Why are you NOT buying rental properties?

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Lazareth
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Re: Why are you NOT buying rental properties?

Post by Lazareth » Fri Jan 10, 2020 11:53 am

The inefficiencies in the residential real estate market are remarkable, and present a phenomenal opportunity for those willing to DIY or hire-out to perform simple cosmetic improvements.

At age 26 I had saved up a minimum down payment on an older two-family home. I moved into the downstairs half and carefully rented out the upstairs. That purchase launched my financial security and I highly recommend it especially to younger folks looking to jump-start their wealth.

I bought the eyesore on the street. It needed paint inside and out, yard clean-up, and some fixture upgrades. That lack of curb appeal saved me tens of thousands of dollars on the purchase price. The out-of-town sellers were anxious to cash-out mom's old house.

Conversely, when I sold the property three years later, my simple touches like the flowers and a new mailbox, sparkling new door hardware and Home Depot light fixtures, sanded or newly-carpeted floors and fresh paint allowed me to sell at a significant premium to similar homes on the street.
a/66, retired, married, enjoy p/t employment.

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watchnerd
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Re: Why are you NOT buying rental properties?

Post by watchnerd » Fri Jan 10, 2020 11:56 am

gougou wrote:
Fri Jan 10, 2020 11:29 am

Existence of a 5X ETF over a long period of time, say 30+ years. Preferably one that had positive return over its lifetime.
Do we have that data?

BTW, I'm not saying this is a good investment -- I'm just saying comparing leveraged RE to REITS is an apples vs oranges question due to gearing.
70% Global Market Weight Equities | 15% Long Treasuries 15% short TIPS & cash || RSU + ESPP

flaccidsteele
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Re: Why are you NOT buying rental properties?

Post by flaccidsteele » Fri Jan 10, 2020 12:03 pm

Lazareth wrote:
Fri Jan 10, 2020 11:53 am
The inefficiencies in the residential real estate market are remarkable, and present a phenomenal opportunity for those willing to DIY or hire-out to perform simple cosmetic improvements.

At age 26 I had saved up a minimum down payment on an older two-family home. I moved into the downstairs half and carefully rented out the upstairs. That purchase launched my financial security and I highly recommend it especially to younger folks looking to jump-start their wealth.

I bought the eyesore on the street. It needed paint inside and out, yard clean-up, and some fixture upgrades. That lack of curb appeal saved me tens of thousands of dollars on the purchase price. The out-of-town sellers were anxious to cash-out mom's old house.

Conversely, when I sold the property three years later, my simple touches like the flowers and a new mailbox, sparkling new door hardware and Home Depot light fixtures, sanded or newly-carpeted floors and fresh paint allowed me to sell at a significant premium to similar homes on the street.
That's an amazing story. Kudos to you for your success and taking the bull by the horns!
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat

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tomtoms
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Re: Why are you NOT buying rental properties?

Post by tomtoms » Fri Jan 10, 2020 1:27 pm

Lazareth wrote:
Fri Jan 10, 2020 11:53 am
The inefficiencies in the residential real estate market are remarkable, and present a phenomenal opportunity for those willing to DIY or hire-out to perform simple cosmetic improvements.
Exactly. This is why RE can be very profitable but there are people out there who don’t want to look at houses during the weekend or paranoid about that 3 am phone call from tenants about some overflowing toilet (hint: just tell them to shut off the valve...most people already know that and won’t call you at 3 am)

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willthrill81
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Re: Why are you NOT buying rental properties?

Post by willthrill81 » Fri Jan 10, 2020 1:50 pm

tomtoms wrote:
Fri Jan 10, 2020 1:27 pm
Lazareth wrote:
Fri Jan 10, 2020 11:53 am
The inefficiencies in the residential real estate market are remarkable, and present a phenomenal opportunity for those willing to DIY or hire-out to perform simple cosmetic improvements.
Exactly. This is why RE can be very profitable but there are people out there who don’t want to look at houses during the weekend or paranoid about that 3 am phone call from tenants about some overflowing toilet (hint: just tell them to shut off the valve...most people already know that and won’t call you at 3 am)
Yes, rental properties can be very profitable. But unless you have a great property management company, it's often (usually?) a part-time job, and it might be even if you have a great manager. And in many areas, the market is such that rental properties are not a very good deal; that's been shown repeatedly in this thread.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

Lazareth
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Re: Why are you NOT buying rental properties?

Post by Lazareth » Fri Jan 10, 2020 2:12 pm

willthrill81 wrote:
Fri Jan 10, 2020 1:50 pm
tomtoms wrote:
Fri Jan 10, 2020 1:27 pm
Lazareth wrote:
Fri Jan 10, 2020 11:53 am
The inefficiencies in the residential real estate market are remarkable, and present a phenomenal opportunity for those willing to DIY or hire-out to perform simple cosmetic improvements.
Exactly. This is why RE can be very profitable but there are people out there who don’t want to look at houses during the weekend or paranoid about that 3 am phone call from tenants about some overflowing toilet (hint: just tell them to shut off the valve...most people already know that and won’t call you at 3 am)
Yes, rental properties can be very profitable. But unless you have a great property management company, it's often (usually?) a part-time job, and it might be even if you have a great manager. And in many areas, the market is such that rental properties are not a very good deal; that's been shown repeatedly in this thread.
I guess it's a matter of comfort level. And there's always someone ready to exploit (in a positive way) another's comfort level. You could step in to the landlord role by purchasing a small single or multi family suburban home, or maybe a condo apartment that allows renting, where the maintenance could be minimal. I owned and rented out two condos, my tenants were executives at a nearby insurance company. They signed one-year leases. I never understood why they didn't just buy but that's their choice. They were happy with the arrangement and so was I. The condo assciation took care of maintenance. I eventualy sold at a nice profit.
a/66, retired, married, enjoy p/t employment.

gougou
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Re: Why are you NOT buying rental properties?

Post by gougou » Fri Jan 10, 2020 2:28 pm

watchnerd wrote:
Fri Jan 10, 2020 11:56 am
gougou wrote:
Fri Jan 10, 2020 11:29 am

Existence of a 5X ETF over a long period of time, say 30+ years. Preferably one that had positive return over its lifetime.
Do we have that data?

BTW, I'm not saying this is a good investment -- I'm just saying comparing leveraged RE to REITS is an apples vs oranges question due to gearing.
Leveraged rental properties are comparable to equities. The underlying business of a stock can very well have a mortgage.

If you put another 3X or 5X leverage on equity then it is comparable to taking out a personal loan and use that as the down payment of a rental property.

Anon9001
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Re: Why are you NOT buying rental properties?

Post by Anon9001 » Fri Jan 10, 2020 2:29 pm

Very poor liquidity combined with garbage rental yields make me not want to buy real estate directly. I would consider REIT's if they were available in a fund format. Country is India.

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tomtoms
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Re: Why are you NOT buying rental properties?

Post by tomtoms » Fri Jan 10, 2020 2:30 pm

willthrill81 wrote:
Fri Jan 10, 2020 1:50 pm
tomtoms wrote:
Fri Jan 10, 2020 1:27 pm
Lazareth wrote:
Fri Jan 10, 2020 11:53 am
The inefficiencies in the residential real estate market are remarkable, and present a phenomenal opportunity for those willing to DIY or hire-out to perform simple cosmetic improvements.
Exactly. This is why RE can be very profitable but there are people out there who don’t want to look at houses during the weekend or paranoid about that 3 am phone call from tenants about some overflowing toilet (hint: just tell them to shut off the valve...most people already know that and won’t call you at 3 am)
Yes, rental properties can be very profitable. But unless you have a great property management company, it's often (usually?) a part-time job, and it might be even if you have a great manager. And in many areas, the market is such that rental properties are not a very good deal; that's been shown repeatedly in this thread.
It is not difficult to find good people nowadays especially with Yelp. Everyone I had worked with have been reliable and good because I prescreened them. You have to do your homework too. You have to make sure the house is solid and is in good condition.

flaccidsteele
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Re: Why are you NOT buying rental properties?

Post by flaccidsteele » Fri Jan 10, 2020 2:32 pm

willthrill81 wrote:
Fri Jan 10, 2020 1:50 pm
tomtoms wrote:
Fri Jan 10, 2020 1:27 pm
Lazareth wrote:
Fri Jan 10, 2020 11:53 am
The inefficiencies in the residential real estate market are remarkable, and present a phenomenal opportunity for those willing to DIY or hire-out to perform simple cosmetic improvements.
Exactly. This is why RE can be very profitable but there are people out there who don’t want to look at houses during the weekend or paranoid about that 3 am phone call from tenants about some overflowing toilet (hint: just tell them to shut off the valve...most people already know that and won’t call you at 3 am)
Yes, rental properties can be very profitable. But unless you have a great property management company, it's often (usually?) a part-time job, and it might be even if you have a great manager. And in many areas, the market is such that rental properties are not a very good deal; that's been shown repeatedly in this thread.
Just like stocks, I make the most money in real estate by buying when the market goes down
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat

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tomtoms
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Re: Why are you NOT buying rental properties?

Post by tomtoms » Fri Jan 10, 2020 2:35 pm

flaccidsteele wrote:
Fri Jan 10, 2020 2:32 pm
willthrill81 wrote:
Fri Jan 10, 2020 1:50 pm
tomtoms wrote:
Fri Jan 10, 2020 1:27 pm
Lazareth wrote:
Fri Jan 10, 2020 11:53 am
The inefficiencies in the residential real estate market are remarkable, and present a phenomenal opportunity for those willing to DIY or hire-out to perform simple cosmetic improvements.
Exactly. This is why RE can be very profitable but there are people out there who don’t want to look at houses during the weekend or paranoid about that 3 am phone call from tenants about some overflowing toilet (hint: just tell them to shut off the valve...most people already know that and won’t call you at 3 am)
Yes, rental properties can be very profitable. But unless you have a great property management company, it's often (usually?) a part-time job, and it might be even if you have a great manager. And in many areas, the market is such that rental properties are not a very good deal; that's been shown repeatedly in this thread.
Just like stocks, I make the most money in real estate by buying when the market goes down
Besides 2006, when was the last time RE collapsed? I am not talking about fluctuations in the RE market.

albireo13
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Re: Why are you NOT buying rental properties?

Post by albireo13 » Fri Jan 10, 2020 3:10 pm

absolutely zero interest in being a rental property owner.
I have a full time job already.
Beyond that, I would prefer to spend my remaining time and attention on family, friends, and relaxing pursuits.

flaccidsteele
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Re: Why are you NOT buying rental properties?

Post by flaccidsteele » Fri Jan 10, 2020 3:45 pm

tomtoms wrote:
Fri Jan 10, 2020 2:35 pm
flaccidsteele wrote:
Fri Jan 10, 2020 2:32 pm
willthrill81 wrote:
Fri Jan 10, 2020 1:50 pm
tomtoms wrote:
Fri Jan 10, 2020 1:27 pm
Lazareth wrote:
Fri Jan 10, 2020 11:53 am
The inefficiencies in the residential real estate market are remarkable, and present a phenomenal opportunity for those willing to DIY or hire-out to perform simple cosmetic improvements.
Exactly. This is why RE can be very profitable but there are people out there who don’t want to look at houses during the weekend or paranoid about that 3 am phone call from tenants about some overflowing toilet (hint: just tell them to shut off the valve...most people already know that and won’t call you at 3 am)
Yes, rental properties can be very profitable. But unless you have a great property management company, it's often (usually?) a part-time job, and it might be even if you have a great manager. And in many areas, the market is such that rental properties are not a very good deal; that's been shown repeatedly in this thread.
Just like stocks, I make the most money in real estate by buying when the market goes down
Besides 2006, when was the last time RE collapsed? I am not talking about fluctuations in the RE market.
Of course

The stock market goes down more frequently and provides more opportunities, but RE downturns give longer windows of opportunity

The US real estate market as a whole will be significantly less volatile than the US stock market going forward

I hold real estate purchased coming out of Canada's 90s downturn and in the US during the Great Recession

Good times

Difficult to lose money when US markets recover 100% of the time

It's never different this time
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat

international001
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Re: Why are you NOT buying rental properties?

Post by international001 » Fri Jan 10, 2020 7:20 pm

I don't think it was mentioned yet, but profitability is local (i.e. on a LCOL area, appreciation is low and rent/buy is stable). While mortgage rates are lower. Isn't this an opportunity ?

Also, I'm a bit perplexed on the assumptions of appreciation. I thought historically in the US was 0% (just inflation). We take for granted a 6-7% stock return. Shouldn't we make the same assumptions for housing?

lawman3966
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Re: Why are you NOT buying rental properties?

Post by lawman3966 » Fri Jan 10, 2020 7:29 pm

One reason I don't plan to invest in RE locally (Seattle area) is the trend toward laws that are increasingly burdensome to LLs.

On other fora I frequent, LLs from California vent day and night about the hassles they have with tenants and with regulations that are both expensive and, in their view, anti-LL.

Returns would have to be stellar to justify switching to LL investing (and work) from passive investing. And from what I hear from LLs both locally and in CA, the returns don't justify such a switch.

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willthrill81
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Re: Why are you NOT buying rental properties?

Post by willthrill81 » Fri Jan 10, 2020 7:37 pm

international001 wrote:
Fri Jan 10, 2020 7:20 pm
Also, I'm a bit perplexed on the assumptions of appreciation. I thought historically in the US was 0% (just inflation).
But a 0% real return on the property doesn't result in a 0% real return on your investment if you're leveraged via a mortgage. For instance, if a $100k property goes up in value due to inflation by 2%, and your investment is $20k, then the $2k is a 10% nominal return on your investment. Subtract inflation, and you still got an 8% real return. However, leverage works in both directions, including amplifying losses.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

flaccidsteele
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Re: Why are you NOT buying rental properties?

Post by flaccidsteele » Fri Jan 10, 2020 9:08 pm

The following is 28 year data on single family home rentals in 30 markets across the US. It looks at Total Return, Appreciation, rental Yield and Sharpe Ratio

Image

Image

The following is the entire 56 page study: NATIONAL BUREAU OF ECONOMIC RESEARCH: Total Returns to Single Family Rentals

In addition, the following is Attom data on where it is better to Buy and where it is better to Rent

Buying A Home Is More Affordable Than Renting In 53 Percent Of U.S. Housing Markets
Other markets with a population of more than 1 million where it is more affordable to rent than buy include counties that surround or are inside of New York City; Dallas, TX; Seattle, WA; Las Vegas, NV; San Jose, CA; San Francisco, CA; San Antonio, TX and Boston, MA.

Counties with a population of at least 1 million, where buying a home is more affordable than renting, were Miami-Dade County, FL; Broward County, FL; Wayne County (Detroit), MI; Philadelphia County, PA; Hillsborough County (Tampa), FL; Cuyahoga County (Cleveland), OH and Allegheny County (Pittsburgh), PA.

...

Counties with a population of at least 1 million, where rents consume the highest percentage of average wages, include Kings County (Brooklyn), NY (65.3 percent); Orange County, CA (outside Los Angeles) (64.7 percent); San Diego County, CA (59.6 percent); Contra Costa County, CA (outside San Francisco) (58.4 percent) and Queens County, NY (57.4 percent).

...

Among counties with a population of 1 million or more, those most affordable for renting are Allegheny County (Pittsburgh), PA (24.3 percent); Cuyahoga County (Cleveland), OH (25.6 percent); Fulton County (Atlanta), GA (26.2 percent); Oakland County, MI (outside Detroit) (26.6 percent) and Wayne County (Detroit), MI (27.5 percent).

...

Wages rose faster than average fair market rents in 484, or 56.6 percent, of the counties analyzed in the report including Harris County (Houston), TX; San Bernardino County, CA (outside Los Angeles); Bexar County (San Antonio), TX; Wayne County (Detroit), MI and Philadelphia County, PA.

Average rents rose faster than average wages in 371, or 43.4 percent, of counties in the report, including Los Angeles County, CA; Cook County (Chicago), IL; Maricopa County (Phoenix), AZ; San Diego County, CA and Orange County, CA (outside Los Angeles).
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat

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tomtoms
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Re: Why are you NOT buying rental properties?

Post by tomtoms » Fri Jan 10, 2020 9:14 pm

flaccidsteele wrote:
Fri Jan 10, 2020 9:08 pm
The following is 28 year data on single family home rentals in 30 markets across the US. It looks at Total Return, Appreciation, rental Yield and Sharpe Ratio

Image

Image

The following is the entire 56 page study: NATIONAL BUREAU OF ECONOMIC RESEARCH: Total Returns to Single Family Rentals

In addition, the following is Attom data on where it is better to Buy and where it is better to Rent

Buying A Home Is More Affordable Than Renting In 53 Percent Of U.S. Housing Markets
Renting is more affordable than buying a home in 94, or 69 percent, of the 136 counties in the report that have a population of at least 500,000 or more.

Renting is the more affordable option in 36 of the 43 counties with a population of at least 1 million or more (84 percent) — including Los Angeles County, CA; Cook County (Chicago), IL; Harris County (Houston), TX; Maricopa County (Phoenix), AZ and San Diego County, CA.

Other markets with a population of more than 1 million where it is more affordable to rent than buy include counties that surround or are inside of New York City; Dallas, TX; Seattle, WA; Las Vegas, NV; San Jose, CA; San Francisco, CA; San Antonio, TX and Boston, MA.

Counties with a population of at least 1 million, where buying a home is more affordable than renting, were Miami-Dade County, FL; Broward County, FL; Wayne County (Detroit), MI; Philadelphia County, PA; Hillsborough County (Tampa), FL; Cuyahoga County (Cleveland), OH and Allegheny County (Pittsburgh), PA.
Does this include leverage? Leverage is the key to making good money in RE. I am not talking about primary residence. I am
talking about rental properties which generates monthly income.
Last edited by tomtoms on Fri Jan 10, 2020 9:15 pm, edited 1 time in total.

flaccidsteele
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Re: Why are you NOT buying rental properties?

Post by flaccidsteele » Fri Jan 10, 2020 9:15 pm

tomtoms wrote:
Fri Jan 10, 2020 9:14 pm
flaccidsteele wrote:
Fri Jan 10, 2020 9:08 pm
The following is 28 year data on single family home rentals in 30 markets across the US. It looks at Total Return, Appreciation, rental Yield and Sharpe Ratio

Image

Image

The following is the entire 56 page study: NATIONAL BUREAU OF ECONOMIC RESEARCH: Total Returns to Single Family Rentals

In addition, the following is Attom data on where it is better to Buy and where it is better to Rent

Buying A Home Is More Affordable Than Renting In 53 Percent Of U.S. Housing Markets
Renting is more affordable than buying a home in 94, or 69 percent, of the 136 counties in the report that have a population of at least 500,000 or more.

Renting is the more affordable option in 36 of the 43 counties with a population of at least 1 million or more (84 percent) — including Los Angeles County, CA; Cook County (Chicago), IL; Harris County (Houston), TX; Maricopa County (Phoenix), AZ and San Diego County, CA.

Other markets with a population of more than 1 million where it is more affordable to rent than buy include counties that surround or are inside of New York City; Dallas, TX; Seattle, WA; Las Vegas, NV; San Jose, CA; San Francisco, CA; San Antonio, TX and Boston, MA.

Counties with a population of at least 1 million, where buying a home is more affordable than renting, were Miami-Dade County, FL; Broward County, FL; Wayne County (Detroit), MI; Philadelphia County, PA; Hillsborough County (Tampa), FL; Cuyahoga County (Cleveland), OH and Allegheny County (Pittsburgh), PA.
Does this include leverage? Leverage is the key to making good money in RE.
The entire 55 page study is linked. The methodology is there
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat

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JAZZISCOOL
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Re: Why are you NOT buying rental properties?

Post by JAZZISCOOL » Fri Jan 10, 2020 9:45 pm

flaccidsteele wrote:
Fri Jan 10, 2020 9:08 pm
The following is 28 year data on single family home rentals in 30 markets across the US. It looks at Total Return, Appreciation, rental Yield and Sharpe Ratio

Image

Image

The following is the entire 56 page study: NATIONAL BUREAU OF ECONOMIC RESEARCH: Total Returns to Single Family Rentals

In addition, the following is Attom data on where it is better to Buy and where it is better to Rent

Buying A Home Is More Affordable Than Renting In 53 Percent Of U.S. Housing Markets
Other markets with a population of more than 1 million where it is more affordable to rent than buy include counties that surround or are inside of New York City; Dallas, TX; Seattle, WA; Las Vegas, NV; San Jose, CA; San Francisco, CA; San Antonio, TX and Boston, MA.

Counties with a population of at least 1 million, where buying a home is more affordable than renting, were Miami-Dade County, FL; Broward County, FL; Wayne County (Detroit), MI; Philadelphia County, PA; Hillsborough County (Tampa), FL; Cuyahoga County (Cleveland), OH and Allegheny County (Pittsburgh), PA.

...

Counties with a population of at least 1 million, where rents consume the highest percentage of average wages, include Kings County (Brooklyn), NY (65.3 percent); Orange County, CA (outside Los Angeles) (64.7 percent); San Diego County, CA (59.6 percent); Contra Costa County, CA (outside San Francisco) (58.4 percent) and Queens County, NY (57.4 percent).

...

Among counties with a population of 1 million or more, those most affordable for renting are Allegheny County (Pittsburgh), PA (24.3 percent); Cuyahoga County (Cleveland), OH (25.6 percent); Fulton County (Atlanta), GA (26.2 percent); Oakland County, MI (outside Detroit) (26.6 percent) and Wayne County (Detroit), MI (27.5 percent).

...

Wages rose faster than average fair market rents in 484, or 56.6 percent, of the counties analyzed in the report including Harris County (Houston), TX; San Bernardino County, CA (outside Los Angeles); Bexar County (San Antonio), TX; Wayne County (Detroit), MI and Philadelphia County, PA.

Average rents rose faster than average wages in 371, or 43.4 percent, of counties in the report, including Los Angeles County, CA; Cook County (Chicago), IL; Maricopa County (Phoenix), AZ; San Diego County, CA and Orange County, CA (outside Los Angeles).
Thanks for these resources. Curious why the first (robust) study didn't include healthy RE markets e.g. Denver, Salt Lake and Las Vegas. The Rocky Mountain states and Nevada are doing well. :happy

hoops777
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Re: Why are you NOT buying rental properties?

Post by hoops777 » Fri Jan 10, 2020 10:58 pm

tomtoms wrote:
Wed Jan 16, 2019 2:28 pm
I am only starting this thread because I was turned off to buying rental properties when I first started to read this forum. I now own several rental properties. Not only it is easier than I had
expected, but I am also making a lot more money. I have a property manager who has been taking good care of the properties. So, I have to ask..if you are willing to hustle and you have the money, why are you not buying rental properties?

Yes, you can buy RE ETF but that is like buying S&P 500. There is no leverage. Leverage is what makes RE investing special but of course leverage is great on the way up but painful on the way down so you have to know what you are doing.

Here are two scenarios (I am simplifying them to make a point on leverage):

(1) Put $80 k in RE ETF. Let’s assume you make 8% per year (after fees). After 9 years, your money would double to $160 k and after 18 years, your money would double again to $320 k.

(2) Put $80 k (20% down payment) on $400 k house. Lets assume a modest 4% appreciation per year and your tenants pay for all expenses (mortgage, property tax, fixes, property manager, etc). After 18 years, the house would double to $800 k.

So $800 k vs. $320 k. That is a big difference! Of course there is nothing wrong with putting money into RE ETF earning 8% per year and cash out when you are 65 like everybody else. But, if you want to be wealthy at a young age, you have to start a business or buy rental properties. For me...I am doing both. I am not trying to impress you but just to let you know where I am coming from. I also have a high paying job so I am flushed with cash. I am using money from my job, business to buy more rental properties. I have stopped buying stocks besides maxing out my 401 k, SEP-IRA, HSA which is already a lot.

I am not saying your average joe can do real estate investing. But, I think if you have the money (high income, low debt) and you are street smart, you can make a lot money in real estate.
Because they are a pain in the %#+ .
K.I.S.S........so easy to say so difficult to do.

flaccidsteele
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Re: Why are you NOT buying rental properties?

Post by flaccidsteele » Fri Jan 10, 2020 11:57 pm

hoops777 wrote:
Fri Jan 10, 2020 10:58 pm
tomtoms wrote:
Wed Jan 16, 2019 2:28 pm
I am only starting this thread because I was turned off to buying rental properties when I first started to read this forum. I now own several rental properties. Not only it is easier than I had
expected, but I am also making a lot more money. I have a property manager who has been taking good care of the properties. So, I have to ask..if you are willing to hustle and you have the money, why are you not buying rental properties?

Yes, you can buy RE ETF but that is like buying S&P 500. There is no leverage. Leverage is what makes RE investing special but of course leverage is great on the way up but painful on the way down so you have to know what you are doing.

Here are two scenarios (I am simplifying them to make a point on leverage):

(1) Put $80 k in RE ETF. Let’s assume you make 8% per year (after fees). After 9 years, your money would double to $160 k and after 18 years, your money would double again to $320 k.

(2) Put $80 k (20% down payment) on $400 k house. Lets assume a modest 4% appreciation per year and your tenants pay for all expenses (mortgage, property tax, fixes, property manager, etc). After 18 years, the house would double to $800 k.

So $800 k vs. $320 k. That is a big difference! Of course there is nothing wrong with putting money into RE ETF earning 8% per year and cash out when you are 65 like everybody else. But, if you want to be wealthy at a young age, you have to start a business or buy rental properties. For me...I am doing both. I am not trying to impress you but just to let you know where I am coming from. I also have a high paying job so I am flushed with cash. I am using money from my job, business to buy more rental properties. I have stopped buying stocks besides maxing out my 401 k, SEP-IRA, HSA which is already a lot.

I am not saying your average joe can do real estate investing. But, I think if you have the money (high income, low debt) and you are street smart, you can make a lot money in real estate.
Because they are a pain in the %#+ .
You’re doing it wrong
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat

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Re: Why are you NOT buying rental properties?

Post by finite_difference » Sat Jan 11, 2020 12:08 am

I don’t buy rentals and would rather invest in the stock market because:

A) Real estate does not help me Sleep Well At Night.
B) I am not handy.
C) I would rather work a different second job.
D) I don’t want to worry about my rentals.
E) I don’t need to make my taxes more complicated.
F) I don’t have hundreds of millions of dollars to entice banks to lend my company lots of money to purchase RE, sell it at a loss, and then claim the tax break(s).
G) I don’t live in California.
H) I wouldn’t want to evict anyone.
I) All of the above.

I picked I).
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh

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Re: Why are you NOT buying rental properties?

Post by international001 » Sat Jan 11, 2020 11:10 am

willthrill81 wrote:
Fri Jan 10, 2020 7:37 pm
international001 wrote:
Fri Jan 10, 2020 7:20 pm
Also, I'm a bit perplexed on the assumptions of appreciation. I thought historically in the US was 0% (just inflation).
But a 0% real return on the property doesn't result in a 0% real return on your investment if you're leveraged via a mortgage. For instance, if a $100k property goes up in value due to inflation by 2%, and your investment is $20k, then the $2k is a 10% nominal return on your investment. Subtract inflation, and you still got an 8% real return. However, leverage works in both directions, including amplifying losses.
Good point. Mortgages are quoted on nominal value.

Still, you shouldn't make assumptions other than 0% appreciation, IMHO

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Re: Why are you NOT buying rental properties?

Post by unclescrooge » Sat Jan 11, 2020 11:24 am

tomtoms wrote:
Fri Jan 10, 2020 2:35 pm
flaccidsteele wrote:
Fri Jan 10, 2020 2:32 pm
willthrill81 wrote:
Fri Jan 10, 2020 1:50 pm
tomtoms wrote:
Fri Jan 10, 2020 1:27 pm
Lazareth wrote:
Fri Jan 10, 2020 11:53 am
The inefficiencies in the residential real estate market are remarkable, and present a phenomenal opportunity for those willing to DIY or hire-out to perform simple cosmetic improvements.
Exactly. This is why RE can be very profitable but there are people out there who don’t want to look at houses during the weekend or paranoid about that 3 am phone call from tenants about some overflowing toilet (hint: just tell them to shut off the valve...most people already know that and won’t call you at 3 am)
Yes, rental properties can be very profitable. But unless you have a great property management company, it's often (usually?) a part-time job, and it might be even if you have a great manager. And in many areas, the market is such that rental properties are not a very good deal; that's been shown repeatedly in this thread.
Just like stocks, I make the most money in real estate by buying when the market goes down
Besides 2006, when was the last time RE collapsed? I am not talking about fluctuations in the RE market.
I think the market was bad 1992 to 1996.

My in-laws bought a historic home in 1996. They weren't in the market for a home, having bought a home the year before. But one day their former agent showed up and told my MIL she had found her dream house. She left out the part that it was beyond her budget and needed a ton of work.

MIL convinced FIL to bite the bullet. That $600k purchase was scary at the time, but now as a fully restored historic craftsman home, it's worth at least $2.5 million, maybe even $3.5 million.

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Re: Why are you NOT buying rental properties?

Post by willthrill81 » Sat Jan 11, 2020 11:24 am

international001 wrote:
Sat Jan 11, 2020 11:10 am
willthrill81 wrote:
Fri Jan 10, 2020 7:37 pm
international001 wrote:
Fri Jan 10, 2020 7:20 pm
Also, I'm a bit perplexed on the assumptions of appreciation. I thought historically in the US was 0% (just inflation).
But a 0% real return on the property doesn't result in a 0% real return on your investment if you're leveraged via a mortgage. For instance, if a $100k property goes up in value due to inflation by 2%, and your investment is $20k, then the $2k is a 10% nominal return on your investment. Subtract inflation, and you still got an 8% real return. However, leverage works in both directions, including amplifying losses.
Good point. Mortgages are quoted on nominal value.

Still, you shouldn't make assumptions other than 0% appreciation, IMHO
I agree that assuming that organic appreciation will occur at a rate faster than inflation is speculation. There are many examples in this thread and others where that didn't happen or where a property's value didn't keep pace with inflation. As such, this makes the table being referred to above somewhat misleading because landlords didn't know how much appreciation their properties would experience. When making a decision about whether to buy a given property, IMHO, appreciation shouldn't enter the picture at all.

Further, there is a schism in the rental real estate community regarding the use of leverage. Some are all in favor of using the most leverage that they possibly can and emphasize cash-on-cash returns. Others hold disdain for overuse of leverage, saying that it increases risk too much. And many are somewhere between. Personally, I have a hard time seeing how leverage can legitimately make an otherwise unattractive property for renting suddenly a good one. I also know that at least some 'pro' landlords share this perspective.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Why are you NOT buying rental properties?

Post by unclescrooge » Sat Jan 11, 2020 11:26 am

Lazareth wrote:
Fri Jan 10, 2020 11:53 am

Conversely, when I sold the property three years later, my simple touches like the flowers and a new mailbox, sparkling new door hardware and Home Depot light fixtures, sanded or newly-carpeted floors and fresh paint allowed me to sell at a significant premium to similar homes on the street.
Congrats on your success!

What was the taxes like on the sale of the duplex?

Did half it it get capital gains exclusion, while the other half faced recapture of deprecation?

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Re: Why are you NOT buying rental properties?

Post by willthrill81 » Sat Jan 11, 2020 11:28 am

Lazareth wrote:
Fri Jan 10, 2020 11:53 am
The inefficiencies in the residential real estate market are remarkable, and present a phenomenal opportunity for those willing to DIY or hire-out to perform simple cosmetic improvements.
Yes, in some situations, forced appreciation can really boost one's returns. We did this with both of last two sales of our primary residence.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Why are you NOT buying rental properties?

Post by Lazareth » Sat Jan 11, 2020 1:24 pm

unclescrooge wrote:
Sat Jan 11, 2020 11:26 am
Lazareth wrote:
Fri Jan 10, 2020 11:53 am

Conversely, when I sold the property three years later, my simple touches like the flowers and a new mailbox, sparkling new door hardware and Home Depot light fixtures, sanded or newly-carpeted floors and fresh paint allowed me to sell at a significant premium to similar homes on the street.
Congrats on your success!

What was the taxes like on the sale of the duplex?

Did half it it get capital gains exclusion, while the other half faced recapture of deprecation?
I don't recall taxes being much of an issue on the sale. It was early 80's and I do recall the benefits of President Reagan's new accelerated depreciation schedule.
Last edited by Lazareth on Sat Jan 11, 2020 1:46 pm, edited 1 time in total.
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Re: Why are you NOT buying rental properties?

Post by jb1 » Sat Jan 11, 2020 1:27 pm

Rental properties = owning a business, you have control of your business, what you do to it, what changes you want, what color the door is.

Stock market = is not a business. Set it and forget it


Not everyone is meant to own a business

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Re: Why are you NOT buying rental properties?

Post by geerhardusvos » Sat Jan 11, 2020 8:44 pm

jb1 wrote:
Sat Jan 11, 2020 1:27 pm
Rental properties = owning a business, you have control of your business, what you do to it, what changes you want, what color the door is.

Stock market = is not a business. Set it and forget it


Not everyone is meant to own a business
More precisely, the stock market is owning other peoples businesses
VTSAX and chill

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Re: Why are you NOT buying rental properties?

Post by geerhardusvos » Sat Jan 11, 2020 8:53 pm

willthrill81 wrote:
Sat Jan 11, 2020 11:28 am
Lazareth wrote:
Fri Jan 10, 2020 11:53 am
The inefficiencies in the residential real estate market are remarkable, and present a phenomenal opportunity for those willing to DIY or hire-out to perform simple cosmetic improvements.
Yes, in some situations, forced appreciation can really boost one's returns. We did this with both of last two sales of our primary residence.
Factoring in the transaction cost of your sales (not even your labor), I would be very interested to know if your scenario would have been better off financially with renting. It’s pretty expensive to sell a home, eating into appreciation, and lots of work to get it ready (we just went through it and I’m not looking to do it anytime again soon). I also thought a lot of your comments on this thread well support the reality of rentals being a good value to the renter in these markets, and less so for those landlords. If you are wearing to become a landlord in your area, likely that means that renting is a great value in your area
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Re: Why are you NOT buying rental properties?

Post by AerialWombat » Sat Jan 11, 2020 9:50 pm

jb1 wrote:
Sat Jan 11, 2020 1:27 pm
Rental properties = owning a business, you have control of your business, what you do to it, what changes you want, what color the door is.

Stock market = is not a business. Set it and forget it


Not everyone is meant to own a business
This is an extremely accurate statement.

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Re: Why are you NOT buying rental properties?

Post by AerialWombat » Sat Jan 11, 2020 10:02 pm

willthrill81 wrote:
Sat Jan 11, 2020 11:24 am
When making a decision about whether to buy a given property, IMHO, appreciation shouldn't enter the picture at all.
+1

The Case Shiller Home Price Index going back to 1890 shows that, nationwide, residential property appreciates an average of 0.2% per year above inflation.

Buying for appreciation is speculating/gambling, not running a business.

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Re: Why are you NOT buying rental properties?

Post by michaeljc70 » Sat Jan 11, 2020 11:23 pm

AerialWombat wrote:
Sat Jan 11, 2020 10:02 pm
willthrill81 wrote:
Sat Jan 11, 2020 11:24 am
When making a decision about whether to buy a given property, IMHO, appreciation shouldn't enter the picture at all.
+1

The Case Shiller Home Price Index going back to 1890 shows that, nationwide, residential property appreciates an average of 0.2% per year above inflation.

Buying for appreciation is speculating/gambling, not running a business.
There are a lot of dynamics at play so I am not advocating buying rentals. However, take a first year with a property that appreciates .2% more than inflation and inflation is 2% and you put 20% down. You got 11% appreciation on your investment or 9% real. Obviously as you have more equity and less leverage things change.

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Re: Why are you NOT buying rental properties?

Post by willthrill81 » Sat Jan 11, 2020 11:35 pm

geerhardusvos wrote:
Sat Jan 11, 2020 8:53 pm
willthrill81 wrote:
Sat Jan 11, 2020 11:28 am
Lazareth wrote:
Fri Jan 10, 2020 11:53 am
The inefficiencies in the residential real estate market are remarkable, and present a phenomenal opportunity for those willing to DIY or hire-out to perform simple cosmetic improvements.
Yes, in some situations, forced appreciation can really boost one's returns. We did this with both of last two sales of our primary residence.
Factoring in the transaction cost of your sales (not even your labor)...
We sold the first home for a negotiated discount rate with a real estate agent and got back everything we put into the home plus about 10% after having lived there for four years. Even if we were to 'pay ourselves' for that time, we still came out far ahead of renting an equivalent property; instead of paying $100k (with after-tax money) for renting for four years, we made a profit of about $20k, tax-free, less our time spent remodeling. On the second home, we were there just one year, also did some remodeling work, and sold the home FSBO (costing us nothing out of pocket) and made about a small net profit, easily coming out ahead of renting again. Instead of paying $20k (again, with after-tax money) for renting a similar unit, we profited about $10k, tax-free, less our time spent remodeling.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Why are you NOT buying rental properties?

Post by willthrill81 » Sat Jan 11, 2020 11:45 pm

michaeljc70 wrote:
Sat Jan 11, 2020 11:23 pm
AerialWombat wrote:
Sat Jan 11, 2020 10:02 pm
willthrill81 wrote:
Sat Jan 11, 2020 11:24 am
When making a decision about whether to buy a given property, IMHO, appreciation shouldn't enter the picture at all.
+1

The Case Shiller Home Price Index going back to 1890 shows that, nationwide, residential property appreciates an average of 0.2% per year above inflation.

Buying for appreciation is speculating/gambling, not running a business.
There are a lot of dynamics at play so I am not advocating buying rentals. However, take a first year with a property that appreciates .2% more than inflation and inflation is 2% and you put 20% down. You got 11% appreciation on your investment or 9% real. Obviously as you have more equity and less leverage things change.
That's quite true. The cash-on-cash returns of rental properties created via leverage can be very attractive indeed. However, leverage works in both directions and can really bite you, which a great many highly leveraged landlords discovered about a decade ago. Again, I know of at least some 'pro' landlords who refuse to buy a property if it wouldn't make sense for them to buy it 100% with cash (i.e. they completely ignore the potential benefits of leverage when evaluating the deal), even though they almost universally get mortgages on their properties.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Why are you NOT buying rental properties?

Post by gch » Sun Jan 12, 2020 12:17 am

I just closed on a house in a suburb of a small central U.S. city (LCOL)

Purchase price - 95k
Down payment - 19k

Yearly rental income (already rented) - 12k

Yearly expenses - 9.5k
PITI - 6.3k
Management - 1.2k
Vacancy (est 1 month) - 1k
Repair (est 1 month) - 1k

Cash return 13% while having no taxes due to depreciation. Also, I’ve never actually had more than 2 weeks of vacancy in this area, but I still calculate based off 1 month.

I have bought one of these similar number type deals for the last 5 years in this same area, and view the leverage risk as low because I could cover the PITI for a long time if something happened to where it was unrentable.

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Re: Why are you NOT buying rental properties?

Post by bltn » Sun Jan 12, 2020 12:22 am

AerialWombat wrote:
Sat Jan 11, 2020 10:02 pm
willthrill81 wrote:
Sat Jan 11, 2020 11:24 am
When making a decision about whether to buy a given property, IMHO, appreciation shouldn't enter the picture at all.
+1

The Case Shiller Home Price Index going back to 1890 shows that, nationwide, residential property appreciates an average of 0.2% per year above inflation.

Buying for appreciation is speculating/gambling, not running a business.
Much like picking individual stocks. With leveraged money.

Not for me. I would rather work hard at my primary job and let my invested savings work passively.

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Re: Why are you NOT buying rental properties?

Post by unclescrooge » Sun Jan 12, 2020 12:39 am

gch wrote:
Sun Jan 12, 2020 12:17 am
I just closed on a house in a suburb of a small central U.S. city (LCOL)

Purchase price - 95k
Down payment - 19k

Yearly rental income (already rented) - 12k

Yearly expenses - 9.5k
PITI - 6.3k
Management - 1.2k
Vacancy (est 1 month) - 1k
Repair (est 1 month) - 1k

Cash return 13% while having no taxes due to depreciation. Also, I’ve never actually had more than 2 weeks of vacancy in this area, but I still calculate based off 1 month.

I have bought one of these similar number type deals for the last 5 years in this same area, and view the leverage risk as low because I could cover the PITI for a long time if something happened to where it was unrentable.
Congrats your your purchase.
Every deal investment looked at in the same range had PITI around $7,700.
Either you are getting exceptionally low rates or the property taxes are really low.
When I run the numbers I rarely see a return higher than 11%.
I always run my number based on return of equity, for a dozen years with a sale at the end. By year 5, you're usually looking at single digit return. Principle pay down reduces your return on investment. Also appreciation usually results in higher tax assessment, reducing cash flow.

international001
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Re: Why are you NOT buying rental properties?

Post by international001 » Sun Jan 12, 2020 11:51 am

willthrill81 wrote:
Sat Jan 11, 2020 11:24 am
international001 wrote:
Sat Jan 11, 2020 11:10 am
willthrill81 wrote:
Fri Jan 10, 2020 7:37 pm
international001 wrote:
Fri Jan 10, 2020 7:20 pm
Also, I'm a bit perplexed on the assumptions of appreciation. I thought historically in the US was 0% (just inflation).
But a 0% real return on the property doesn't result in a 0% real return on your investment if you're leveraged via a mortgage. For instance, if a $100k property goes up in value due to inflation by 2%, and your investment is $20k, then the $2k is a 10% nominal return on your investment. Subtract inflation, and you still got an 8% real return. However, leverage works in both directions, including amplifying losses.
Good point. Mortgages are quoted on nominal value.

Still, you shouldn't make assumptions other than 0% appreciation, IMHO
I agree that assuming that organic appreciation will occur at a rate faster than inflation is speculation. There are many examples in this thread and others where that didn't happen or where a property's value didn't keep pace with inflation. As such, this makes the table being referred to above somewhat misleading because landlords didn't know how much appreciation their properties would experience. When making a decision about whether to buy a given property, IMHO, appreciation shouldn't enter the picture at all.

Further, there is a schism in the rental real estate community regarding the use of leverage. Some are all in favor of using the most leverage that they possibly can and emphasize cash-on-cash returns. Others hold disdain for overuse of leverage, saying that it increases risk too much. And many are somewhere between. Personally, I have a hard time seeing how leverage can legitimately make an otherwise unattractive property for renting suddenly a good one. I also know that at least some 'pro' landlords share this perspective.
Leverage is good if you can have a reasonable assumption that the return (appreciation + rentals) are beyond interest rate, and *also* that returns will be more or less stable (not a big depreciation). You can make this assumption on LCOL area.

It's difficult to pick a location/tenant to invest, same than stock market. But even if you could diversify, it's a difficult argument to make that housing appreciation will be >0% over the next 20 years.

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Re: Why are you NOT buying rental properties?

Post by geerhardusvos » Sun Jan 12, 2020 4:50 pm

willthrill81 wrote:
Sat Jan 11, 2020 11:35 pm
geerhardusvos wrote:
Sat Jan 11, 2020 8:53 pm
willthrill81 wrote:
Sat Jan 11, 2020 11:28 am
Lazareth wrote:
Fri Jan 10, 2020 11:53 am
The inefficiencies in the residential real estate market are remarkable, and present a phenomenal opportunity for those willing to DIY or hire-out to perform simple cosmetic improvements.
Yes, in some situations, forced appreciation can really boost one's returns. We did this with both of last two sales of our primary residence.
Factoring in the transaction cost of your sales (not even your labor)...
We sold the first home for a negotiated discount rate with a real estate agent and got back everything we put into the home plus about 10% after having lived there for four years. Even if we were to 'pay ourselves' for that time, we still came out far ahead of renting an equivalent property; instead of paying $100k (with after-tax money) for renting for four years, we made a profit of about $20k, tax-free, less our time spent remodeling. On the second home, we were there just one year, also did some remodeling work, and sold the home FSBO (costing us nothing out of pocket) and made about a small net profit, easily coming out ahead of renting again. Instead of paying $20k (again, with after-tax money) for renting a similar unit, we profited about $10k, tax-free, less our time spent remodeling.
Nice, glad it worked out
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Re: Why are you NOT buying rental properties?

Post by Vihoo » Mon Jan 13, 2020 12:10 am

JAZZISCOOL wrote:
Fri Jan 10, 2020 9:45 pm
Thanks for these resources. Curious why the first (robust) study didn't include healthy RE markets e.g. Denver, Salt Lake and Las Vegas. The Rocky Mountain states and Nevada are doing well. :happy
Agree with this, at least for Vegas.

We’ve cleaned up over the last 3 years from appreciation + equity pay-down on the few we have out there. Property management company is rock solid and very selective on who they work with which has been great for me. I might get one email a month from them...if even that? Otherwise, I just get my monthly direct deposits of >$4k+

Down payment Cash in: $11k, Equity at 3 years in $100k
Down payment Cash in: $14k, Equity at 2 years in $87k
Down payment Cash in: $44k, Equity at 1 year in $69k

Tenant pool is awesome, even considering LCOL
1st rented to a school administrator
2nd rented to a CFO
3rd rented to a real estate agent

All 3 are cashflow positive. Only one has PMI.
(Been too lazy/busy to get it dropped on the 3rd.)

Smart money says to sell and invest elsewhere (1031).
These are ~2500 miles from where I live. In 2019, I didn’t see a single picture of our rentals, let alone visit Vegas and actually check on the properties.

It’s not anecdotal either. You just need to develop the system and learn how to vet people. My cousin, who is busier than me, started piggybacking on my set up in Vegas. He purchased two cashflow rentals as well. I did the homework for us, so he just had to throw cash at it. Then interestingly enough, my own real estate agent saw my success and joined in as well on his own rentals. Been a fun ride.

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Re: Why are you NOT buying rental properties?

Post by JAZZISCOOL » Mon Jan 13, 2020 10:13 am

RE: by Vihoo » Sun Jan 12, 2020 10:10 pm

JAZZISCOOL wrote: ↑Fri Jan 10, 2020 7:45 pm
Thanks for these resources. Curious why the first (robust) study didn't include healthy RE markets e.g. Denver, Salt Lake and Las Vegas. The Rocky Mountain states and Nevada are doing well. :happy
Agree with this, at least for Vegas.


"Agree with this, at least for Vegas."

It sounds you've had great success with your properties in LV. I don't own rentals personally but like to read this thread.

A friend of a friend just bought a winter vacation house in Henderson, NV last week after turning down something similar in Florida. Not sure if they will try to rent out while not there. :happy

I sense the post-2008 financial crisis presented a once-in-a-lifetime RE opportunity for some investors who had the dry powder. But I agree there are various strategies now if one wants to pursue RE.

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Re: Why are you NOT buying rental properties?

Post by stoptothink » Mon Jan 13, 2020 10:18 am

JAZZISCOOL wrote:
Mon Jan 13, 2020 10:13 am
I sense the post-2008 financial crisis presented a once-in-a-lifetime RE opportunity for some investors who had the dry powder. But I agree there are various strategies now if one wants to pursue RE.
+1. Unfortunately I, and most of the people I know personally who have invested in residential real estate, were on the wrong side of that once-in-a-lifetime opportunity.

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Re: Why are you NOT buying rental properties?

Post by Vihoo » Mon Jan 13, 2020 10:30 am

JAZZISCOOL wrote:
Mon Jan 13, 2020 10:13 am
RE: by Vihoo » Sun Jan 12, 2020 10:10 pm

JAZZISCOOL wrote: ↑Fri Jan 10, 2020 7:45 pm
Thanks for these resources. Curious why the first (robust) study didn't include healthy RE markets e.g. Denver, Salt Lake and Las Vegas. The Rocky Mountain states and Nevada are doing well. :happy
Agree with this, at least for Vegas.


"Agree with this, at least for Vegas."

It sounds you've had great success with your properties in LV. I don't own rentals personally but like to read this thread.

A friend of a friend just bought a winter vacation house in Henderson, NV last week after turning down something similar in Florida. Not sure if they will try to rent out while not there. :happy

I sense the post-2008 financial crisis presented a once-in-a-lifetime RE opportunity for some investors who had the dry powder. But I agree there are various strategies now if one wants to pursue RE.
I agree. I was a college student and started going to new builds during my time off between 2009-2010. I was able to help my Dad (purely a dividend/index fund investor, until then) pick up some short sales off owners who were upside down. We really lucked out as a result. I knew then I had to get into real estate ownership early in my life.

I didn’t get my actual start until 2016 when I had a real income. It was way late in the game, but I caught the tail end of the wave and my career ironically took me to the #1 or 2 spot in the U.S. for real estate growth for the last few years.

Henderson is a consistent market. I believe it is also AirBnB friendly unlike Vegas which banned it. I always feel like that’s where some great deals are. New builds are going crazy down there and very well priced. Great downtown area and so much new stuff being built down there. It’s definitely lower priced than having Vegas as the city name.

For those who don’t know the area, it’s somehow another city, but treated at times as if it’s almost the lesser of the two, yet it is really just an expansion of Vegas for all intents and purposes. Driving down the highway, you’d have no idea you were suddenly in Henderson. My worry is in a downturn, it will likely get hit harder than “Vegas”.

That being said, likely the best area to own is still in Summerlin. Housing prices are going insane, due to the out of state investors and also Cali migration to Summerlin, but it’s the safe, well-planned, has a great hospital, it’s own major casino and downtown area (Red Rock), strongest schools (by Vegas standards). In a downturn people will capitalize and try to get into the Summerlin area first - whether by renting or buying.
Last edited by Vihoo on Mon Jan 13, 2020 10:38 am, edited 2 times in total.

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JAZZISCOOL
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Location: Colorado - 5,700 ft.

Re: Why are you NOT buying rental properties?

Post by JAZZISCOOL » Mon Jan 13, 2020 10:34 am

stoptothink wrote:
Mon Jan 13, 2020 10:18 am
JAZZISCOOL wrote:
Mon Jan 13, 2020 10:13 am
I sense the post-2008 financial crisis presented a once-in-a-lifetime RE opportunity for some investors who had the dry powder. But I agree there are various strategies now if one wants to pursue RE.
+1. Unfortunately I, and most of the people I know personally who have invested in residential real estate, were on the wrong side of that once-in-a-lifetime opportunity.
Agree. And psychologically, even if they had the capital to invest, many investors IMO would not have had the ability to pull the trigger at that time (or at least I don't think I would have) after the horrible equity losses in the public markets.

flaccidsteele
Posts: 397
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Location: Canada

Re: Why are you NOT buying rental properties?

Post by flaccidsteele » Mon Jan 13, 2020 1:05 pm

stoptothink wrote:
Mon Jan 13, 2020 10:18 am
JAZZISCOOL wrote:
Mon Jan 13, 2020 10:13 am
I sense the post-2008 financial crisis presented a once-in-a-lifetime RE opportunity for some investors who had the dry powder. But I agree there are various strategies now if one wants to pursue RE.
+1. Unfortunately I, and most of the people I know personally who have invested in residential real estate, were on the wrong side of that once-in-a-lifetime opportunity.
Back when I was buying, we (Canadians) were the largest foreign buyers of US RE

Most were snowbirds looking for winter homes, but I was in my 30s and wanted cash flow. Specifically cash flow in US$ (since my expenses are in C$). I couldn't care less about a winter home
JAZZISCOOL wrote:
Mon Jan 13, 2020 10:34 am
Agree. And psychologically, even if they had the capital to invest, many investors IMO would not have had the ability to pull the trigger at that time (or at least I don't think I would have) after the horrible equity losses in the public markets.
Canadians and other foreigners weren't as psychologically invested in US RE at the time. So we bought with less anxiety. We just saw 1) B class property in B class locations priced at less than replacement value - everywhere and 2) our currency being as strong as the US$

Both occurrences were rare - the combination was once-in-a-century
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat

flaccidsteele
Posts: 397
Joined: Sun Jul 28, 2019 9:42 pm
Location: Canada

Re: Why are you NOT buying rental properties?

Post by flaccidsteele » Mon Jan 13, 2020 1:23 pm

flaccidsteele wrote:
Mon Jan 13, 2020 1:05 pm
Back when I was buying, we (Canadians) were the largest foreign buyers of US RE

Most were snowbirds looking for winter homes, but I was in my 30s and wanted cash flow. Specifically cash flow in US$ (since my expenses are in C$). I couldn't care less about a winter home
Once the C$ went back to being weaker than the US$, many Canadian snowbirds sold their US properties for a nice little windfall

In addition to a quick profit, many snowbirds sold because their US homes generate US$-denominated expenses and the C$ predictably lost value against the US$

I kept my US RE and US$ cash flow. US$ will always be good in Canada
Last edited by flaccidsteele on Mon Jan 13, 2020 1:27 pm, edited 1 time in total.
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat

ponyboy
Posts: 907
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Re: Why are you NOT buying rental properties?

Post by ponyboy » Mon Jan 13, 2020 1:25 pm

Im not buying rentals because most people are disgusting. No one will take care of your property like you would. That would drive me nuts. Not to mention, if I had a dead beat tenant who didnt pay and trashed the place, I would probably end up in prison for how I would react. I wouldnt be able to control myself.

Clicking a few buttons and moving money to vanguard sounds much better than sitting in a cell the rest of my life.

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