[elsupremo]

I am trying for a passive income and/or rent-free situation for myself and would really really appreciate some insight from the brethren who have been there or are getting there.

I have about 50k liquid + another 35k I can easily lay hands on . This is US coin. I can borrow 70% LTV with 30% down at ~7%. I have vey good credit. I cannot get a conventional FHA type loan. I earn a simple income online.

The hair-pulling I'm having is this: I want to live abroad - in LatinAm or E.Europe however I am fairly certain that I am not going to be able to get a mortgage overseas. So if I bought there, the best I could hope for is a situation were I rent out extra rooms and live rent free. Is that right?

So it seems that my only hope to get income off a property is to buy here in the US. Either buying a prop under my cash limit or buying a prop with a value up to 200k so I can rent it out -- either entirely or as rooms-- to net me an income of $800+/month. So then the question is -where?

I found some great articles on realtytrac. Here's some links:
http://www.realtytrac.com/content/news-a...t-map-8023
http://www.worldpropertyjournal.com/nort...s-8340.php

Another article says the best rental markets are where colleges are.
http://www.realtytrac.com/images/reporti...ns_650.jpg
This seems like a good idea in terms of Gaming and Quality of Life - although my primary focus is rental income.

So what I'd like to know is if any of you are familiar with these markets and if you would encourage/discourage me insofar as being a landlord and deriving income from these properties.

Now, my instinct is to crunch the numbers in those tables (in the articles) and come up with a winner location but in the end, I'm going to have to go to this place , live there for at least a bit, and there's a lot to know about a market that can make or break one's little income fantasy pretty quick.
Like for ex. Detroit is 'cheap' but property taxes often top 5k per year - ouch.

[RockHard]

(01-18-2015 09:28 PM)elsupremo Wrote:  

I am trying for a passive income and/or rent-free situation for myself and would really really appreciate some insight from the brethren who have been there or are getting there.

I have about 50k liquid + another 35k I can easily lay hands on . This is US coin. I can borrow 70% LTV with 30% down at ~7%. I have vey good credit. I cannot get a conventional FHA type loan. I earn a simple income online.

The hair-pulling I'm having is this: I want to live abroad - in LatinAm or E.Europe however I am fairly certain that I am not going to be able to get a mortgage overseas. So if I bought there, the best I could hope for is a situation were I rent out extra rooms and live rent free. Is that right?

So it seems that my only hope to get income off a property is to buy here in the US. Either buying a prop under my cash limit or buying a prop with a value up to 200k so I can rent it out -- either entirely or as rooms-- to net me an income of $800+/month. So then the question is -where?

I found some great articles on realtytrac. Here's some links:
http://www.realtytrac.com/content/news-a...t-map-8023
http://www.worldpropertyjournal.com/nort...s-8340.php

Another article says the best rental markets are where colleges are.
http://www.realtytrac.com/images/reporti...ns_650.jpg
This seems like a good idea in terms of Gaming and Quality of Life - although my primary focus is rental income.

So what I'd like to know is if any of you are familiar with these markets and if you would encourage/discourage me insofar as being a landlord and deriving income from these properties.

Now, my instinct is to crunch the numbers in those tables (in the articles) and come up with a winner location but in the end, I'm going to have to go to this place , live there for at least a bit, and there's a lot to know about a market that can make or break one's little income fantasy pretty quick.
Like for ex. Detroit is 'cheap' but property taxes often top 5k per year - ouch.

If you want to be a landlord, you'll need to be your own property manager or all your profit goes to the PM, so you'll need to live on site. Bear that in mind I know Lincoln is cheap. You can get a lot of house there, but you're in Lincoln. Trenton can be cheap, if you're in Trenton, but I grew up in the area, and honestly, Trenton still scares me. NJ approaches Detroit in terms of urban blight. My guess is that the Ohio locations are going to be the winners.

The great thing about college towns is you have a lot of people who need short term housing. The bad thing is that they're college students - they party, drink a lot, and don't have a sense of responsibility. So bear that in mind: your customers are pretty much fuckups.

What is ideal is to find a town with a big medical school. You will have residents coming through. They will be on 1-4 year residencies and fellowships and don't fuck around because they can't afford to. A big law school works as well, but med school is perfect. Advertise to your target audience. However, this client is a bit more upscale and you need to be able to afford a place a med student would like. But check out that list - do any of these schools have BIG med or Law schools? Those are better bets, if you can swing a decent property.

You have 115k, so at 70% LTV you can borrow about $165K. Get on Zillow, look in each of these target markets and make a guess.

BTW, checking on aimloan.com, if you're getting 7% in this interest rate environment, your credit score is either fucked or you need a better mortgage broker.

[samsamsam]

There have been many threads on this, I would suggest a quick search.

I'll be honest, it is never as easy as it seems.

So many questions about who will manage it when you are abroad, appropriate reserves, etc.

Not so easy to sell property when under duress.

I like to crunch numbers also, but sometimes even the most analyzed investment can fail.

I'd hate to have to borrow money from others (assumption) for the additional 35k.

If you are good at online stuff, why not reinvest your cash into online but (BIG BUT) different online businesses?

[rudebwoy]

Look at Europe, some good deals to be had. I believe in UK you need 35% as a foreign investor, the trouble is London is expensive.
I would look at Hungary, cheap properties in Budapest.

[WanderingSoul]

You're looking go spend $115k for $800 monthly income?

Since you make money online you could use that cash to buy legitimate profitable online businesses that will bring in way more than $800 per month.

[Killface]

Incorrect, a good property manager will only take 5-8% of gross rent. If your profit is only 5-8% of gross rent, you did not buy the right property.

Everyone's first idea is to buy in college towns because the parents of the kids have money, yada yada...this is generally a bad idea. These rental markets are usually very overpriced.

Aimloan is useless for this guy. He stated he can't go conventional because he is self employed online. He needs a portfolio or commercial lender. These are extremely hard to find but I know of a few, after tons of networking and calling small local banks and credit unions. The terms for a typical loan like this are: 25 year amortization, 10/15 year term, 5 years fixed rate, adjustable up to three times at max 2% additional each, with the initial rate usually being in the high fives or low sixes. Rarely you will find a fixed rate one instead of an ARM but these will be the 7-8% he quoted. These lenders lend based on the asset and its cashflows and do not give a shit about your w2 income.

You need to buy property in states that have landlord friendly laws, high rents, and low home values. I would stick with Kansas City, Ohio, indiana, Atlanta, some of Texas, some of Florida.

You need to visit biggerpockets.com and scour every article.

I am acquiring about 800k of property this year. If I had 115k right now I would leverage it into a 70% LTV commercial loan into a 380k apartment building. This building would likely have 18-20 units. It should generate, at minimum, $7600 in gross rent per month (2% of purchase price). Do a detailed analysis to arrive at your expected net, including budgeting for maintenance and vacancy. In general, you can expect about a third of the gross rent as profit on a financed property. So you will net $2500 or so from this purchase, conservatively. You can find buildings on loopnet.com . Negotiate down about 25% off of asking price. If you can't find any that meet that criteria in that range, then keep looking and don't buy til you do.

Source: I am financially independent from rental property

[WanderingSoul]

Killface, would that $2,500 figure be net profit, or would you stil have to subtract your mortgage from it?

Great info. Thanks.

[RockHard]

Ditto that. To be continued, I need to do some reading first.

[CodyB]

The real estate market in 'safe economies' is very fucking hot right now. Canada, Australia, UK and New Zealand are all being bought up by 'CASHED' up speculators with literally cash to burn who are looking to buy a safe asset. To them they aren't banking on a massive appreciation or return, just a bricks and mortar exchange for their (often) dirty cash.

Regardless if its a western country or developing country, if you can pick up a property relatively cheap with a good rental yield, chances are there is something underlying and there will be risk involved.

Example: Thailand - politically unstable and rules and laws are enforced in very strange ways. What's legal today might be illegal tomorrow.

In Australia the rental market is very good outside of the metro areas. You can pick up a property for around $250KUSD in some areas and you'll make money on the rental. Problem these areas are hit hard in times of economic stagnation and you are less likely to have a massive appreciation in your property. You can probably expect 3-5% growth per year, it will be a little bit better than inflation.

[Killface]

That is net profit. And it's tax free due to your write offs, essentially.

I am still working on that data sheet. If you've seen the price of oil lately, you can see why I've been working like a dog. But I thought I would pop my head in on this thread

[Killface]

I would personally be nervous about owning real estate in a foreign country if it was my first venture and I didn't have a sizeable domestic portfolio. If you'd like to expose yourself to foreign real estate in a more passive manner, I recommend te vanguard etf VNQI

[kufu]

Killface, am I reading it correctly... 380k for 18-20 units!? That's about 20k$ per apartment. In my area you need to pay about 10x that for one bedroom apt... are you talking about rural areas or some damaged buildings where you need to put some capital into renovating it?

(01-21-2015 11:38 PM)Killface Wrote:  

I am acquiring about 800k of property this year. If I had 115k right now I would leverage it into a 70% LTV commercial loan into a 380k apartment building. This building would likely have 18-20 units. It should generate, at minimum, $7600 in gross rent per month (2% of purchase price). Do a detailed analysis to arrive at your expected net, including budgeting for maintenance and vacancy. In general, you can expect about a third of the gross rent as profit on a financed property. So you will net $2500 or so from this purchase, conservatively. You can find buildings on loopnet.com . Negotiate down about 25% off of asking price. If you can't find any that meet that criteria in that range, then keep looking and don't buy til you do.

Source: I am financially independent from rental property

[Killface]

No, there are decent markets where you can do this. Kansas City, Indianapolis, Ohio, Atlanta

[Dantes]

I red recently that Cleveland has one of the highest return on investment in the US. I have a friend who just bought a few homes there for 50-75k per.

[elsupremo]

OP here. I’m chagrined to read your insights only now. Somehow I was not subscribed to the thread (yes, I did tick the box) and thought that y’all just weren’t interested in the topic. So thanks , muchachos, for the ideas thus far.

I want to be more clear on my situation – it’s uncomfortable to be too specific but if I want actionable opinions I need to be forthcoming. So:
I don’t work online in that sense – I guess the term is telecommute. My employer is 5k miles away – the work is less than fulltime and it was approved only until I get some med issues out of the way. I don’t want to go back to the Gulf.
The amount to work with is 50k liquid + 35k sig loan at 6.5%. That’s 85K. I could afford a $275k property (leaving a lil fat in) or up to 300k (I can get 75% if it has 5+ units –not rooms- in the prop). That money is at 7%. I’ve looked – and would love to be wrong—for anything lower but without w2’s or tax returns you’re doomed.
I’m fairly numerate and a good negotiator but rather green in RE investing. I have rented props and rooms on Airbnb and conventionally and have been able to find a good tenant to double as prop mgr. Although absentee landlordism isn’t ideal, there are more and more ways to make it a reality.
I’m interested in props that will NET me > 1000/mo. That means after the loan & interest, prop tax, hoa fees, contingency, insurance, etc. I’ve been looking here in SFL –at sfh-and that isn’t easy. I have not seen too many multi-fams. The ones I’ve seen are overpriced or true dumps. Btw –THANKS for mentioning Loopnet. Hadn’t seen it before.
I have a lot of plans , personal and business, that I’ll work on while abroad, so its not like I’m planning on retiring or living on ramen forever but I’d liketo set up a base income to pay for rent and basics while I undertake other, possibly longer term, projects. Remember it takes time to decide on a place after visiting others, time to learn the culture at a business level, time to form impressions, deal with bureaucracy -- and time to enjoy yourself.
Some you mentioned buying online businesses. I’d love to hear more on that. I have researched it awhile ago and I was both stunned at the possibilities and scared off the massive amount of scams and ruses. If I could buy an online biz that honestly makes even a little money – I’d love to try it. I was amazed but a little disbelieving of some sites selling for only a few months income. Why would they sell it when they could pay someone to manage it. Although I’ve managed contractors via Odesk before and can vouch that it ain’t easy – and not that cheap--getting good help. And the time commitment is often high. So I’m not sure if in the end landlording is any worse – but I’d love to be wrong.
I’d love to hear of ops abroad --- like the guy who mentioned 35% down for props in the UK – but that is definitely a no-go. Tell me, where else in Europe and the Americas can one get a mortgage as a foreigner?? The idea there would be to live cheap or free by renting rooms or setting up a mini hostel or pensione. Ive seen – from afar—a number of couples that live abroad like that.
Looking back at the US. Where would you suggest I look? My lender won’t loan in about 10 states – most of which are high risk such as MI. I’m looking a lot at metros in the South, (except FL), Ohio, and PA for that high rent to prop value ratio, low unemp rate, university metros. Also, in some degree, I don’t want to buy were I wouldn’t live. I grew up near Appalachia and I like the seasons. I’m cooked on single or bi-season places eg. FL, CA, AK, AZ, etc. Also, I may need to live there for awhile or take or keep one of the units or room and so must be ok with it.
BTW, a shout out for the sug to look at metros with big U’s with big grad schools – pharma, law, med, etc. Right away I though of Pittsburgh and Cleveland.
Specially I’d like to thank guys like killface and samsamsam---- 2% omg. I wish I had like an older brother who’d done this shit before and could say, look here grasshopper, here’s what’s up. It sucks trying to get an education from the people who are trying to butter their bread on what they tell you e.g realtors.
Still, you keep walkin looking at the ground, soonerlater you're bound to find a dime

[Killface]

Do not listen to realtors. You want a realtor who allows you to go through the MLS and select properties yourself, and just does your paperwork. Wholesalers are also great for this. Realtors are paid on commission proportionate to the price of the property, so they will try to get you in an expensive house by giving you horror stories about lower end properties. Avoid avoid.

Of the states you mentioned, assuming that is all you're working with, go with Ohio. Columbus, Cleveland, Cincinnatti. If it's an option I also recommend Indianapolis and Kansas City.

For online businesses, empireflippers.com or flippa.com . Your mileage may vary. If you aren't an expert, it's hard to tell whether someone is doing something to inflate stats. Also if it's an ecommerce store and not an Adsense / amazon site you are responsible for the whole backend now, so you better know what you're doing. I would recommend buying a little site under $5k to tinker with. But honestly, with a site that small you could just start your own from scratch, probably learn a lot more, and spend a couple hundred max, if you outsource your shit.

Easy formula here is: find a dropshipper, set up ecommerce store using free wordpress woo commerce plugin, profit.

[saturn]

How about germany- Awsome economy, currency that is very cheap right now. If the euro goes tomorrow you can expect the german currency to appreciate at least 50% in dollar terms. Currently is dragged down by the eurozone.

This is a suggestion, something I am interested in as a hedge. I would not recommend for a first investment. But if anyone knows about german property investment I would like to hear from them

[Akula]

(01-21-2015 11:38 PM)Killface Wrote:  

Incorrect, a good property manager will only take 5-8% of gross rent. If your profit is only 5-8% of gross rent, you did not buy the right property.

Everyone's first idea is to buy in college towns because the parents of the kids have money, yada yada...this is generally a bad idea. These rental markets are usually very overpriced.

Aimloan is useless for this guy. He stated he can't go conventional because he is self employed online. He needs a portfolio or commercial lender. These are extremely hard to find but I know of a few, after tons of networking and calling small local banks and credit unions. The terms for a typical loan like this are: 25 year amortization, 10/15 year term, 5 years fixed rate, adjustable up to three times at max 2% additional each, with the initial rate usually being in the high fives or low sixes. Rarely you will find a fixed rate one instead of an ARM but these will be the 7-8% he quoted. These lenders lend based on the asset and its cashflows and do not give a shit about your w2 income.

You need to buy property in states that have landlord friendly laws, high rents, and low home values. I would stick with Kansas City, Ohio, indiana, Atlanta, some of Texas, some of Florida.

You need to visit biggerpockets.com and scour every article.

I am acquiring about 800k of property this year. If I had 115k right now I would leverage it into a 70% LTV commercial loan into a 380k apartment building. This building would likely have 18-20 units. It should generate, at minimum, $7600 in gross rent per month (2% of purchase price). Do a detailed analysis to arrive at your expected net, including budgeting for maintenance and vacancy. In general, you can expect about a third of the gross rent as profit on a financed property. So you will net $2500 or so from this purchase, conservatively. You can find buildings on loopnet.com . Negotiate down about 25% off of asking price. If you can't find any that meet that criteria in that range, then keep looking and don't buy til you do.

Source: I am financially independent from rental property

Ok maybe I missed something but a 70% LTV on an apartment building would mean around a ~$165K total property cost right? So when you get a sec maybe walk me through how you'd get to $380?

I have I actually know KC and a couple other cities in the Mid-West somewhat well so what sort of area would that building be in? $380k with 10-20 apts just sounds like it's in a super low rent area right? Don't you get lots and lots of issues with tennants and if so who manages these issues while you are away? And how do you manage your properties while working out of the area for extended periods of time? As a couple posters have already said I would rather own a few properties but be somewhat location independent but maybe that's too much to ask (and why an online business might be a better fit for some of us who game abroad mostly). Thx.

[Killface]

You're taking 115 / 0.7 when you should be doing 115 / (1-.07) . What you described would be considered 30% LTV.

The building I described would be considered "class C". That's not a warzone or a slum, but a quality, if small and older, property in a working class neighborhood with low to medium crime.

Tenant issues are not bad and I hired a property manager to take care of everhthing. It's 95% passive.

Online businesses are great and can potentially blow up much faster than real estate. Both are "fastlane" though. I am currently working on launching an amazon business by the end of the month.

[BostonBMW]

I own a few smaller multi-families here in New England. There is some pretty good advice on this thread. I have been managing the properties myself since they are about 1-1.5 hours away from where I live. A few points that might be helpful:

- I prefer to manage my on my own because I have a great lawyer (evictions) and an excellent handyman (repairs). I preferred to learn as I grow my holdings. I spend about 10 hours a week at most on the RE.
- I can't stress how critical it is to get good tenants, regardless of whether you or your property manager screens for them, ideally you should meet with them before agreeing to rent the apartment. I'd rather take a $50/month hit in rent to get stable tenants who will stay for many years. Turning over apartments can be a real hassle (locating new tenants, cleaning/repairing the units).
- Besides home insurance, I have a few home warranties for major systems. In case my plumbing goes, I know that it will be covered (with a deductible). It allows me to sleep easily and without having to pay a property manager.

Now, I have been interested in the Midwest markets for some time. I have a few concerns about investing/managing properties remotely:

- I'll have to hire a property manager. I am not against spending the $$, however the fact that I will need to find the right manager and manage him as well, seems to add another layer of complexity to my system.
- Right now I can be on-site by driving a few hours if there is a catastrophic event (fire, flooding etc.) however if I invest in the Midwest, it's a few hours by plane at the very least.
- I will need to do heavy amount of research. New England is a compact region and I have roots here, so I can always call on a buddy or friend of a friend who can help. For example, after the last blizzard, I was able to get my driveways plowed 3 times just because my buddy's cousin does landscape (summer)/snow removal (winter) and he took care of me.

Now on the flip side:

- I'd like to achieve the 2% Rule. It's almost impossible to get to that here in New England, unless we're talking about warzones. If the Midwest has the returns, I can bite the bullet and get out there.
- Diversification: I having properties spread out helps during downturns, where one region might be hit harder, while another continues to stay afloat.
- Ultimately, I also want to make significant cash flow (enough to quit my job) so the dinero in my bank account should matter more than location.

I guess I am looking for reassurances and/or horror stories on remotely investing in Real Estate. Please share if you can.

[edlefou]

(01-22-2015 11:29 AM)Killface Wrote:  

That is net profit. And it's tax free due to your write offs, essentially.

Can you expand on how the net profit is tax free?

I've been renting out apartments for 13 years and after you deduct your write offs from your gross you still have to pay tax on the net.

If there's some way to avoid paying tax on the net it would be very helpful if you could shed some light.

[samsamsam]

Edlefou, don't you have depreciation on your properties? That can add up to a lot unless you have a low acquisition price.

[Killface]

You still have to pay tax on the net but the net should be tiny after expenses and depreciation. Then you can take it as a distribution through an LLC (if you don't self manage) and not pay self employment taxes. Your LLC should also be in a tax free state, so no state taxes either.

[edlefou]

(02-02-2015 06:37 PM)samsamsam Wrote:  

Edlefou, don't you have depreciation on your properties? That can add up to a lot unless you have a low acquisition price.

Depreciation allowance is usually 4% on the value of the building ONLY (a typical split would be something like 80% building and 20% land) and you take 4% each year on the remaining balance, so the amount you can deduct for depreciation goes down slightly every year.

Here's an approximation for a $380K property: 380 x 0.8 * 0.04 = $12,160 or about $1K/month.

That would let you reduce your taxable monthly net from $2500 to $1500, but I don't see how it could be tax free.

[Killface]

Yeah it's not entirely tax free but compared to being an employee it will feel like it.