You should build automatic increases into your lease. At the end of the lease there is a place for general terms. Just put in there, a nominal 4% increase in rent will occur. I typically communicate with my tenants via text and simply just tell them about the increase before they sign the new lease.

Many folks here don't understand the renter's dynamics. 1.) The rental market is pretty hot now. (Will not always be)....but that means if you are going up 4%, most likely your competitors are too and it can be really tough to even find availability, much less availability in your price range.

2.) It cost money to move. Really it does. Moving truck, boxes, manpower/friendpower/pizza/beer, deposits, change of address forms. Most people are lazy. They really don't want to move because it takes a lot of brainpower and money. So either you pay the 4% or you do the above.

I would agree that a healthy 25-50% of your worth in real estate would be OK. 50% seems a little high.

But I will say...the properties I buy are not like Miami condos that cost $500K and could lose $200K in value. When you buy a $45K house, there's not much room to go down. Lesson is choose your rentals appropriately.
Thank you for your insight

Anyway just to make clear we're talking the same ROI

i calculate the ROI based on NET Realizable Value (NRV) of current market price, not from acquiring price

I acquire the rental property several years ago before there's 350% surge on property price, the price has weaken on the last 4 years but still there's 280% to 300% gain based on current NRV

I have 3 types of properties:
1) Unmanaged rental (Yearly rent)
2) Managed rental (Monthly rent), more like a hostel but monthly rent, with one building consist of 20 tenant
3) Land holding with no yield but good capital appreciation

Returns on Unmanaged Rentals
If i calculate based on acquiring price, i will get 7% on rentals for unmanaged; if based on current NRV, it currently only gave 1.8% to 2%

Return on Managed Rentals
If i calculate based on acquiring price, i will get 10% on rentals for managed; if based on current NRV, it currently only gave 5%

Yes my initial mistake is due to inefficient local stock market, having no knowledge of indexing, and having no knowledge on rentals, i think rental is my best option...

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Re: Can i rely on rental property?

Post by abuss368 » Tue Mar 12, 2019 8:31 pm

Neus wrote:
Mon Mar 11, 2019 11:58 pm
So i wonder how rental property fares in term of income reliability in case my etf stock holding jitters

So far the issue is:
1) I find it difficult to raise rent even to match inflation rate
2) The return hasn’t consider the depreciation of the building
3) I’m not sure how long the building will last before need to rebuild

But selling all rentals and went all paper (stock and bond) also doesn’t feel right

Any thoughts?
One could also consider an investment in Vanguard REIT Index and Vanguard International REIT Index. There would be more diversification and lower costs overall. Not to mention the tax reporting would be much easier.
John C. Bogle: "Simplicity is the master key to financial success."

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Neus
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Re: Can i rely on rental property?

Post by Neus » Tue Mar 12, 2019 8:38 pm

dbr wrote:
Tue Mar 12, 2019 9:15 am
Thesaints wrote:
Tue Mar 12, 2019 1:38 am
Yes, income from (and appreciation of) rentals is not a sure thing. The one thing that is sure, though, is that they will require work on your part, as opposed as a Total Stock Market ETF, which will require virtually none.
For sure. Rental property is a perfectly reasonable investment and holding of assets. As suggested above it is also really a business that you have to run. There is risk to both the value of the assets and your ability to obtain income.

Probably the only use of money that is structured as reliable income would be a single premium immediate annuity which also is an insurance product that pools longevity risk. But that is a topic for a different conversation. There are pluses and minuses to annuities of this type. Social Security is an example of an annuity you may already eventually have.

Stocks and bonds have their own risks and their own assessment of how reliable the income that can be taken will be.

It might be good to do some reading in the Wiki and in some of the books available on the general subject.
Yes, it turns out rentals is not as easy as it seems at the first place

I'm not sure i have access to single premium immediate annuity but i'll check it out

My consideration is if i allocate 50%-50% on stock and bond, and have rentals, the allocation became 50% stock, 25% bond, 25% rental

So the logic is when stock dips i can safely not withdraw from the stock portion at all because managed rental yield at 5% is still higher than bond yield and both should cover my expenses if i cut back and put the stock down period as tightening the belt period

And another logic which need confirmation is: while managed rental only yield 5%, there's capital appreciation on the principal which at least is adjusting to inflation; While at bond, there's no capital appreciation

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Neus
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Re: Can i rely on rental property?

Post by Neus » Tue Mar 12, 2019 8:44 pm

abuss368 wrote:
Tue Mar 12, 2019 8:31 pm
Neus wrote:
Mon Mar 11, 2019 11:58 pm
So i wonder how rental property fares in term of income reliability in case my etf stock holding jitters

So far the issue is:
1) I find it difficult to raise rent even to match inflation rate
2) The return hasn’t consider the depreciation of the building
3) I’m not sure how long the building will last before need to rebuild

But selling all rentals and went all paper (stock and bond) also doesn’t feel right

Any thoughts?
One could also consider an investment in Vanguard REIT Index and Vanguard International REIT Index. There would be more diversification and lower costs overall. Not to mention the tax reporting would be much easier.
My experience with owning vanguard REITS is:
1) The price fluctuates quite sharply and it unnerves me, i didn't expect this kind of fluctuation for a supposedly stable investment which mimic rentals
2) This need confirmation because in my current knowledge, due some reason, unlike real estate, REITS doesn't appreciate the capital over time

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Re: Can i rely on rental property?

Post by abuss368 » Tue Mar 12, 2019 8:47 pm

Neus wrote:
Tue Mar 12, 2019 8:44 pm
abuss368 wrote:
Tue Mar 12, 2019 8:31 pm
Neus wrote:
Mon Mar 11, 2019 11:58 pm
So i wonder how rental property fares in term of income reliability in case my etf stock holding jitters

So far the issue is:
1) I find it difficult to raise rent even to match inflation rate
2) The return hasn’t consider the depreciation of the building
3) I’m not sure how long the building will last before need to rebuild

But selling all rentals and went all paper (stock and bond) also doesn’t feel right

Any thoughts?
One could also consider an investment in Vanguard REIT Index and Vanguard International REIT Index. There would be more diversification and lower costs overall. Not to mention the tax reporting would be much easier.
My experience with owning vanguard REITS is:
1) The price fluctuates quite sharply and it unnerves me, i didn't expect this kind of fluctuation for a supposedly stable investment which mimic rentals
2) This need confirmation because in my current knowledge, due some reason, unlike real estate, REITS doesn't appreciate the capital over time
Direct real estate fluctuates in value as well. No different than any asset. There is no readily quotable value form an exchange available.
John C. Bogle: "Simplicity is the master key to financial success."

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Neus
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Re: Can i rely on rental property?

Post by Neus » Tue Mar 12, 2019 8:52 pm

StandingRock wrote:
Tue Mar 12, 2019 11:24 am
Neus wrote:
Mon Mar 11, 2019 11:58 pm
So i wonder how rental property fares in term of income reliability in case my etf stock holding jitters

So far the issue is:
1) I find it difficult to raise rent even to match inflation rate
2) The return hasn’t consider the depreciation of the building
3) I’m not sure how long the building will last before need to rebuild

But selling all rentals and went all paper (stock and bond) also doesn’t feel right

Any thoughts?
1) You don't have to raise it every year, should be able to raise it occasionally though.
2.) Are you using depreciation to reduce taxes? That can be a big deal, it's a significant tax savings.
3.) I would hope whatever you are renting out is structually sound and fit for living.
1) Yes but my initial reason for trying rental is because i think i can raise it every year to adjust it for inflation, so since i can't it will lose the inflation protected purpose i'm trying to achieve
2) I don't use depreciation to reduce taxes, but if the building can last 28 years, and it cost me 150.000 USD to build and the ending value is 0, there's 5.357 USD depreciation per year using straight line that i haven't account for on the 5% yield
3) It's totally safe and sound, but i have no knowledge how long does managed rental property will last before the need to rebuild, thus additional capital is needed, IFRS acknowledged a property to be depreciable for 28 years, but i have saw several building excess 50 years and still rentable with proper maintenance and interior refresh

If with proper maintenance it can last 50 years before need to rebuild, then i think it's quite a good investment
If it can last only 28 years, then it's something else

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Re: Can i rely on rental property?

Post by Wiggums » Tue Mar 12, 2019 9:23 pm

Neus wrote:
Tue Mar 12, 2019 8:27 pm

I have 3 types of properties:
1) Unmanaged rental (Yearly rent)
2) Managed rental (Monthly rent), more like a hostel but monthly rent, with one building consist of 20 tenant
3) Land holding with no yield but good capital appreciation
Your question is “can you rely on property” but I am not sure what this means. what is your goal? What problem are you trying to solve?

Is this property your entire portfolio or just a small portion?

Can you live off the proceeds from the property?

Do you feel like you have too much invested in the three properties?

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Re: Can i rely on rental property?

Post by CurlyDave » Tue Mar 12, 2019 11:46 pm

For the small investor rentals are a completely different class of investment than stocks or bonds.

1. Rentals done right require WORK. They are the furthest an investor can get from a passive investment. This is both a good and a bad thing. The bad is the time involved. The good is that, if you do it right, you are compensated for the time you put in.

DW and I spent a lot of time on our rentals during our accumulation phase. For the right couple this is working together toward a common goal and can strengthen your relationship. We were compensated in appreciation, mortgage pay-down and rent. Now that we have retired, I manage our rentals in our retirement location. This is a part time job I can't be fired from and enhances our income.

2. The work does not stop at managing, repairing and improving the rentals you own. We were constantly doing rent surveys. See what units are available, plan out a route and drive to see 6 or 8 on a Saturday. Compare with the ones you own, to get a feel for what the fair market rent of your units really is. Forget a fixed percentage increase every year. You are in a competitive market and you need to know the market.

Once a year I would increase rents. I would take what I perceived the fair market value of the unit to be and multiply by 11/12. Then I would raise the rent to that level in a letter to the tenant. Why 11/12? My thinking was that a vacancy would usually take a month to fill and I would get no rent and would have to pay for fix-up costs. At 11/12 of the current market rent, if my tenant stays I am not really out any rent and I save the fix-up cost. I have never had a tenant leave due to the rent increase with this strategy. I have had many say they could not afford it and tell me they were going to leave, but once they look around and see what a new place would cost, they always decide to pay the new rent. After all, it is less than they would pay elsewhere and they don't have moving expenses.

If a tenant leaves for some other reason, then I increase the rent to current market value for the new tenant.

3. Never, ever use a yearly lease. This protects the tenant against a rent increase, but does nothing to protect you. Tenants move out and break leases all the time and they are judgement-proof. Not enough resources to make it worthwhile to try to enforce the lease. Use a month-to-month rental agreement.

4. One of the great beauties of rental property is that I can borrow 80% of the price at very reasonable interest rates. And then get someone else to pay off the loan for me. This is the way to build wealth in real estate. And the paying off is in future, inflated dollars.

5. Never get overextended. Analyze every new purchase based on a "bad case analysis". Not "worst case", which is you lose your job, get hit by a car and crippled and go blind, plus have the unit vacant. But one where one of a couple is unemployed for a year, and you have a year long vacancy. If you can survive this, then you are not going to be overextended.

6. Never buy a property you would not live in yourself if you suffered a serious financial reversal.

7. Never buy a property where you think you should bring a pistol with you in order to collect the rent.

There are lots of lessons learned over the years, but rental properties have generated substantial wealth for us...

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Re: Can i rely on rental property?

Post by Neus » Wed Mar 13, 2019 12:01 am

CurlyDave wrote:
Tue Mar 12, 2019 11:46 pm
For the small investor rentals are a completely different class of investment than stocks or bonds.

1. Rentals done right require WORK. They are the furthest an investor can get from a passive investment. This is both a good and a bad thing. The bad is the time involved. The good is that, if you do it right, you are compensated for the time you put in.

DW and I spent a lot of time on our rentals during our accumulation phase. For the right couple this is working together toward a common goal and can strengthen your relationship. We were compensated in appreciation, mortgage pay-down and rent. Now that we have retired, I manage our rentals in our retirement location. This is a part time job I can't be fired from and enhances our income.

2. The work does not stop at managing, repairing and improving the rentals you own. We were constantly doing rent surveys. See what units are available, plan out a route and drive to see 6 or 8 on a Saturday. Compare with the ones you own, to get a feel for what the fair market rent of your units really is. Forget a fixed percentage increase every year. You are in a competitive market and you need to know the market.

Once a year I would increase rents. I would take what I perceived the fair market value of the unit to be and multiply by 11/12. Then I would raise the rent to that level in a letter to the tenant. Why 11/12? My thinking was that a vacancy would usually take a month to fill and I would get no rent and would have to pay for fix-up costs. At 11/12 of the current market rent, if my tenant stays I am not really out any rent and I save the fix-up cost. I have never had a tenant leave due to the rent increase with this strategy. I have had many say they could not afford it and tell me they were going to leave, but once they look around and see what a new place would cost, they always decide to pay the new rent. After all, it is less than they would pay elsewhere and they don't have moving expenses.

If a tenant leaves for some other reason, then I increase the rent to current market value for the new tenant.

3. Never, ever use a yearly lease. This protects the tenant against a rent increase, but does nothing to protect you. Tenants move out and break leases all the time and they are judgement-proof. Not enough resources to make it worthwhile to try to enforce the lease. Use a month-to-month rental agreement.

4. One of the great beauties of rental property is that I can borrow 80% of the price at very reasonable interest rates. And then get someone else to pay off the loan for me. This is the way to build wealth in real estate. And the paying off is in future, inflated dollars.

5. Never get overextended. Analyze every new purchase based on a "bad case analysis". Not "worst case", which is you lose your job, get hit by a car and crippled and go blind, plus have the unit vacant. But one where one of a couple is unemployed for a year, and you have a year long vacancy. If you can survive this, then you are not going to be overextended.

6. Never buy a property you would not live in yourself if you suffered a serious financial reversal.

7. Never buy a property where you think you should bring a pistol with you in order to collect the rent.

There are lots of lessons learned over the years, but rental properties have generated substantial wealth for us...
Thank you, great point..

Yes indeed real estate has generate wealth for me too but it seems the return isn’t worth it anymore and it’s time to move on

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Neus
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Re: Can i rely on rental property?

Post by Neus » Wed Mar 13, 2019 12:07 am

michaelingp wrote:
Tue Mar 12, 2019 11:10 am
My parents never owned any stocks or bonds, just real estate. Might have had something to do with lasting effects of the 1930's crash. As others have said, it's a business, and they put in a lot of sweat equity and made plenty of mistakes. In addition to funding their own retirement, they provided a lot of assistance for their children's homes. They bought one house for me from a full-time real-estate investor. He told me, "Once you get 20 houses, you're set for life." So this may be the wrong forum, but there is precedent.
Yes my parents also why i bought real estate in the first place

In part they’re correct as i’m experiencing 300% gain which unfortunately i haven’t realize by selling yet

But it seems for parents generation, real estate seems like the best idea, but this generation has indexing which parents are unfamiliar with, especially in my country where stock market is highly inefficient

Can you help me understand about 20 houses and set for life part..?
20 houses is a lot more work

JustinR
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Re: Can i rely on rental property?

Post by JustinR » Wed Mar 13, 2019 12:08 am

You get the same return in the stock market as you do with rentals, for 90,000% less work.

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Neus
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Re: Can i rely on rental property?

Post by Neus » Wed Mar 13, 2019 12:14 am

Wiggums wrote:
Tue Mar 12, 2019 9:23 pm
Neus wrote:
Tue Mar 12, 2019 8:27 pm

I have 3 types of properties:
1) Unmanaged rental (Yearly rent)
2) Managed rental (Monthly rent), more like a hostel but monthly rent, with one building consist of 20 tenant
3) Land holding with no yield but good capital appreciation
Your question is “can you rely on property” but I am not sure what this means. what is your goal? What problem are you trying to solve?

Is this property your entire portfolio or just a small portion?

Can you live off the proceeds from the property?

Do you feel like you have too much invested in the three properties?
I have about 25 properties which can be classified into those 3 categories

90% of my net worth is tied to real estate

What i’m trying to understand is whether rental income can be relied for income, together with 25% of bond, in times of stock downturn in the future, so i didn’t have to do safe withdraw rate on the stock portion at bad times

Real estate 5% yield still has higher yield than bond and there is capital appreciation while bond has none

Yes i can live from rental but the problem is inflation is higher than amount i can raise on rental every year

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Neus
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Re: Can i rely on rental property?

Post by Neus » Wed Mar 13, 2019 12:17 am

JustinR wrote:
Wed Mar 13, 2019 12:08 am
You get the same return in the stock market as you do with rentals, for 90,000% less work.
In my case, rental is not intended to be like stock, but to be more like bond

I can’t stomach more than 50% on stock

Therefore 50 stock - 50 bond suits me

But i think why not 50 stock - 25 bond - 25 rental real estate (if rental can be relied upon)

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Re: Can i rely on rental property?

Post by msk » Wed Mar 13, 2019 6:13 am

JustinR wrote:
Wed Mar 13, 2019 12:08 am
You get the same return in the stock market as you do with rentals, for 90,000% less work.
Empty land can also show tremendous appreciation, with, essentially, nil effort. The OP has elsewhere indicated that his local population is increasing rapidly and has resulted in rapid appreciation of RE prices but not in rents (he quoted 2% returns on the RE value). I wished to retire early, at age 45, when my rents on paid-up property equaled my job income. Too bad the good times never last long enough :annoyed Suddenly the supply of property surged, rents collapsed and it took much longer to pay off the mortgage on my last apartment building. My retirement was thereby postponed by 10 years, to age 55. Upon retirement I sold off the apartment building to a friend and his rents almost doubled in another 5 years (new surge in rents). So he was very happy. But I had put the sales proceeds into one stock, and that went up 3x in 2 years. So both of us were pleased. Every booming location I have participated in (in different countries) seems to go up cyclically, not smoothly. Sudden bouts of doubling in the land value, perhaps in 5 to 10 year cycles. The cost of building seems to go up simply with inflation but land value is intricately tied to local population growth. Hence in steady-state locations it is often said that RE keeps pace with inflation, but to make big $ in RE you have to have a nose for where population is surging, and sell out before the neighborhood becomes unpopular.

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Re: Can i rely on rental property?

Post by bondsr4me » Wed Mar 13, 2019 7:13 am

There are a few issues that can be difficult to deal with.
From what I saw with a client:

Finding reliable paying tenants was always an ongoing issue; constant turnover; constant vacancies.
He was constantly dealing with the JP to evict tenants; the income is usually lost; costs of evictions a real pain.
Tenants would string things out for as long as they could before being evicted.
Trashy places left behind.

When the Great Recession hit, he barely held onto his rental properties.
The market values of properties barely covered the outstanding loans.
He was constantly trying to remortgage at lower rates, but his equity was too low and the bankers wouldn't touch him.

He also was taking out personal liines of credit which did not help his overall equity.

Upkeep costs were a constant headache.

No rentals for me....only what's in the etf's.
I don't want anyone calling me in the middle of the night for busted pipes or rats or bats or noisy drunk tenants.
No thank you...

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Re: Can i rely on rental property?

Post by dbr » Wed Mar 13, 2019 8:29 am

Neus wrote:
Tue Mar 12, 2019 8:38 pm
dbr wrote:
Tue Mar 12, 2019 9:15 am


For sure. Rental property is a perfectly reasonable investment and holding of assets. As suggested above it is also really a business that you have to run. There is risk to both the value of the assets and your ability to obtain income.

Probably the only use of money that is structured as reliable income would be a single premium immediate annuity which also is an insurance product that pools longevity risk. But that is a topic for a different conversation. There are pluses and minuses to annuities of this type. Social Security is an example of an annuity you may already eventually have.

Stocks and bonds have their own risks and their own assessment of how reliable the income that can be taken will be.

It might be good to do some reading in the Wiki and in some of the books available on the general subject.
Yes, it turns out rentals is not as easy as it seems at the first place

I'm not sure i have access to single premium immediate annuity but i'll check it out

Anyone can buy an SPIA from an insurance company at any time. If one is suffering from health conditions it may even be possible to get a reduction in the cost. An annuity operates in reverse to life insurance. It still takes thinking through whether or not an SPIA would be helpful or not in any particular situation, but it is an independent way to provide income in retirement.


My consideration is if i allocate 50%-50% on stock and bond, and have rentals, the allocation became 50% stock, 25% bond, 25% renta

So the logic is when stock dips i can safely not withdraw from the stock portion at all because managed rental yield at 5% is still higher than bond yield and both should cover my expenses if i cut back and put the stock down period as tightening the belt period

It can be perfectly reasonable to diversity one's wealth and sources of income to include real estate, stocks, and bonds. The devil is in the details and takes some thinking through.

And another logic which need confirmation is: while managed rental only yield 5%, there's capital appreciation on the principal which at least is adjusting to inflation; While at bond, there's no capital appreciation

Correct. Bonds remove risk of uncertainty in what the value will be and that is paid for by lower expectation of return. There is an ironclad trade off of possible higher return with greater risk. Risk means the hoped for return may not materialize.


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Re: Can i rely on rental property?

Post by Every things free » Wed Mar 13, 2019 8:58 am

I have. For 35 years mine have paid for all my bills, 30+ ocean cruises and a healthy portfolio of stocks and bonds. My brother has 4 rentals and seldom has a vacancy.
Kim
You know when you are rich. You can buy anything you want but want nothing.

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AerialWombat
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Re: Can i rely on rental property?

Post by AerialWombat » Wed Mar 13, 2019 10:04 am

As already indicated by other posters, there aren't many active real estate investors here. In fact, some regulars on BH are aggressively anti-real estate, so be forewarned.

I currently own five doors, in three different states, and use property managers for all. Even with property managers, I still have to "manage the manager" -- it's NOT 100% passive, as some infomercial and seminar gurus would lead you to believe. Even though I didn't start acquiring properties again (I went BK in the '07 RE crash) until 2015, my cash flow is already sufficient to provide me with a meager existence if I had no other income.

My cash-on-cash returns are in the high teens.

The issues you pointed out are real. Vacancies and repairs suck, but it comes with the territory. It's said that you "make your money when you buy", which is true. You MUST include allowances for these costs in your long-term projections. I maintain much larger than normal cash reserves with my property managers (meaning, they hold the funds in trust accounts) to be used for repairs, and I choose not to be stingy with maintenance. This one factor alone aides greatly in tenant renewal. For example, all my leases currently expire in February and March, and every tenant just renewed, with all but one getting a rent increase. I voluntarily hold one tenant's rent at 2010 levels (tenant already lived there when I bought it) by choice, as a personal contribution to affordable housing efforts in this particular city (near Seattle).

While I am a huge believer in the power of real estate, I don't put all my eggs in that one basket. I know many people on Bigger Pockets that do, but my target AA is 50% real estate equity, 50% securities. Due to the rampant appreciation on my properties, I'm way out of balance on this, and so I'm probably not going to purchase another property in 2019 -- all cash is going to stocks/bonds in order to "rebalance" back to 50/50.

Within my securities portfolio, I'm incredibly conservative for my age, at 30/70 stocks/bonds, in order to balance out the high risk of my real estate holdings.

I hope this helps.
“Life doesn’t come with a warranty.” -Michael LeBoeuf

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Re: Can i rely on rental property?

Post by renue74 » Wed Mar 13, 2019 1:11 pm

Here's the deal....nobody says it, but it needs to be said:

People are inherently dirty. Tenants even more so. If you buy a rental property, you ensure the systems are working properly (plumbing, HVAC, electrical)...and leave it alone. If you make it nice, it won't be nice in 5 years.

I live in an area where I can be $50K rental houses...but they look like $50K rental houses. But, gentrification is occurring and over the next 10 years, I would expect those rental houses would be $100K or more. Lack of inventory and these types of homes work well for first time home buyers in the south.

So my plans are to let it ride for rentals for 8 years or so....spend some time completely rehabbing them and then selling them to owner occupants.

Does that sound like investing? Not really...it's not. It's a business and it sucks up your time. For me...I love learning and doing building trades. But I don't love doing them for people who don't respect it...and that's what tenants do. (6 year landlord...give me another 8 and I'm cashing out)

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Neus
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Re: Can i rely on rental property?

Post by Neus » Wed Mar 13, 2019 8:34 pm

AerialWombat wrote:
Wed Mar 13, 2019 10:04 am
As already indicated by other posters, there aren't many active real estate investors here. In fact, some regulars on BH are aggressively anti-real estate, so be forewarned.

I currently own five doors, in three different states, and use property managers for all. Even with property managers, I still have to "manage the manager" -- it's NOT 100% passive, as some infomercial and seminar gurus would lead you to believe. Even though I didn't start acquiring properties again (I went BK in the '07 RE crash) until 2015, my cash flow is already sufficient to provide me with a meager existence if I had no other income.

My cash-on-cash returns are in the high teens.

The issues you pointed out are real. Vacancies and repairs suck, but it comes with the territory. It's said that you "make your money when you buy", which is true. You MUST include allowances for these costs in your long-term projections. I maintain much larger than normal cash reserves with my property managers (meaning, they hold the funds in trust accounts) to be used for repairs, and I choose not to be stingy with maintenance. This one factor alone aides greatly in tenant renewal. For example, all my leases currently expire in February and March, and every tenant just renewed, with all but one getting a rent increase. I voluntarily hold one tenant's rent at 2010 levels (tenant already lived there when I bought it) by choice, as a personal contribution to affordable housing efforts in this particular city (near Seattle).

While I am a huge believer in the power of real estate, I don't put all my eggs in that one basket. I know many people on Bigger Pockets that do, but my target AA is 50% real estate equity, 50% securities. Due to the rampant appreciation on my properties, I'm way out of balance on this, and so I'm probably not going to purchase another property in 2019 -- all cash is going to stocks/bonds in order to "rebalance" back to 50/50.

Within my securities portfolio, I'm incredibly conservative for my age, at 30/70 stocks/bonds, in order to balance out the high risk of my real estate holdings.

I hope this helps.
Yes i agree.. Those real estate gurus makes it look so easy

Hm it's interesting that you want to purchase another, i think i'm done with property, at least the rent generating ones (capital appreciation ones like land is still interesting though)

But as you point out, real estate appreciation is really occur, and it occur in cycles (we're currently on soft market, upcoming election next month)

I'm currently bid my time for the next hot cycles and planned to cash out on most..

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Re: Can i rely on rental property?

Post by Cycle » Wed Mar 13, 2019 8:47 pm

I have 16% in rental real estate right now. It provides good diversity to my income. I could also use it as a chore for kids when they are old enough to mow the lawn / shovel.
Never look back unless you are planning to go that way

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Neus
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Re: Can i rely on rental property?

Post by Neus » Wed Mar 13, 2019 9:33 pm

renue74 wrote:
Wed Mar 13, 2019 1:11 pm
Here's the deal....nobody says it, but it needs to be said:

People are inherently dirty. Tenants even more so. If you buy a rental property, you ensure the systems are working properly (plumbing, HVAC, electrical)...and leave it alone. If you make it nice, it won't be nice in 5 years.

I live in an area where I can be $50K rental houses...but they look like $50K rental houses. But, gentrification is occurring and over the next 10 years, I would expect those rental houses would be $100K or more. Lack of inventory and these types of homes work well for first time home buyers in the south.

So my plans are to let it ride for rentals for 8 years or so....spend some time completely rehabbing them and then selling them to owner occupants.

Does that sound like investing? Not really...it's not. It's a business and it sucks up your time. For me...I love learning and doing building trades. But I don't love doing them for people who don't respect it...and that's what tenants do. (6 year landlord...give me another 8 and I'm cashing out)
Thank you for your insight

Is there any particular reason for "8" years?

renue74
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Re: Can i rely on rental property?

Post by renue74 » Thu Mar 14, 2019 8:07 am

Neus wrote:
Wed Mar 13, 2019 9:33 pm
renue74 wrote:
Wed Mar 13, 2019 1:11 pm
Here's the deal....nobody says it, but it needs to be said:

People are inherently dirty. Tenants even more so. If you buy a rental property, you ensure the systems are working properly (plumbing, HVAC, electrical)...and leave it alone. If you make it nice, it won't be nice in 5 years.

I live in an area where I can be $50K rental houses...but they look like $50K rental houses. But, gentrification is occurring and over the next 10 years, I would expect those rental houses would be $100K or more. Lack of inventory and these types of homes work well for first time home buyers in the south.

So my plans are to let it ride for rentals for 8 years or so....spend some time completely rehabbing them and then selling them to owner occupants.

Does that sound like investing? Not really...it's not. It's a business and it sucks up your time. For me...I love learning and doing building trades. But I don't love doing them for people who don't respect it...and that's what tenants do. (6 year landlord...give me another 8 and I'm cashing out)
Thank you for your insight

Is there any particular reason for "8" years?
My personal plan....

I'm 45. I plan to retire when I'm 55. Holding rental property for 8 years more years. Then slowly getting rid of tenants, fix & flip to sell off properties over 2 years....that get's me to 55. I have friends how have been in rentals for 10-20 years. Eventually you get tired of it and want out. When they try to sell their portfolio of homes (10-15 homes each), it has taken them about 2-3 years to fully liquidate all their properties.

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