Advice on buying property and becoming a Landlord

Why would you buy property in full without a loan? Buy a basic real estate finance book and study up on return on investment. Second, a 4 unit is too small for most property management companies to take you seriously for. The tenants and the property will determine how much maintenance and headaches you will have to deal with and is all part of your due diligence once you find a property.

Whatever you do with your money, be careful with financial planners. Many such as Ameriprise offer heavy load annuity or mutual fund products that are terrible. You would be better off paying a fixed fee person. Other places charge 1% of assets, but then they put you in no load funds, so you end up saving money in the long run.

I know this didn't answer your question, but if you are not going to buy real estate I don't want to see you get taken. The above was more a word of caution about what not to do. Before you do anything to some research. Maybe post a separate topic here. I think there might be some smart people here sometimes.

You don't have experience being a landlord and you might hate it. Best thing to do is buy China ETFs from US based securities firms and let your money bake there.

cap rate wrote:

Why would you buy property in full without a loan? .

This is the WORST MISTAKE ANYBODY CAN EVER MAKE WHEN BUYING REAL ESTATE!!!!!!!!!!!!!!

If you are going to buy real estate, the ONLY way to do it is with CASH. I was told a long time ago that the absolute best investment for the long run is to buy single family units. The problems you will have dealing with people in multiple units is not worth the extra few dollars you may make on it.

I started by buying my first rental in 1995. When I got enough rents I bought another. It was slow going in the beginning but as I acquired more properties, the amount of the rent increased. I also bought and sold a lot of houses during the "boom" a few years ago. When the market tanked, I have spent the last 3 years really buying a lot of properties to rent. I now have 22 single family rentals ALL PAID FOR.

Over the years, I have seen countless guys who read these basic "Real estate investment books" end up bankrupt or lose all their properties at sheriffs sales. Leveraging your money in real estate is very foolish. For instance, if you leveraged your money 5 times, what really happens is you end up with 5 times the work and 5 times the hassle for virtually no more income than if you didn't leverage at all. Why would you want to do that?

What kind of properties are you buying? Most people don't have the luxury of scraping together $100K or more to buy properties with cash.

How did buying single family units between 2003 and 20008 work out?

if you had a million dollars would you rather let it whittle away in time and lose its value through inflation? or would you rather trade it straight up for 1 million dollars worth of real estate rentals that will be less money but it will last for a loooong loooong time, AND increases with inflation?

triyoda wrote:

What kind of properties are you buying? Most people don't have the luxury of scraping together $100K or more to buy properties with cash.

How did buying single family units between 2003 and 20008 work out?

Worked out FANTASTIC. The market told me houses were far more valuable to sell during that time so that is what I did. At the beginning of 2008, I quit trying to sell houses (except right before the gov't bailout ended in April 2009 when I sold 3 houses in a couple weeks) and started buying all the foreclosures at about 25% of what they sold for a couple years before that.

As for the 100k, the OP said he came up with a large sum of money. I had to work 6 or 7 years in the restaurant industry to pay off my house and save enough for my first property. 100k is okay to start if that is the low end in your area. I live in the midwest so I have 20-25k in my houses that I rent for 400-500 a month. It is all relative though so if you had a 100k house, you better only have 50k in it and rent it for 1,000 a month.

Of those 22 houses, 3 or 4 are worth 60-75k each even though I have less than 25k in each one. When the market comes back, I can sell each of those and turn that money into 9 or 10 rentals.

Again, this is an advantage of single family houses. There is a very slim market for multi-units and they aren't as liquid. Single family properties give you the opportunity to do what is best according to the market at the time. For every 100 people interested in buying a house to live in, there might only be 1 person interested in buying a multi family home.

Dear landlord

Please don’t put a price on my soul

My burden is heavy

My dreams are beyond control

When that steamboat whistle blows

I’m gonna give you all I got to give

And I do hope you receive it well

Dependin’ on the way you feel that you live

Dear landlord

Please heed these words that I speak

I know you’ve suffered much

But in this you are not so unique

All of us, at times, we might work too hard

To have it too fast and too much

And anyone can fill his life up

With things he can see but he just cannot touch

Dear landlord

Please don’t dismiss my case

I’m not about to argue

I’m not about to move to no other place

Now, each of us has his own special gift

And you know this was meant to be true

And if you don’t underestimate me

I won’t underestimate you

Come to Australia and manage you own money.

Love Foreclosures,

I also live in the midwest and near an area where houses can be bought for 10k - 30k pretty readily. I am half tempted to try my hand at this first by just buying a 20k house, renting it for $400 a month and find out if I even like it.

Have you bought your houses cheap and then put a lot of money into them? It appears that most of your homes are pretty cheap homes, does this create a risk in attracting tenants that are a credit risk or in repelling tenants due to perhaps a poorer area of town? I'm afraid trying my hand at a cheap home first, wouldn't give me an accurate portrayal of if I like this or not because my tenants might be worse. Thoughts or any other advice?

Anyone who rents a 25-30K home is going to be a 'problem' tenant. They will be only marginally able to meet their monthly obligations, first emergency and you are not getting paid. I'd only do this if you are in a state that will allow you to kick 'em out IMMEDIATELY and without the use of a lawyer. Otherwise, don't bother.

FoghornLonghorn wrote:

Anyone who rents a 25-30K home is going to be a 'problem' tenant. They will be only marginally able to meet their monthly obligations, first emergency and you are not getting paid. I'd only do this if you are in a state that will allow you to kick 'em out IMMEDIATELY and without the use of a lawyer. Otherwise, don't bother.

You'll (realistically) be able kick them out of a lawyer anyway.

Landlord-tenant law is a mess- while there are decent laws in most states, people who are in these situations can't afford a lawyer anyway and the cases are to small for it to be worth a lawyer's time.

But you are right to take that stuff into account. Most landlords have little idea what the laws are.

I dabbled in being a landlord for a little while, and I hated it, so I got out. You want to be a nice guy and try to be and then you're taken advantage of...no thanks. The BEST landlords are ones who enjoy fixing things, CAN fix things themselves, and enjoy dealing with people a LOT. You say you want the fewest obligations as possible, well, this is NOT it then.

How much is this large sum? $200,000? More? I would have a different view if this sum is $800,000 vs. $150,000.

I agree with Flagpole, that how much money you have will influence your best strategy. Also, your stage in life. If you're somewhat settled, and the money is in the 50-150k range, putting a large down on the home you'd like to live in for the rest of your life is hard to compete with. But if you're already in that home or if you're young and don't mind living in a smaller unit in part of the building makes a ton of financial sense. The maintenance and other work involved can vary largely on a lot of factors. The best scenario is a building that has been built in the '90s or more recently and close to an expensive college. Rich parents will always be there to help pay the rent and even the worst college students are still easier on a unit than a poorer family with kids. Regardless, property management companies will gladly manage it for you if you don't want anything to do with it. It just depends on how much money you want to recoup from the rents.

It sounds like you only have enough to shop for one 4-plex. Don't expect to be able to profit enough to quit your day job on that. Owning a 4-plex rental is the sort of thing that's just a small income supplement but more so a long term investment.