Real Estate Investing

Has/Does anyone on this board own any real estate and rent it out?


 


I have been doing it for the last 3 years, not the way I have wanted to but for other reasons. I am about to do it the way that I want too.


 


I bought a condo back in 2010 and due to circumstances had to move out of it and move to another city for a job, so I found a family to move into it quickly. I haven't really been making money on it but its been keeping me afloat. Now that I am about to finish school and have a job lined up, I will be getting back into real estate in a big way.


 


The plan is to sell my condo, and buy a house, get a couple roommates and use that extra money to purchase another house that I will rent out.


 


I am thinking if everything goes well I will add 1-2 houses to my portfolio every 3-5 years.


 


So does anyone have any stories or have tried this?


Comments

  • Whats your long term goals with the properties?


     


    That will be a major deciding factor for what sort of properties you want to invest in.


     


    Have you ever considered commerical properties?


     


    Do LOTS of research...neightbourhood, demographics, average home values, average rental rates, etc.


     


    For the love of God/Buddha/Allah/Ganesha get a home inspection!


     


    I'm more of the "slum lord", multi dwelling, more bang for your buck. I have a real estate company with 2 other shareholders, and we're more inclined to purchasing duplex/triplex/quadplex. For what they cost to purchase, you stand to make more in rental income than just a home(at least thats what I've found with research into rental rates). It also spreads out the vacany %. But multiple dwellings also means 2x, 3x, 4x the maintenance too. But the one beauty of rentals and taxes in Canada is that maintence(this includes condo fees) are considered an expense and work to offset your rental income for tax purposes(you may already know this seeing as you've been renting your condo). And believe it or not, if you're in a higher tax range, having a property generating a loss isn't a bad thing. Like a business, if you're property runs a loss, it will offset your taxes(ie: you will have a reduced tax burden). A pretty good thing if you're make a very high income and running out of ways to reduce your overall taxes(RRSP, Political donations, etc.).


     


    When crunching the #'s, don't forget to allow for insurance, 1-3% of value for maintenance each year, property management(if you're not doing it yourself), and that you can afford to float the property if it becomes vacant.


     


    Getting a house and having roommates can be a double edged sword. If they're great, it can be an awesome time(and profitable in that they're helping pay down the mortgage), but if they're not it can make you regret ever making the decision and could be very costly.


     


    Just a few things to consider.


     


    Oh did I mention do LOTS of research? ;)


     


    Head down to Chapters, there's a $h!t ton of books on the subject, many specifically meant for the Canadian market. Hope that helps.


  • I feel like mentioning a bunch of the RichDad books here would be a great idea. RichDad PoorDad, and Cashflow Quadrant. Probably others.



    I'm not yet at the point of investing into RE yet, but it is on my bucketlist, after my business is running successfully.


  • StevoStevo Upgrade in Progress

    I wrote a bit about this on my blog if you're interested: http://www.thatstevenbaker.com/why-do-people-buy-investment-properties/


     


    Whatever you do, just make sure you're clear on what you're doing! It sounds like you are. :-D


  • Not going to lie, I love talking about money and real estate, so I hope we can keep this topic going for awhile. I do not have much time at the moment but will mention a few things.


     


    Stevo, not a bad article. One thing that is missing from it, is taxing of profits. The 100 dollars you mention of profit per week, would be taxable (at least in Canada, not sure how Australia works it) and that is one of the biggest pet peeves I have with real estate shows. Oh look by renting your basement suite you will now gain an extra 18,000 a year, free money! Wrong, its taxable minus what that part pays of the mortgage based of sq feet.


     


    I feel like richdad poordad was a terrible book and I don't remember why, I read it probably 20 years ago, when I was 10. When I was 8 I read a book called the wealthy barber, and I remember this being a much better book. I would have to go back and read the new versions of both there books.


     


    Garret what kind of business do you have?


     


    Invo, my motivation into the properties is both simple and complex.


     


    The simple part is to acquire as many as possible using as little money as I can. Meaning paying off one place quicker by using the extra profit from others, then taking that money and using it to pay off more while taking out equity from the paid off place and so on.


    I would like to get into 4plex's, especially if I can buy some land near a school or university, build a new 4plex and rent it out.


    I know condo's are good if you want low maintenance however, condo fees eat profits.


    Houses are good because you can get more profit out of them, more risk due to more freedom of the tenant.


     


    I have lived with about 20 roommates in the last 12 years, some good, some bad. Just have to lay down laws at the start and let them know whos in charge ;)


     


    I plan on having a savings account of about 10k in the bank per property, for the first 5. Then after that have 5k per house in the bank, up to 100k. Once you get to that level it is safe to say if you need money now, you can get money from a bank quickly.


     


    I am 4 months away from starting a job that is paying me over 120k/ year to start, so needless to say I am getting very excited to finally start with these plans as they have been a long time in the making.  My next post I will talk about the two chances I missed out on, which ended up leaving me without 35k profit and 70k profit.


  • edited January 2014

    Not a fan of rich dad poor dad either.


     


    I'm into house flipping: buying a house and selling it quickly for profit. I'm not into buying and renting since I've seen too many headaches when my parents did it.


     


    I was an asset manager for a real estate investment company a year ago. I believe the ROI is better, both with less headaches and money, with flipping if you find the right company to invest in. I would not try to do it myself at all since it's super competitive and there's a learning curve that you need to go through. Why go through the headache? You should at least learn the basics so you're not getting scammed and find a company with a great track record. By working with an investment company they can help you get a hard money loan from the bank. Essentially the company shows the bank their track record or a stable investment and the bank will literally give you cash so you can invest it. 


     


    The one I worked for had an investment team and real estate team, so flipping a house took about a month, no more than two.  We were buying foreclosed homes and always did our comps to make sure we made a profit. You can always rent out the house you flip, but I rather sell it since you're always making profit on each house. Another thing about flipping, especially SFR (Single Family Residences) is that everyone is looking to buy and it's easy to find comps for it and make a profit with some upgrades to the house. 


     


     


    Just my 2 cents. 


  • Kevin,


     


    Where are you located? Canada, US? Any particular investment companies you'd recommend?


     


    I agree the whole renting thing is a pain at times. But isn't flipping a little harder right now due to the stagnation of the current market? I mean, yes there are still good pockets, where properties are moving, but I've kind of found as a whole things still aren't great for moving stuff quickly.


  • StevoStevo Upgrade in Progress


    Stevo, not a bad article. One thing that is missing from it, is taxing of profits. The 100 dollars you mention of profit per week, would be taxable (at least in Canada, not sure how Australia works it) and that is one of the biggest pet peeves I have with real estate shows. Oh look by renting your basement suite you will now gain an extra 18,000 a year, free money! Wrong, its taxable minus what that part pays of the mortgage based of sq feet.




    =====


    Cheers for the feedback. I steer away from tax as its different everywhere. I like to say "net" and leave it there :-D



  • Kevin,


     


    Where are you located? Canada, US? Any particular investment companies you'd recommend?


     


    I agree the whole renting thing is a pain at times. But isn't flipping a little harder right now due to the stagnation of the current market? I mean, yes there are still good pockets, where properties are moving, but I've kind of found as a whole things still aren't great for moving stuff quickly.




     


     


    I'm located in the United States. The markets that I'm used to are California, San Francisco/Bay Area, Los Angeles, and Las Vegas. 


     


    You can basically flip in any city if you can have access to the last few months of comps in that area. 

  • StevoStevo Upgrade in Progress

    comps?


  • Comps = comparable houses/ properties


     


    The thing I see wrong with flipping a property is that I think most people do it cheaply and poorly.  A lot of them will just do cosmetic work instead of fixing something up properly and making it safe and for the long term. Especially the shows on TV that show people flipping properties.


     


    The second issue is, what happens if they property sits for 6 months empty before it sells.


     


    What if you are opening up a wall and you see a huge issue that will cost 50,000 dollars to fix. You just lost all your profits. I feel like there is too much risk with this way of doing it.


     


    However lots of people do it and seem to make profit, so its not terrible, just not for me.

  • edited January 2014

    Yea, there's some sketchy makeovers where they make it look nice for comps when the inspector comes. However you have to realize that it's about how it looks comparable to the other prices/homes. 


     


    As far as finding out the house issues we always look at its listing records to mitigate risks and actually go inspect the house (can't enter), but we can look, and look as much as we can. 


     


    If it sit 6 months before it sells, someone fucked up when buying the house - they shouldn't have bought it in the first place. This rarely ever happens if you do your homework.  


  • Investing in real estate is the next big thing. Nowadays paying high prices for condos is a norm. Although there are very few people like you who want to do little different.


    And I would not recommend house flipping to you.


    My blog


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