Why are you NOT buying rental properties?

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Helo80
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Re: Why are you NOT buying rental properties?

Post by Helo80 » Thu Apr 02, 2020 1:16 pm

Cubicle wrote:
Fri Mar 27, 2020 8:10 pm
A family member has multiple commercial & residential rental properties. Multiple of each already "gave notice" that April rent won't be possible.
And that is exactly why I have no interest in landlording.

True, a lease agreement is a legal contract, but I'm not so cold and heartless, that in genuine struggle like what we have now, that I'd yell, threaten, and eventually evict tenants. But, some landlords claim to have a great screening system.

I wonder how many people that are relying on their tenants to cover the mortgages that they have out on their rental properties now are going to be stretching their finances thin if suddenly some or all of their tenants don't pay. It's less of an issue if said landlords on the property deeds free and clear.

barberakb
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Re: Why are you NOT buying rental properties?

Post by barberakb » Thu Apr 02, 2020 3:19 pm

Just an update for those wondering. I have 4 SFH rentals.

2 have paid in full, 1 hasn't paid but expects to pay in full this week and 1 let us know that they can only pay half this month.

Luckily that 1 that can only pay half is on the 1 house that I own free and clear.

LawProf
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Re: Why are you NOT buying rental properties?

Post by LawProf » Thu Apr 02, 2020 7:55 pm

I really want to hear an update from tomtoms.

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Re: Why are you NOT buying rental properties?

Post by AerialWombat » Thu Apr 02, 2020 8:34 pm

I have 7 rental units spread across 3 states. Only one unit is located in a place with limited viral impact. Most tenants have already paid April rent, and not a one has indicated they won’t/can’t. Time will tell if this holds up.

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Cubicle
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Re: Why are you NOT buying rental properties?

Post by Cubicle » Thu Apr 02, 2020 10:09 pm

Helo80 wrote:
Thu Apr 02, 2020 1:16 pm
a lease agreement is a legal contract, but I'm not so cold and heartless, that in genuine struggle like what we have now, that I'd yell, threaten, and eventually evict tenants
Even if I was cold, heartless, & frigid (& I'm not saying I'm not...!) many states have banned evictions, including ours. You can still go to court & get the order, but they won't be removed until 60 days after the state of emergency is over, in Jersey at least. And if a tenant knows they are being evicted, I don't expect them to keep the unit in good condition. Or not pour cooking grease down the sink. Or flush literal garbage down the toilet. They wouldn't be holding out for their security deposit if they know eviction is coming.
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Re: Why are you NOT buying rental properties?

Post by abuss368 » Thu Apr 02, 2020 10:14 pm

I could not imagine the stress of being a landlord or even not being able to pay the rent.

We will get through this.
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AerialWombat
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Re: Why are you NOT buying rental properties?

Post by AerialWombat » Fri Apr 03, 2020 2:09 am

abuss368 wrote:
Thu Apr 02, 2020 10:14 pm
I could not imagine the stress of being a landlord or even not being able to pay the rent.
It’s hard to stress over it when Congress has given landlords bailout options — disaster loans to cover lost rent, mortgage payment forbearance up to 12 months. Plus, landlords should have their own deep reserves.

Hakuna matata. :beer

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tomtoms
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Re: Why are you NOT buying rental properties?

Post by tomtoms » Fri Apr 03, 2020 2:38 am

LawProf wrote:
Thu Apr 02, 2020 7:55 pm
I really want to hear an update from tomtoms.
You must have missed it:
tomtoms wrote:
Tue Mar 24, 2020 11:25 pm
I have not received any call yet but I am prepared to keep on paying the mortgage if necessary. I don't want to evict anyone or take them to small claim court. However, that does not mean their credit score won't be affected or late fee doesn't apply. Nobody wants an eviction on their record.

Rent doesn't just disappear. If I don't pay my mortgage, my lender won't have the money to pay pension funds and therefore, retirees won't get their pension. It goes on and on throughout the economy.

gr7070
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Re: Why are you NOT buying rental properties?

Post by gr7070 » Fri Apr 03, 2020 8:53 am

abuss368 wrote:
Thu Apr 02, 2020 10:14 pm
I could not imagine the stress of being a landlord or even not being able to pay the rent.

We will get through this.
It's no more stressful than losing 30% in the stock market, but having not sold anything, actually bought more by rebalancing, and having proper finances nothing has changed.

As you said, we will get through this.

Maintain proper personal and business finances for one and their RE business and things will be fine. EF, insurance, little to no debt other than reasonable mortgage, etc.

Owning rental property is not that big a deal. It carries some added risk and thus one should have some added mitigation. That's it.

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Re: Why are you NOT buying rental properties?

Post by lostdog » Fri Apr 03, 2020 9:08 am

AerialWombat wrote:
Fri Apr 03, 2020 2:09 am
abuss368 wrote:
Thu Apr 02, 2020 10:14 pm
I could not imagine the stress of being a landlord or even not being able to pay the rent.
It’s hard to stress over it when Congress has given landlords bailout options — disaster loans to cover lost rent, mortgage payment forbearance up to 12 months. Plus, landlords should have their own deep reserves.

Hakuna matata. :beer
Ariel,

Do you have mortgages on your properties?
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abuss368
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Re: Why are you NOT buying rental properties?

Post by abuss368 » Fri Apr 03, 2020 10:05 am

gr7070 wrote:
Fri Apr 03, 2020 8:53 am
abuss368 wrote:
Thu Apr 02, 2020 10:14 pm
I could not imagine the stress of being a landlord or even not being able to pay the rent.

We will get through this.
It's no more stressful than losing 30% in the stock market, but having not sold anything, actually bought more by rebalancing, and having proper finances nothing has changed.

As you said, we will get through this.

Maintain proper personal and business finances for one and their RE business and things will be fine. EF, insurance, little to no debt other than reasonable mortgage, etc.

Owning rental property is not that big a deal. It carries some added risk and thus one should have some added mitigation. That's it.
Thanks for the response. I understand your post but also look at it a little different. While index funds can (and will) decline during market pullbacks (as will any investment), the stress or direct real estate ownership is much different. These are ordinary folks, families, possibly losing jobs, working with banks, and so forth.

A decline in a mutual fund is different.
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

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tomtoms
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Re: Why are you NOT buying rental properties?

Post by tomtoms » Fri Apr 03, 2020 10:26 am

abuss368 wrote:
Fri Apr 03, 2020 10:05 am
gr7070 wrote:
Fri Apr 03, 2020 8:53 am
abuss368 wrote:
Thu Apr 02, 2020 10:14 pm
I could not imagine the stress of being a landlord or even not being able to pay the rent.

We will get through this.
It's no more stressful than losing 30% in the stock market, but having not sold anything, actually bought more by rebalancing, and having proper finances nothing has changed.

As you said, we will get through this.

Maintain proper personal and business finances for one and their RE business and things will be fine. EF, insurance, little to no debt other than reasonable mortgage, etc.

Owning rental property is not that big a deal. It carries some added risk and thus one should have some added mitigation. That's it.
Thanks for the response. I understand your post but also look at it a little different. While index funds can (and will) decline during market pullbacks (as will any investment), the stress or direct real estate ownership is much different. These are ordinary folks, families, possibly losing jobs, working with banks, and so forth.

A decline in a mutual fund is different.
It depends on what you own. If it is commercial RE or luxury condos then you might lose some sleep. The funny thing is my RE property might be the only asset class that makes money this year.

gr7070
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Re: Why are you NOT buying rental properties?

Post by gr7070 » Fri Apr 03, 2020 10:30 am

abuss368 wrote:
Fri Apr 03, 2020 10:05 am
gr7070 wrote:
Fri Apr 03, 2020 8:53 am
abuss368 wrote:
Thu Apr 02, 2020 10:14 pm
I could not imagine the stress of being a landlord or even not being able to pay the rent.

We will get through this.
It's no more stressful than losing 30% in the stock market, but having not sold anything, actually bought more by rebalancing, and having proper finances nothing has changed.

As you said, we will get through this.

Maintain proper personal and business finances for one and their RE business and things will be fine. EF, insurance, little to no debt other than reasonable mortgage, etc.

Owning rental property is not that big a deal. It carries some added risk and thus one should have some added mitigation. That's it.
These are ordinary folks, families, possibly losing jobs, working with banks, and so forth.

A decline in a mutual fund is different.
Who do you think owns mutual funds, owns rental property? "ordinary folks, families, possibly losing jobs, working with banks, and so forth."

It's not that different. As I mentioned the risks are a little different, slightly greater. Therefore added mitigation is needed, retained earnings (EF), added insurance, minimize debt.

Hmmm all of those things are exactly what's needed for ordinary folks, families, possibly losing jobs, working with banks, and so forth. Just a little more.

RE is just another investment tool. We use that tool with the appropriate approach just like we use the financial markets. We have an AA, we buy and hold, rebalance, etc. RE is not much different. We apply very similar reasonable, appropriate measures to help ensure success.

michaeljc70
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Re: Why are you NOT buying rental properties?

Post by michaeljc70 » Fri Apr 03, 2020 10:36 am

abuss368 wrote:
Fri Apr 03, 2020 10:05 am
gr7070 wrote:
Fri Apr 03, 2020 8:53 am
abuss368 wrote:
Thu Apr 02, 2020 10:14 pm
I could not imagine the stress of being a landlord or even not being able to pay the rent.

We will get through this.
It's no more stressful than losing 30% in the stock market, but having not sold anything, actually bought more by rebalancing, and having proper finances nothing has changed.

As you said, we will get through this.

Maintain proper personal and business finances for one and their RE business and things will be fine. EF, insurance, little to no debt other than reasonable mortgage, etc.

Owning rental property is not that big a deal. It carries some added risk and thus one should have some added mitigation. That's it.
Thanks for the response. I understand your post but also look at it a little different. While index funds can (and will) decline during market pullbacks (as will any investment), the stress or direct real estate ownership is much different. These are ordinary folks, families, possibly losing jobs, working with banks, and so forth.

A decline in a mutual fund is different.
I agree. Also, a lot of rentals are bought using leverage. I don't need my stocks to perform to make a loan payment on them. I don't have to decide to kick people out to make a loan payment. I don't even have to decide whether to fire a bad performing CEO of a stock I own. All that being said, that is why rentals can be a very profitable investment. One is a passive investment and one isn't so they aren't the same thing.

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abuss368
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Re: Why are you NOT buying rental properties?

Post by abuss368 » Fri Apr 03, 2020 3:32 pm

michaeljc70 wrote:
Fri Apr 03, 2020 10:36 am
I agree. Also, a lot of rentals are bought using leverage. I don't need my stocks to perform to make a loan payment on them. I don't have to decide to kick people out to make a loan payment. I don't even have to decide whether to fire a bad performing CEO of a stock I own. All that being said, that is why rentals can be a very profitable investment. One is a passive investment and one isn't so they aren't the same thing.
Exactly.

There are three ways to own real estate each with their own set of advantages and disadvantages:

1) REITs
2) Private Placement
3) Direct Ownership
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

Helo80
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Re: Why are you NOT buying rental properties?

Post by Helo80 » Fri Apr 03, 2020 3:35 pm

gr7070 wrote:
Fri Apr 03, 2020 10:30 am
RE is just another investment tool. We use that tool with the appropriate approach just like we use the financial markets. We have an AA, we buy and hold, rebalance, etc. RE is not much different. We apply very similar reasonable, appropriate measures to help ensure success.
I get it, but at the same time I think there is a bit of downplaying that goes on with REI. It comes with risks, and unfortunately the radio infomercials nor investors are always transparent with that. It's also not necessarily that investors are lying by omission or deliberately deceiving, but lying from having never had bad tenants.

At the same time though, even the worst tenants can usually find somewhere to live... and the homeless crisis in some major cities is not simply from the worst tenants that have used literally every last rental option at their disposal.

Helo80
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Re: Why are you NOT buying rental properties?

Post by Helo80 » Fri Apr 03, 2020 3:40 pm

michaeljc70 wrote:
Fri Apr 03, 2020 10:36 am
All that being said, that is why rentals can be a very profitable investment. One is a passive investment and one isn't so they aren't the same thing.

Yup... and since RE is local, you don't have major players like Goldman Sachs and other players on Wall Street trying to actively invest in some random suburb of any number of American cities. Thus, pricing and true investing deals are still had and transacted every deal in RE.

I'm curious how landlording and leases play out six months from today... I'm not rooting against landlords... at all... but, while I'm disappointed in S&P500 and TSM performance in the last 6 weeks, I'm also like... "whatever" as I have my AA and investing schedule in place. Have not touched it, and will just keep chugging along here...

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Re: Why are you NOT buying rental properties?

Post by flaccidsteele » Fri Apr 03, 2020 3:45 pm

abuss368 wrote:
Fri Apr 03, 2020 10:05 am
gr7070 wrote:
Fri Apr 03, 2020 8:53 am
abuss368 wrote:
Thu Apr 02, 2020 10:14 pm
I could not imagine the stress of being a landlord or even not being able to pay the rent.

We will get through this.
It's no more stressful than losing 30% in the stock market, but having not sold anything, actually bought more by rebalancing, and having proper finances nothing has changed.

As you said, we will get through this.

Maintain proper personal and business finances for one and their RE business and things will be fine. EF, insurance, little to no debt other than reasonable mortgage, etc.

Owning rental property is not that big a deal. It carries some added risk and thus one should have some added mitigation. That's it.
Thanks for the response. I understand your post but also look at it a little different. While index funds can (and will) decline during market pullbacks (as will any investment), the stress or direct real estate ownership is much different. These are ordinary folks, families, possibly losing jobs, working with banks, and so forth.

A decline in a mutual fund is different.
My equities have declined in value

My rentals have not

And the rent for April came in full and on time

I’m glad I decided to pick up rentals in 2009. I can’t imagine the stress of just owning equities and bonds

For me, rentals have won since 2009 and are currently winning during the coronavirus crisis so far

PS: it’s true that I can’t evict but it seems like tenants don’t want to take the chance that they will still owe the rent, get evicted and pay fees/penalties
Last edited by flaccidsteele on Fri Apr 03, 2020 3:48 pm, edited 1 time in total.
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FIREchief
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Re: Why are you NOT buying rental properties?

Post by FIREchief » Fri Apr 03, 2020 3:48 pm

I have a question for those who have had tenants who claim they can't pay the rent this month. Did they lose their jobs? (let's assume "yes") Did they immediately apply for unemployment benefits? Do they understand that the federal government is going to bump up their unemployment benefit, in the cases of lower income folks likely above what they were making while working? It just makes no sense that the fed has sent out free parachutes, but I see all this stuff in the media and elsewhere about folks who lost their jobs and suddenly can't buy groceries or pay the rent. I once got laid off by an employer who augmented my unemployment benefits up to about 75% of what I had been making for four months (this despite being very young and having minimal savings). I never missed a payment or failed to pay the rent. What am I missing here?
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abuss368
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Re: Why are you NOT buying rental properties?

Post by abuss368 » Fri Apr 03, 2020 3:49 pm

flaccidsteele wrote:
Fri Apr 03, 2020 3:45 pm

My equities have declined in value

My rentals have not
Are you sure about that? If the rentals were placed on the market today would the listing price be the same as a month ago and sell at that price?
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

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Re: Why are you NOT buying rental properties?

Post by flaccidsteele » Fri Apr 03, 2020 3:59 pm

abuss368 wrote:
Fri Apr 03, 2020 3:49 pm
flaccidsteele wrote:
Fri Apr 03, 2020 3:45 pm

My equities have declined in value

My rentals have not
Are you sure about that? If the rentals were placed on the market today would the listing price be the same as a month ago and sell at that price?
Normally I would say that I’m not sure, but I’m still getting calls from “investors” wanting to buy my properties. Last one being yesterday. And she wasn’t offering 30% off 2019 peak prices. So yeah, I’m pretty sure the value has held up better than my equities

I would rather also buy equities today than another rental because of the price collapse in the former

Objectively my rentals have done better than my equities since 2009 and early into the coronavirus crisis. However, to be fair, almost nothing beats rentals bought in 2009-2012
Last edited by flaccidsteele on Fri Apr 03, 2020 4:03 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

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AerialWombat
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Re: Why are you NOT buying rental properties?

Post by AerialWombat » Fri Apr 03, 2020 4:02 pm

lostdog wrote:
Fri Apr 03, 2020 9:08 am
Do you have mortgages on your properties?
Yes, on all of them.

Landlords are eligible for SBA disaster loan assistance, and can take advantage of the forbearance programs if their loans are agency backed. Two of my rentals are on VA loans (GNMA), four are owned by FNMA, and 1 is a portfolio loan. The portfolio loan is the only one not automatically eligible for forbearance. Plus, I have my own reserves. Plus, I could take up to $100,000 out of my 401k without penalty now. Plus, Roth IRA contributions.

I lost everything I had (including properties) in the 2007 real estate crash, and wound up homeless for a year. I refuse to accept the same fate this time around. I will exercise every option available to preserve my real estate, as they are my real retirement plan -- the securities portfolio is Retirement Plan C. I will liquidate my 401k at a significant loss if I have to in order to keep my real estate.

That's just my attitude. Others may view their securities portfolio as Plan A, and not be willing to backstop their real estate in this manner. But, my real estate equity is about 5x my securities balance, so it just makes sense for me. YMMV.

michaeljc70
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Re: Why are you NOT buying rental properties?

Post by michaeljc70 » Fri Apr 03, 2020 4:12 pm

Helo80 wrote:
Fri Apr 03, 2020 3:40 pm
michaeljc70 wrote:
Fri Apr 03, 2020 10:36 am
All that being said, that is why rentals can be a very profitable investment. One is a passive investment and one isn't so they aren't the same thing.

Yup... and since RE is local, you don't have major players like Goldman Sachs and other players on Wall Street trying to actively invest in some random suburb of any number of American cities. Thus, pricing and true investing deals are still had and transacted every deal in RE.

I'm curious how landlording and leases play out six months from today... I'm not rooting against landlords... at all... but, while I'm disappointed in S&P500 and TSM performance in the last 6 weeks, I'm also like... "whatever" as I have my AA and investing schedule in place. Have not touched it, and will just keep chugging along here...
In a city with millions of people, you are competing with much larger fish which makes it harder. I don't have a team of real estate people, property managers, general contractors, multi-million dollar lines of credit, etc. This is the main reason I don't have rentals. I've looked at various points over the last 15-20 years and never found anything that was a great buy (on a cash flow basis) in my mind .

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Re: Why are you NOT buying rental properties?

Post by flaccidsteele » Fri Apr 03, 2020 4:14 pm

michaeljc70 wrote:
Fri Apr 03, 2020 4:12 pm
I've looked at various points over the last 15-20 years and never found anything that was a great buy (on a cash flow basis) in my mind .
Great Recession: “You couldn’t have been looking that hard”
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 michaeljc70 » Fri Apr 03, 2020 4:16 pm

flaccidsteele wrote:
Fri Apr 03, 2020 4:14 pm
michaeljc70 wrote:
Fri Apr 03, 2020 4:12 pm
I've looked at various points over the last 15-20 years and never found anything that was a great buy (on a cash flow basis) in my mind .
Great Recession: “You couldn’t have been looking that hard”
That wasn't one of the points I was looking as I couldn't do it then. And my other comment (not quoted) applied then (people with way more resources than I have were competing).

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Re: Why are you NOT buying rental properties?

Post by RomeoMustDie » Fri Apr 03, 2020 4:25 pm

gr7070 wrote:
Fri Apr 03, 2020 10:30 am
abuss368 wrote:
Fri Apr 03, 2020 10:05 am
gr7070 wrote:
Fri Apr 03, 2020 8:53 am
abuss368 wrote:
Thu Apr 02, 2020 10:14 pm
I could not imagine the stress of being a landlord or even not being able to pay the rent.

We will get through this.
It's no more stressful than losing 30% in the stock market, but having not sold anything, actually bought more by rebalancing, and having proper finances nothing has changed.

As you said, we will get through this.

Maintain proper personal and business finances for one and their RE business and things will be fine. EF, insurance, little to no debt other than reasonable mortgage, etc.

Owning rental property is not that big a deal. It carries some added risk and thus one should have some added mitigation. That's it.
These are ordinary folks, families, possibly losing jobs, working with banks, and so forth.

A decline in a mutual fund is different.
Who do you think owns mutual funds, owns rental property? "ordinary folks, families, possibly losing jobs, working with banks, and so forth."

It's not that different. As I mentioned the risks are a little different, slightly greater. Therefore added mitigation is needed, retained earnings (EF), added insurance, minimize debt.

Hmmm all of those things are exactly what's needed for ordinary folks, families, possibly losing jobs, working with banks, and so forth. Just a little more.

RE is just another investment tool. We use that tool with the appropriate approach just like we use the financial markets. We have an AA, we buy and hold, rebalance, etc. RE is not much different. We apply very similar reasonable, appropriate measures to help ensure success.
Not being able to pay rent or debt payments is 1000x more stressful than unrealized losses on index funds.

Maybe I'm the minority.

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Re: Why are you NOT buying rental properties?

Post by gabbar » Fri Apr 03, 2020 6:15 pm

This is a very interesting discussion. Which area of the country did you invest in during the last downturn? Hypothetically, if you were to buy now, which areas would you look at now?
flaccidsteele wrote:
Fri Apr 03, 2020 3:59 pm
abuss368 wrote:
Fri Apr 03, 2020 3:49 pm
flaccidsteele wrote:
Fri Apr 03, 2020 3:45 pm

My equities have declined in value

My rentals have not
Are you sure about that? If the rentals were placed on the market today would the listing price be the same as a month ago and sell at that price?
Normally I would say that I’m not sure, but I’m still getting calls from “investors” wanting to buy my properties. Last one being yesterday. And she wasn’t offering 30% off 2019 peak prices. So yeah, I’m pretty sure the value has held up better than my equities

I would rather also buy equities today than another rental because of the price collapse in the former

Objectively my rentals have done better than my equities since 2009 and early into the coronavirus crisis. However, to be fair, almost nothing beats rentals bought in 2009-2012

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tomtoms
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Re: Why are you NOT buying rental properties?

Post by tomtoms » Fri Apr 03, 2020 7:21 pm

More risk? Yes.

More work? Yes.

Higher return? Yes.

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Re: Why are you NOT buying rental properties?

Post by stoptothink » Fri Apr 03, 2020 8:14 pm

FIREchief wrote:
Fri Apr 03, 2020 3:48 pm
I have a question for those who have had tenants who claim they can't pay the rent this month. Did they lose their jobs? (let's assume "yes") Did they immediately apply for unemployment benefits? Do they understand that the federal government is going to bump up their unemployment benefit, in the cases of lower income folks likely above what they were making while working? It just makes no sense that the fed has sent out free parachutes, but I see all this stuff in the media and elsewhere about folks who lost their jobs and suddenly can't buy groceries or pay the rent. I once got laid off by an employer who augmented my unemployment benefits up to about 75% of what I had been making for four months (this despite being very young and having minimal savings). I never missed a payment or failed to pay the rent. What am I missing here?
Nothing. Been in the same situation and it never even crossed my mind to not pay rent. My brother has a tenant that was making $200k+/yr in oil & gas, lost his job a few weeks ago and called my brother later that evening to tell him he can't pay the rent. Would bet my life he isn't missing the payments on his truck and jet skis. It's about priorities.

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Re: Why are you NOT buying rental properties?

Post by averagedude » Fri Apr 03, 2020 8:38 pm

These are some of my reasons why I don't do real estate.
1. I'm lazy, and it requires some effort. REIT investing seems more appealing to me.
2. I'm older, so I feel I won't benefit from the mistakes that I will make, like a younger person would.
3. I am risk averse to make a concentrated position in only one geographical area.
4. The data shows that index stock investing has better returns if no leverage is involved.
5. I'm older, so I refuse to leverage my investments.
6. I don't have the know how or intelligence to replace parts in a toilet, much less make any repairs or maintenance on a structure.
7. I have witnessed failure from real estate investing from family members. One was from overleveraging, and the other was from being too compassionate toward deadbeat tenants.

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Re: Why are you NOT buying rental properties?

Post by SDBoggled » Fri Apr 03, 2020 10:17 pm

In my local markets, it has been less than a month of shelter in place so I think much too soon to buy. The estimated current effect on single family homes up to ~10% drop at the "low" end. Larger drops compared to market peaks at the luxury end have been occurring over the last 2 years. Liquidity is still available for multi-families refinances, closings and development projects. I think it is too soon to see the maximum drop in multi-family units. Need to see rent non-payment, liquidity squeeze. As someone else noted, the next 6 months will be interesting to watch.

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FIREchief
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Re: Why are you NOT buying rental properties?

Post by FIREchief » Fri Apr 03, 2020 10:39 pm

stoptothink wrote:
Fri Apr 03, 2020 8:14 pm
FIREchief wrote:
Fri Apr 03, 2020 3:48 pm
I have a question for those who have had tenants who claim they can't pay the rent this month. Did they lose their jobs? (let's assume "yes") Did they immediately apply for unemployment benefits? Do they understand that the federal government is going to bump up their unemployment benefit, in the cases of lower income folks likely above what they were making while working? It just makes no sense that the fed has sent out free parachutes, but I see all this stuff in the media and elsewhere about folks who lost their jobs and suddenly can't buy groceries or pay the rent. I once got laid off by an employer who augmented my unemployment benefits up to about 75% of what I had been making for four months (this despite being very young and having minimal savings). I never missed a payment or failed to pay the rent. What am I missing here?
Nothing. Been in the same situation and it never even crossed my mind to not pay rent. My brother has a tenant that was making $200k+/yr in oil & gas, lost his job a few weeks ago and called my brother later that evening to tell him he can't pay the rent. Would bet my life he isn't missing the payments on his truck and jet skis. It's about priorities.
Thank you!! :sharebeer Deadbeats are deadbeats, and idiots are idiots. To bring this back on topic and answer the original question, my answer is that there are too many idiots out there and I have no way of knowing who they are until they actually become my tenant. Just as anybody can act professional in a job interview, anybody can present themselves as 'good guys' when signing the lease. You won't see their real nature until it is too late. I find it laughable that folks in this thread claim to be able to separate the wheat from the chaff when considering potential tenants.
Last edited by FIREchief on Sat Apr 04, 2020 11:31 am, edited 2 times in total.
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barberakb
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Re: Why are you NOT buying rental properties?

Post by barberakb » Sat Apr 04, 2020 1:31 am

Just because you don't know how to do it shouldn't make it laughable...

jb1
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Re: Why are you NOT buying rental properties?

Post by jb1 » Sat Apr 04, 2020 6:10 am

People not paying rent due to this really seems like an excuse for me .. I assume they won’t be able to pay the next few months then.

Let me guess, they also have Netflix, eat out all the time, and have crap saving habits?

stoptothink
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Re: Why are you NOT buying rental properties?

Post by stoptothink » Sat Apr 04, 2020 8:54 am

jb1 wrote:
Sat Apr 04, 2020 6:10 am
People not paying rent due to this really seems like an excuse for me .. I assume they won’t be able to pay the next few months then.

Let me guess, they also have Netflix, eat out all the time, and have crap saving habits?
In this specific situation, with the increased unemployment, it is hard to suggest otherwise. I have read a few stories recently of tenants making up the residents of entire apartment complexes collectively deciding to not pay their rent at this time. In times of distress, deadbeats will try to take advantage.

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Re: Why are you NOT buying rental properties?

Post by Sandtrap » Sat Apr 04, 2020 9:39 am

Hawaii has temporarily suspended court eviction cases. This was in the Hawaii news. Landlords are unable to evict for nonpayment of rent.

There are exceptions and provisions to this.
Not good at all.😬😬

Not sure if this is happening elsewhere?

Actionably (and per topic) : It's important for R/E rental property owners and prospective owners to be familiar not only with the local landlord tenant codes, rental laws, ADA regulations, "Bed Bug" codes, etc, and changing laws as noted above.

j🌺
Last edited by Sandtrap on Sat Apr 04, 2020 10:42 am, edited 3 times in total.
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Re: Why are you NOT buying rental properties?

Post by LadyGeek » Sat Apr 04, 2020 9:47 am

The discussion is starting to derail regarding tenant lifestyles. Please stay on-topic and state your concerns in a civil, factual, manner.
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Re: Why are you NOT buying rental properties?

Post by randomguy » Sat Apr 04, 2020 9:56 am

barberakb wrote:
Sat Apr 04, 2020 1:31 am
Just because you don't know how to do it shouldn't make it laughable...
I have heard people use the same logic for picking individual stocks:) People were largely employed in March. It will not be until like June when things really ramp up. It could be messy but it might also end up hitting some real estate investors a lot heavy than others. And for the ones it doesn't hit, they will all like to think it was skill and not luck. And the ones that get hit will think it was all bad luck and not lack of skill...

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tomtoms
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Re: Why are you NOT buying rental properties?

Post by tomtoms » Sat Apr 04, 2020 10:17 am

randomguy wrote:
Sat Apr 04, 2020 9:56 am
barberakb wrote:
Sat Apr 04, 2020 1:31 am
Just because you don't know how to do it shouldn't make it laughable...
I have heard people use the same logic for picking individual stocks:) People were largely employed in March. It will not be until like June when things really ramp up. It could be messy but it might also end up hitting some real estate investors a lot heavy than others. And for the ones it doesn't hit, they will all like to think it was skill and not luck. And the ones that get hit will think it was all bad luck and not lack of skill...
Unlike the stock market, the RE market is not efficient.

I stick to single family homes. I only buy in a good neighborhood with good schools. Every tenant is checked for income, credit score and eviction history.

I could have better cash flow by buying multi-family building in a bad neighborhood but that came with more risk (and headache).

randomguy
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Re: Why are you NOT buying rental properties?

Post by randomguy » Sat Apr 04, 2020 12:02 pm

tomtoms wrote:
Sat Apr 04, 2020 10:17 am
randomguy wrote:
Sat Apr 04, 2020 9:56 am
barberakb wrote:
Sat Apr 04, 2020 1:31 am
Just because you don't know how to do it shouldn't make it laughable...
I have heard people use the same logic for picking individual stocks:) People were largely employed in March. It will not be until like June when things really ramp up. It could be messy but it might also end up hitting some real estate investors a lot heavy than others. And for the ones it doesn't hit, they will all like to think it was skill and not luck. And the ones that get hit will think it was all bad luck and not lack of skill...
Unlike the stock market, the RE market is not efficient.

I stick to single family homes. I only buy in a good neighborhood with good schools. Every tenant is checked for income, credit score and eviction history.

I could have better cash flow by buying multi-family building in a bad neighborhood but that came with more risk (and headache).
And people with good incomes living in single family homes in good neighborhoods aren't among the 10 million people who have filed for unemployment benefits in the past 2 weeks much less whatever happens over the next 2-3 months? :)

Luke Duke
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Re: Why are you NOT buying rental properties?

Post by Luke Duke » Sat Apr 04, 2020 12:17 pm

tomtoms wrote:
Fri Apr 03, 2020 7:21 pm
More risk? Yes.

More work? Yes.

Higher expected return? Yes.
FIFY

oldfort
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Re: Why are you NOT buying rental properties?

Post by oldfort » Sat Apr 04, 2020 12:29 pm

tomtoms wrote:
Thu Jan 09, 2020 10:52 am
watchnerd wrote:
Thu Jan 09, 2020 10:07 am
tomtoms wrote:
Wed Jan 16, 2019 2:28 pm


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.

Isn't the more fair comparison to also use leverage on the RE ETF? To buy it on margin?
No bank is going to lend you money to buy RE ETF.
Maybe, not directly, but you could take out a HELOC to invest in REITs. For some reason, that advice doesn't seem too popular on bogleheads.

ny_rn
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Re: Why are you NOT buying rental properties?

Post by ny_rn » Sat Apr 04, 2020 12:38 pm

I have two rentals in another state. Rents came in on time for 4/1/20. I also have a solid cash reserve, so I'm not too worried. I plan on throwing out a few low-ball offers (> 30% below market value) on a few properties soon.

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FIREchief
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Re: Why are you NOT buying rental properties?

Post by FIREchief » Sat Apr 04, 2020 12:56 pm

tomtoms wrote:
Sat Apr 04, 2020 10:17 am
Unlike the stock market, the RE market is not efficient.

I stick to single family homes. I only buy in a good neighborhood with good schools. Every tenant is checked for income, credit score and eviction history.
How do you check for eviction history?
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

Atilla
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Re: Why are you NOT buying rental properties?

Post by Atilla » Sat Apr 04, 2020 1:25 pm

I would have a huge problem if the government appropriated my property by saying I'm not allowed to get rid of non-payers. Add virtual confiscation to the list of risks of owning rental property.

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FIREchief
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Re: Why are you NOT buying rental properties?

Post by FIREchief » Sat Apr 04, 2020 2:00 pm

Atilla wrote:
Sat Apr 04, 2020 1:25 pm
I would have a huge problem if the government appropriated my property by saying I'm not allowed to get rid of non-payers. Add virtual confiscation to the list of risks of owning rental property.
Yep. Pass a law to give all of those who lose jobs money so that they can pay their rent and then not require them to pay their rent. :annoyed
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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tomtoms
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Re: Why are you NOT buying rental properties?

Post by tomtoms » Sat Apr 04, 2020 2:01 pm

randomguy wrote:
Sat Apr 04, 2020 12:02 pm
tomtoms wrote:
Sat Apr 04, 2020 10:17 am
randomguy wrote:
Sat Apr 04, 2020 9:56 am
barberakb wrote:
Sat Apr 04, 2020 1:31 am
Just because you don't know how to do it shouldn't make it laughable...
I have heard people use the same logic for picking individual stocks:) People were largely employed in March. It will not be until like June when things really ramp up. It could be messy but it might also end up hitting some real estate investors a lot heavy than others. And for the ones it doesn't hit, they will all like to think it was skill and not luck. And the ones that get hit will think it was all bad luck and not lack of skill...
Unlike the stock market, the RE market is not efficient.

I stick to single family homes. I only buy in a good neighborhood with good schools. Every tenant is checked for income, credit score and eviction history.

I could have better cash flow by buying multi-family building in a bad neighborhood but that came with more risk (and headache).
And people with good incomes living in single family homes in good neighborhoods aren't among the 10 million people who have filed for unemployment benefits in the past 2 weeks much less whatever happens over the next 2-3 months? :)
Like I said...it is about risk. Obviously there is no guarantee but that doesn’t mean you can’t manage risk. Renting your property to a couple of nurses is better than renting it to drug reps. I think you get the point.

quantAndHold
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Re: Why are you NOT buying rental properties?

Post by quantAndHold » Sat Apr 04, 2020 2:26 pm

Sandtrap wrote:
Sat Apr 04, 2020 9:39 am
Hawaii has temporarily suspended court eviction cases. This was in the Hawaii news. Landlords are unable to evict for nonpayment of rent.

There are exceptions and provisions to this.
Not good at all.😬😬

Not sure if this is happening elsewhere?

...

j🌺
This is happening everywhere. And even if it wasn’t, the odds you could get a court to hear the case, the Marshall to do the eviction, get the place prepped and find a new tenant in any kind of timely manor are low. For one thing, most courts aren’t handling anything except emergencies right now.

I wouldn’t take April rent payments, or lack thereof, as any kind of gospel for what’s going to happen in May or June. Things didn’t really go south most places until the second half of March.

Earlier this week, I was talking to a friend who has a bunch of rentals. California, whitch shut things down earlier than much of the rest of the country. 10% of his tenants couldn’t pay on April 1. May will be more interesting, since more people aren’t working.

Anyway, I think I mentioned upthread that I would be interested in a small apartment building, but in the six years I’ve been looking, cap rates have never gone over 1% in my area, so it just hasn’t ever penciled out. Waiting and watching...
Yes, I’m really that pedantic.

randomguy
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Re: Why are you NOT buying rental properties?

Post by randomguy » Sat Apr 04, 2020 2:54 pm

tomtoms wrote:
Sat Apr 04, 2020 2:01 pm
randomguy wrote:
Sat Apr 04, 2020 12:02 pm
tomtoms wrote:
Sat Apr 04, 2020 10:17 am
randomguy wrote:
Sat Apr 04, 2020 9:56 am
barberakb wrote:
Sat Apr 04, 2020 1:31 am
Just because you don't know how to do it shouldn't make it laughable...
I have heard people use the same logic for picking individual stocks:) People were largely employed in March. It will not be until like June when things really ramp up. It could be messy but it might also end up hitting some real estate investors a lot heavy than others. And for the ones it doesn't hit, they will all like to think it was skill and not luck. And the ones that get hit will think it was all bad luck and not lack of skill...
Unlike the stock market, the RE market is not efficient.

I stick to single family homes. I only buy in a good neighborhood with good schools. Every tenant is checked for income, credit score and eviction history.

I could have better cash flow by buying multi-family building in a bad neighborhood but that came with more risk (and headache).
And people with good incomes living in single family homes in good neighborhoods aren't among the 10 million people who have filed for unemployment benefits in the past 2 weeks much less whatever happens over the next 2-3 months? :)
Like I said...it is about risk. Obviously there is no guarantee but that doesn’t mean you can’t manage risk. Renting your property to a couple of nurses is better than renting it to drug reps. I think you get the point.
And what happens when your nurses develop covid19 disability (i.e. their lungs are destroyed) and can't work? Are you sure you will still be getting your rent checks? Are you going to be the landlord trying to evict those heros? You should have rented to computer programmers. Most of them have been practicing social distancing for years.:) I think you get the point. I am just not sure you are willing to face it. It is a very human thing to deny risks that we can't control. The one saving grace in this case is the disaster is happening to everyone. Makes it more likely for you to get a bailout than when the bad luck is just happening to you.

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tomtoms
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Re: Why are you NOT buying rental properties?

Post by tomtoms » Sat Apr 04, 2020 8:04 pm

randomguy wrote:
Sat Apr 04, 2020 2:54 pm
tomtoms wrote:
Sat Apr 04, 2020 2:01 pm
randomguy wrote:
Sat Apr 04, 2020 12:02 pm
tomtoms wrote:
Sat Apr 04, 2020 10:17 am
randomguy wrote:
Sat Apr 04, 2020 9:56 am


I have heard people use the same logic for picking individual stocks:) People were largely employed in March. It will not be until like June when things really ramp up. It could be messy but it might also end up hitting some real estate investors a lot heavy than others. And for the ones it doesn't hit, they will all like to think it was skill and not luck. And the ones that get hit will think it was all bad luck and not lack of skill...
Unlike the stock market, the RE market is not efficient.

I stick to single family homes. I only buy in a good neighborhood with good schools. Every tenant is checked for income, credit score and eviction history.

I could have better cash flow by buying multi-family building in a bad neighborhood but that came with more risk (and headache).
And people with good incomes living in single family homes in good neighborhoods aren't among the 10 million people who have filed for unemployment benefits in the past 2 weeks much less whatever happens over the next 2-3 months? :)
Like I said...it is about risk. Obviously there is no guarantee but that doesn’t mean you can’t manage risk. Renting your property to a couple of nurses is better than renting it to drug reps. I think you get the point.
And what happens when your nurses develop covid19 disability (i.e. their lungs are destroyed) and can't work? Are you sure you will still be getting your rent checks? Are you going to be the landlord trying to evict those heros? You should have rented to computer programmers. Most of them have been practicing social distancing for years.:) I think you get the point. I am just not sure you are willing to face it. It is a very human thing to deny risks that we can't control. The one saving grace in this case is the disaster is happening to everyone. Makes it more likely for you to get a bailout than when the bad luck is just happening to you.
We can play the “what if” game.

What if the nurses fall in love of the house and offered me 2x what I paid for?

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