"the rentor pays your mortgage (and a small % more for maintainence and yourself) then at the end of the year, you get to write off the interest. Is that right?"

This depends totally on your gearing....how much deposit you put into the properties, size of each loan etc etc

********

"Just for calling a plumber every once in a while? Or hiring a bunch of mexicans from the front of Home depot to clean and fix the place up?"

Over simplification...you also get tenants fucking off and not paying rent owed by them for months after they wreck the place. It is usually better to employ a good property manager that controls payments and vets prospective tenants....although this costs you...

I'm not sure where he gets this idea. There's certainly taxes on residential property and, from what I understand, commercial property taxes can be even higher ... although it probably varies depending on what state you live in.

Perhaps the only exception would be Louisana, which doesn't have residential property tax but does have commercial ... Otherwise, there most certainly would be taxes ...

Lots of great advise above,

I also dabble in this field in Australia and can give you some tips but be aware that some of the things mentioned below could be different where you are.

Some tips that come to mind and please excuse me if someone else mentioned any of these also, I didn't read every one ..

Look into getting a legal structure in place correctly before you start acquiring a number of properties, in Australia trusts are widely used by serious property investors.
Average Mum & and Dad investors are often not aware of the benefits or are turned of the idea by their basic tax return type accountants, so do your homework on this one.

Using a trust to purchase your properties will provide you with legal protection in case you get sued personally so you wont loose your properties.
They also provide tax benefits, you can divide the rental income from the trust between multiple persons and each person is then taxed at their applicable personal tax rate.
(Downside is any losses cannot be passed outside the trust so negative gearing of your personal tax doesn't work with this, but you need to look at the future benefits)

As mentioned in an earlier post, the way to the wealth is through the equity, you wont get anywhere quickly with just the rent income, its not worth investing in property for this.
You make money when you buy, by paying below market prices and or renovating, and always buy in places that are or will be going up in value in the short/mid term.
(Choose an area and get to know everything about its market and importantly what's going to happen in future that could boost prices, country areas are the usually the best for big gains unless you have big dollars to start with in the city areas)

Once values start to rise because of what you have done to the property or market trends, go and get it revalued and use the extra equity for a deposit on another one and repeat it all over again.
To prevent running out of cashflow when you have several mortgages you can convert some of them to "interest only" loans where the amount owed to the lender stays the same and you just pay the interest component which is tax deductable.

Over time the value of the property will go up and the loan amount will remain stagnant, So for example you may have owed 100k on a house worth 120k originally but in 20 yrs time, the 100k owing should look pretty small compared to what the property is worth then.
Its when this happens that you would probably look at your portfolio and sell off the non performers and payout the better ones if you want to go debt free.

Don't allow emotions to kick in when looking to buy, they can be your worst enemy, concentrate on the figures, set yourself a bottom rate of return that you wont go under and stay well above it. You will get to know what a good return in your area is and start to only be interested in these top performers after a while.

Great buys are out there but its like trying to find a needle in a haystack , I find on average the really good buys seem to pop up around every 6 -8 weeks when your looking daily to give some idea of how many properties you will be looking at before finding one that glitters.

Pay a property manager to look after it for you, they deal with the tenants and their problems, organize repairs, do inspections etc. and will appear for you in court if need be usually for about a 5% cut of the rent, then they deposit the rest in the bank for you.. too easy..


MOST IMPORTANTLY have an exit strategy, don't buy anything your not confident you could shift quickly and could walk away from without loosing money if the need arose and you will sleep easy.:thumbsup

Oh yeah and take anything a Real Estate agent tells you with a grain of salt :Graucho

A good read. I might mention this. When you find a property that you are seriously interested in take a qualified contractor with you to give it the once over. He will spot things that you might not and you can get a running list of things that need to be repaired as well as estimated costs. This will give you a better idea on whether or not to make the purchase. I use retired contractors, carpenters, plumbers etc. as I have already mentioned, because they will work cheaper, than those that are still active in their trades.

Good link, I just bookmarked it http://www.bizbuysell.com/

This thread reminds me of my thread a few weeks ago, about buying a carwash... it's all good :thumbsup

I'm selling off my last investment property this month.
It was great when I first got involved but as my time became more valuable, it was not spent on management so instead of doing things wrong, I started selling off instead.
For young people (under 30) real estate is a GREAT investment.
sweat equity is a beautiful thing and mortgage rates are low right now. (one day they won't be) once interest rates rise again, you'll be sitting in the catbird seat with all the potential buyers locked out of the market because of higher interest rates.

I think this is a beautiful time to be a buyer of investment properties.

Income property is a great long term investment. I have some commercial property that was left to me by my grandparents that generates a nice income now and once the mortgague is paid off in a few years, I can retire on the income.

I always try to buy the cheapest property in a good neighborhood. My latest house is next door to a home that sold for $120K more then I paid for mine. Talk to your realtor about where property values are going up over the long term and try to buy in that area. In SE florida, the near the ocean the faster prices go up, which is why I bought here.

Finding 0 down deals is hard, but look for people selling fixer-uppers. Many of them just want to get out and are more flexible in order to close a deal. Pre-foreclosures can also be a good place to look as is the foreclosure market.

Actually, I disagree.

If equity is the name of the game (which many people here have argued) ... rather than monthly rental income ... Then consider this:

All interest rates have done is drive up prices. Once interest rates go back up, there's a good chance that property values could decline as much as 20 percent ... as they have done in previous real estate recessions ...

If you're selling off your investment property now, I'm sure you're doing great. But I certainly wouldn't want to be a buyer right now ... especially for investment property.

The people I know who have done best with investment property bought back in 96-97, when prices were still low, and the early '90s real estate slump was just ending. Those people have really benefitted from the subsequent real estate boom.

But real estate is cyclical, just like anything else. And I think the market is peaking right now.

Of course, if you can find a bargain property somewhere, that's a different story. But generally, prices are inflated right now. In many markets, the low interest rate benefits have largely been wiped out by higher prices ...

Consequently, your carrying costs are high ... cutting into potential rental income profits. And you risk a negative equity situation going in ...

As far as the deals themselves being a pain in the ass...if you can find a seller who is willing to keep the existing loan you just buy out his equity..if you have the cash...then you pay his mortage...which is usually way less than anything you'll find based on the current value..Teh there are no closing costs ..no loan assholes...none of that stuff...i just did it with the place i just got..It just takes a larger down payment...but it all goes to the equity.

I was a landlord for six years til July of this year.


From my experience, I would recommend that you take the Real Estate Principals class at a junior college to get the concept of Real Estate and being a landlord is two of the chapters studied. Heck, since you are in California, you can actually take the test after the one class and get a license to sell under a broker. I also advise that you use a Real Estate Management company to manage the homes ! Unfortunately, we did not do that. :(

There is alot of money to be made in Real Estate if you watch the market. I made 120 k profit off of my rental. The only reason I sold the place was my hub was tired of going to the house , managing it, and I wanted to add on to my current house.

I have a bunch of rental homes, it really is the only tax dodge left. The only thing I have experienced is that you lose money for the first couple of years until rental rates catch up with the outflows, but that may just because I go with more upscale properties.

great discussion here:) i'll add my :2 cents:

I did the 'rent to drunken college students' thing in my former hometown. The income was excellent and the house more than doubled its value in about 5 years (and wasnt cheap in the first place). All that said, I doubt I'll take that route in the future because drunken college students are, on the whole, fucking awful tenants. In the future, I'll be looking mostly at apartments and commercial property, espcially fixer-type projects.

On the subject of property management companies. What a scam! Almost all of them should be called property neglect companies.

Depending on your objectives and time horizon, this could be a more risky time to invest because interest rates seem very likely to move back up within the next year or two. Of course, sweat-equity projects can cushion the blow to some degree.

Get Asian people to rent your investment property, preferably Japanese.

The Japanese seem to have a real respect for the property of others.

When I was in Tokyo for a few days in 1996 I felt as if I could have left all my shit on the street corner and it would have still been there the next day.

here's a fun place to look at real estate


http://www.realtor.com/default.asp?hm=on&poe=realtor

My grandmother owned a few and did really well in her retirement thanks to those. After 30 years the properties are free and clear and the income stream is sweet. You can refi and then buy more properties.

Only downside is based on whether you like the hands on approach or not. Property management is a royal pain in the butt. And one bad tenent can literally sit in your place, fuck it up, not pay rent and you have to go through hell to get him evicted in some cases. Most people just let a property management company run things and handle all the 24/7 BS, tenent calls etc.

I've known a few guys who have done real well sucking up properties that were beat, with quick cash closings, and then fix'm em up and flip them in 6 months.

Real Estate is usually a safe bet, if you are a long term investor, but on a short term basis you can lose serious bucks if you are buying and selling incorrectly during a fucked up market cylce.

Like right now in South Florida the low end market is still solid, as is the ultra estate end, but the $500K to $2Mil market is in the tank and soft as butter. People that got wiped out in the stock market are all trying to unload their 2nd homes down here and stuff. You can get some real deals right now if you are a buyer and not a seller.

Problem I always have had with Realtor, ListingLink etc...is that none of them give the same amount of info as the actual mls listing. i prefer to just go into my realtor's office and do homework there.

Very Interesting Shit, I have been looking into resort rentals and having a management company do the bookings and what not.

Only thing that sucks is I am sure properties like this have high insurance rates becuase resort rentals are always fucked up, shit is stolen and so on....

anyone had properties in the resort area of real estate?

Interesting to hear such good responses. Thanks, "theking" for offering so much good advice. :thumbsup

I also noticed that a lot of people said that when interest rates go up everyone is going sell and that may be a bad time to buy. It's funny because last night our friend David, (the guy that has income properties) mentioned that it's about to be a sellers market. That's what he must have meant.

Since it will definitly be a long term investment for us. We'll do our research. Los Angeles always seems to increase in value, except for gangland places, but we wouldn't buy there anyway.

Actually in Bakersfield, 100 miles north of L.A. people are moving into the south west side of town in droves. Maybe that's not a bad place to lok at.

We paid nearly 275K for our 3 bedroom home, (L.A. is expensive) in Bakersfield for the same price we could have purchased a 4 bedroom, 3.5 bath, and twice the size.

As fasr as it being better than mutual funds... I hope so. Luckily we got out before things started going south.

Exactly, As I noted in my post, you need to buy below or at market value not inflated pricing.
Most Pro's slow down on the buying and switch to other variations during inflated periods. Such as vendor finance.
Its the newbie investors that generally get sucked into buying expensive property with small returns.
It all comes back to cutting through the bullshit with the estate agents and the media hype. The agents work for the seller, not the buyer and will drive prices up as high as they can.

Also a lot of people tend to come over to the property side of investing from the stock market when things dont look so good over there, then go back a while later because they have the taste for making money faster than you do in property.

There are always good buys out there in any market cycle, its just a matter of finding them.
:thumbsup

rentals are nice if you have a really good property manager. my Father in law has rooming houses.

Rooming houses are the best for fast easy money from pretty dependable tennats. He maintains one of the 6 bedrooms for his use (crash pad, quasi-office and general chill out room when we party)

The house is in Philly that he paid 28k for a 6 bedroom house in Fishtown, and rents 5 rooms out at 100 per week a piece on a $300 per month mortgage. For an extra 10 per week each tennant gets an old 386 machine and another 20 gets you an ethernet cable from cable modem via Linksys 8 port rotuer.

They all took the PC, Ethernet connection since its all guys there, I encourage them to sign up to my sites, muhahahahahaha.


also, there are no leases to have to deal with as well, so you dont have the misery of an asshole tennant for a year and the agony of going to court to evict. No rent that week, goodbye, If they try to get the authorities involved, the rentee is a guest in your home. Goodbye pain in the ass rentee.....

There ya go

Herb K
See ya in philly this weekend to all out there from the home of Brotherly love

Las Vegas is the fast growing city now about 6,000+ a month
coming in from everwhere. we own about 6 different all
commercel land 12.5% a year no rentors, no problems, Great
$$$$ for the pocket.

my :2 cents:
softcore

Well, I guess if you're a short term investor you'd disagree but
I'm not concerned with paying 10% too much for a building.
Also, I'm not talking about buying single family homes as an investment. I'm talking multi-units.

You should never buy a single family home in this environment.

Now, again. investment properties are for buying NOW. When interest rates are this low EVERYONE can afford to buy. Once the rates start rising, your renter base grows because some good people won't be able to buy with higher rates.
When rates go up, investment props go up because rents go up.

One thing to remember: Generally mortgages for investment properties come with points so you will needs some decent up front cap to pay the points when you close.

You're assuming that interest rates tell the entire story. They don't.

In many markets, rising prices have directly tracked with lower interest rates ... Meaning, people are paying higher prices for homes because the lower interest rate results in the same monthly payment.

Therefore, just as a hypothetical example, a property worth $160,000 two years ago, with an 8 percent mortgage, results in the same monthly payment as that same property, selling for $200,000 today, with a six percent mortgage.

Hence the reason people have been willing to pay more ... because the monthly payment is about the same.

Now when interest rates rise --- perhaps causing the real estate bubble to burst (and even the National Association of Realtors has acknowledged this possibility) ....

People won't pay higher prices anymore, because the monthly payments will be too high ....

At that point, you're probably looking at a 20 percent correction in prices ... which happened in the real estate recessions of the '80s and '90s ...

And Joe Blow's monthly payment is still going to be about the same ... since he can go back to buying that same property for $160,000 at 8 percent interest ...

So higher interest rates don't necessarily mean that a ton of people are going to be shut out the housing market and, in turn, renting properties ...

Meanwhile, as an investor who bought that property for $200,000 ... you're stuck in a negative equity situation ... without the rising rental income to help you ride through the down cycle ...

And, of course, if you discover that you hate hassle of being a landlord ... and want to sell in a down market ... the situation could be much worse ...

Make sure you screen the tenants very carefully.

My father had deadbeat tenants and my mother did too. My mother's tenants actually started a fire in the house from using the fireplace and refused to pay rent for 6 months, and there was nothing we could do about it but get a letter from a lawyer. Couldn't shut off the heat or electricity on them or anything

The law is always on the tenant's side and they know it.

well erotictrance is definitly keeping our eyes open to the downside of things, and I appreciate that.

Here in LA (and agin we'll do our research) I would assume that a nice apartment building with a managemant company would turn a small profit.

Our friend uses a management company I think. I'll ask him later. He never complained of having bad tenants, so maybe the company he uses is good.

Income properties...can't wait to get my hands on one. When I move to NY next year first thing I'm doing is taking a Real Estate course. Then, I'm going to invest in Real Estate. I can do a lot of the work involved in renovation on my own if needed (drywalling etc..)

Hope for the best, but prepare for the worst case scenario ...

That's all I'm saying, really.

The hardest part is finding someone to rent it out.. and making sure they pay you. If they dont pay, or no one rents it... you gotta pay the payment out of your own pocket.

Well here in LA it's not too hard to find renters. When we moved out of our apartment, into this house. The next people were practically moving in on us. The even opted not to have the apartment repainted, or recarpeted first. They said they would take it as is.

Regarding the real estate market, what I've seen done is to:


1. Buy a fix-er-upper that has a high selling value but has an owner with an immediate need for cash.

2. Do some generous 'housecleaning'
(Clean up yard, paint house, pull up old rug, etc, etc,...anything that can be done over a weekend or two)

3. Sell the note at a price that is about 1/2 to 2/3 of what you would have received had you held onto the property long enough to have sold it at it's appraised value.


Or you can follow the advice already given and take a class on real estate at a local JC or university.

BUT whatever you do, stay away from the late night TV "real estate" Guru's...especially Carleton Sheets...No good...trust me... ! :)

later....

I totally agree ...

Real estate agents are truly horrible ...

They artibrarily add as much as $50,000 to the market price ... apparently because some idiots will pay it ...

Then they get really pissed and offended when you do your homework ....

And find out that the listing price is WAY over market value ...

Definitely beware of agents ...

mikesapartment does well :-)

Erotirance, your points are good, like any investment do your research and know the history of the market in your area.

I've been fortunate in investing in areas where recession meant prices went up 5%/year instead of 40%:) First Norther Ca during the boom years of the 90's, now in S. Florida. Florida is too popular of a tourist/retirement place for property values to suffer much, short of a cat 5 hurricane coming through.

Redshoe, a "seller's market" is one where sellers have all advantage. There are lot's of buyers for every seller so the seller can pick their deal. San Francisco during the 90's was a classic sellers market where the better properties had 5 or 6 offers the day they went on the market and often went for $40K over the asking price. A "buyer's market" is where there are too many sellers and not enough buyers. Property sits on the market for months and prices drop. Buyer's get a much better deal in a buyer's market then in a seller's market.

So true. And I think it's safe to say that it's a seller's market right now.

Buyers are screwed ... LOL

This sounds like the best project yet... I want to do something similar... Big house out of a college town in the country -- strip it down -- then construct a MONSTOR pool -- then turn the house into some kind of club with some living/office/fuck spaces upstairs -- downstairs the dancefloor and bar and shit -- use a porno-password to get in to the 24/hour party (keep the cops out) -- then you have cameras in the trees and shit and cameras in the pool under glass -- when you enter the 24/hour party you got to get past Bruno who signs your parking sticker (and keeps the male female ratio good hehe) -- you sign a model release statement and for that you get access to the amazing pool and free party booze... now you got a pool cam that's out of this world and if you're really sick you could have a VIP room with lap dances ehhe... Somebody fund me! I know a great location :p

yikkes rental homes!! we used to have 2 houses besides
the commercial stuff not only was the return shitty (around4%)
but they are nothing but trouble, tenants moving out and wrecking the place while they are there.
If you buy the right commercial property and choose your tenant
carefully you can have a good longterm income with none or
little hassles !

Did you forget who you replied to? It was Lens. His rental properties are probably all homes in Beverly Hills. You know, just 'throw-away' houses for the rich. LOL

Well. This is all very inspiring. I kinda like Pete's idea. I know the college-fuck-party scene is going good right now. :thumbsup

Does anyone know of any good books, or study guides on this subject. I live in L.A., I don't think we have any colleges here, it's kind of a small town. LOL

What I mean is, I can't just go out and start a class tomorrow, but I would like to start some kind of research while I'm still excited about it. Maybe if I offered to buy Lens a beer in Vegas he could give me a few pointers. Whadda ya say, Lens?

Well first thing is don't take any advice above from people that haven't been there. Those that have, have different experiences. I've been in real estate for almost ten years (I'm 31 now), and I live off the rental income (and now porn). Other people have to go to work every day in order to pay me. Personally I think it's way easier than the adult biz. If you're knowledgable the maintenance/repairs/screening will not be a problem for you. More millionaires have been made in RE than any other industry by a very large margin. Feel free to look me up in Vegas I enjoy RE immensely.

The Fed recently dropped the key rate by 50 basis points or .5% This lowers interest rates for mortgage lenders [although foreclosures are actually hitting 9 year records!] and makes purchasing rental property even more attractive.