Income Generating Real Estate

Go away, future slumlord!

Depending on where you buy in the city, it may be very very hard to find something where you can cover your costs unless you have a huge down payment. And in the areas where you can cover your costs, you may not like the tenants that you'll find. Furthermore, as you alluded to, rent in many areas has gone down a bit over the past couple of years. There's not much sign to me that natural forces will bring it up soon in my area of town, especially in the apartment/rental condo market. Why not wait out the market a bit more before moving forward? You can use that time to learn more about how to become a successful landlord - by actually reading books, etc. rather than trusting what Letsrun has to say.

I definitely do read books about it. That is what has made me concern about the rent vs. covering my monthly costs issue. I am just looking for any real life stories that can add insight. Since there are always investing threads I figured there had to be someone around this board who would do it.

There is probably a decent chance that you will have a net tax loss from the property, so you would want to include in your calculations the tax benefit of this offsetting your other income. A couple of points:

While this could give you a bigger refund, or owe less tax come April, you could still have problems if you are not running positive cash flow.

The greater your other income, the greater this tax benefit will be, because of marginal tax rates.

Remember that depreciation recapture upon a sale is taxed at ordinary income rates, and appreciation will be taxed at capital gains rates unless you live in the property for 2 of the previous 5 years before selling.

Thanks. Anyone have any stories about how real estate worked for them.

Before you dive into purchasing an investment property- while you save your money- go get hired at an apartment building and get some experience dealing with renters, leasing, fixing small problems, and dealing with people's crap.

While you work as the caretaker, you probably will get discounted or free rent. This will allow you to really stash cash for a down payment, and once you find a property and purchase it- you can take what you would be paying for rent and apply it to your rental property payment, along with rent from your renters. Put it in a spreadsheet and watch how much faster you can pay off the property.

I have read quite a few books on real estate investing but didn't know about all the little things that go into renting units to everyday people. After being a caretaker for a year for 40 apartments, I've learned there are a lot of crappy things that come along with all the glamor that is advertised in real estate investing.

just my .02

take the easy route, but a couple well managed reits

old fart wrote:

take the easy route, but a couple well managed reits

get motivated, and do both- but purchase reit index funds.

then when old fart is pissed that the market only gave him 6.5% return over 10 years instead of the booming 35% he was promised by his financial advisor- you'll be swimming in cash from your investment property and because your reit index fund returns weren't deflated by high expense ratios, high turnover, and poor management.