[jbkunt2]

Hi all,

I’m keen to invest in a rental property but having a hard time finding one.

A 5% return seems like it should be the minimum.

Here is Chicago, most of the properties I see are priced so that the rental returns would be about zero it appears.

Any tips or advice would be greatly appreciated.

Thanks.

[Hypno]

Rules of thumb, buy it locally so you are close enough to keep an eye on it. Only buy properties where the monthly rent is at least 1% of the purchase price.

In other words, don't pay 100K for a property if it will only rent for $900, but if you can get $1200/mo then its worth crunching the numbers.

That is a superficial analysis, you need to understand operating expenses and some other things.

Here is some more info:

http://thecrux.com/how-to-buy-real-estate-right/

The point is, you make your money when you buy. You have to buy at the right price. Only suckers buy and hope to make money "when it goes up."

[jbkunt2]

Thanks for the info. I am not sure you can get a 1% rent v purchase price in Chicago.

I found this studio for 130k which I can rent for $1,110 - 1,150:



Does this look worth a go?

[CodyB]

(02-02-2018 10:03 AM)jbkunt2 Wrote:  

Here is Chicago, most of the properties I see are priced so that the rental returns would be about zero it appears.

3-4 bedroom houses in regional towns man.

Lower mortgage repayment. Larger families, poorer and more desperate to secure accomodation makes a very competitive renters market.

In Australia can get a 10-20% rental yiel. More if you go through a government agency that subsidises homes for poor people. Just have good insurance.

Downside is that capital appreciation is barely above inflation.

[Hypno]

Generally you want to avoid condos because (1) some condos have rules against renting, (2) a bad tenant will get you in all sorts of trouble, (3) the HOA fees will kill you, and (4) you could get hit with a special assessment, especially in an older building.

Also, you need to budget for repairs and things that wear out. Carpet for example needs to be replaced every couple of years. You have to asssume some vacancy, some costs to get the place let, some turnover costs like cleaning and repainting.

[jamaicabound]

(02-02-2018 10:26 AM)Hypno Wrote:  

Rules of thumb, buy it locally so you are close enough to keep an eye on it. Only buy properties where the monthly rent is at least 1% of the purchase price.

In other words, don't pay 100K for a property if it will only rent for $900, but if you can get $1200/mo then its worth crunching the numbers.

That is a superficial analysis, you need to understand operating expenses and some other things.

Here is some more info:

http://thecrux.com/how-to-buy-real-estate-right/

The point is, you make your money when you buy. You have to buy at the right price. Only suckers buy and hope to make money "when it goes up."

I agree with you on buy locally, especially for a new investor but just to play devils advocate someone living in California that may not be an option. I know there used to be a dude on this forum who lived on the west coast but bought properties in Toledo Ohio and throughout the Midwest and did really well. he was buying properties for like 15k or 20k that weren't even necessarily in the ghetto just a cheap city. Rents were also abnormally high in relation to properties prices so I think he was still getting $600 to $800 on those types of properties.

[jamaicabound]

(02-02-2018 10:03 AM)jbkunt2 Wrote:  

Hi all,

I’m keen to invest in a rental property but having a hard time finding one.

A 5% return seems like it should be the minimum.

Here is Chicago, most of the properties I see are priced so that the rental returns would be about zero it appears.

Any tips or advice would be greatly appreciated.

Thanks.

I'm in Chicago as well. I have a rental in Aurora and a Rental in Joliet both properties my rental income is double my mortgage.

I've been looking to pickup another property however I will say things are kind of inflated. My rental in Joliet is a dump althogh I think Joliet as a whole is kind of a dump but parts of Aurora feed into Naperville schools so you can get a much cheaper property ie under 100K thats in one of the most desirable school districts in the state.

College towns in Illinois are also a goldmine for properties. Pickup a property for 25k maybe 50k. Rather than having a lease of $800 how most student housing works is each kid pays say $200 or $225 or $250. Parents typically cosign the lease so you know you'll get money back for damages or unpaid rent and rather than just renting the house for the $600 it's probably worth you get 4 kids in there paying $200 or more a piece and you get $800 maybe even $1,000 or $1200 depending on how large the property is.

I see some good opportunities in Elgin and Bolingbrook as well. I try to stay out of the south suburbs.

[edlefou]

(02-02-2018 11:58 AM)jbkunt2 Wrote:  

Thanks for the info. I am not sure you can get a 1% rent v purchase price in Chicago.

I found this studio for 130k which I can rent for $1,110 - 1,150:

Does this look worth a go?

Disclaimer: I don't know anything about Chicago.

Insurance is really cheap at $237 a year. Is that a US thing? I pay about two grand a year for a policy on a triplex covering full replacement cost for a loss, as well as rental income replacement, liability, etc.

What's the breakdown on monthly fees? This is for repairs and property management? This is your biggest controllable expense and an opportunity to boost your yield if you get hands-on.

If it's condo fees I personally think that would be throwing money out the window.

Why 20% downpayment? What if you put down 10% and buy two? Or 5% and buy four?

[Australia Sucks]

Codyb I don't think you are really giving the full story when you are talking 10 - 20% yields in regional Australia.

The only way you can get it is buying into dying regional towns where population and employment is falling or buying into a town so small where there is almost no liquidity and it will take forever to sell your property or buying in shit-hole suburbs full of unemployed and drug addicts, etc. Unless you are taking massive risks or being very active e.g. doing construction or major renovations or subdivisions, etc you are not going to be getting anything near a 10% net yield, let alone 20%.

In vibrant major regional towns like Dubbo, Lithgow, Orange, Armidale, Tamworth, Bendigo, Launceston, Coffs Harbour, Bundaberg, Port Macquarie, Warrnambool, etc the net (as opposed to gross) rental yields on properties located in middle class suburbs is generally in the 2-7% range with an average net yield for typical houses usually being 3 or 4%.

[ItalianStallion9]

Price to rent ratio is a decent metric in this case. It means the mortgage would be low, and the median rent is high. California is not a good place to obtain rental income (in most major metros there) but many midwestern states have potential.

[mujji]

(01-28-2019 06:05 AM)rathoresudha Wrote:  

If you are looking set up your work on that property, You can use these amazing property management software, they will help you manage your real estate business.

I think @jbkunt2 looking for rental property not real estate business.

[CDRhodes]

I rent out my old home in a moderately sized city in the Southeastern US. Rent is approximately 25% higher than the mortgage so I do well there. Things to consider are the age and condition of the property. As a landlord you are responsible for repairs and they can be costly. Living close by and being prepared to do a lot of the work yourself can mitigate some of that cost. I’ve found that insurance on a rental property isn’t terribly high, but it’s another cost to factor in. Bottom line is that you can’t spend any of your “profits” for quite some time as you will need to save it and build a reserve of cash for when the roof leaks or the hot water heater leaks, or your outgoing tenants manage to set a fire in the dishwasher (ask me how I know). Lastly, renters can be a pain in the ass. Even the good ones never leave a place in the condition in which they found it. My advice would be to vet prospective tenants as thoroughly as possible. I don’t really “make” much money off my property right now, other than the fact that someone else is paying my mortgage and I can pay for repairs and upkeep without going out of pocket.

[Virtual]

(02-02-2018 01:18 PM)Hypno Wrote:  

Generally you want to avoid condos because (1) some condos have rules against renting, (2) a bad tenant will get you in all sorts of trouble, (3) the HOA fees will kill you, and (4) you could get hit with a special assessment, especially in an older building.

Also, you need to budget for repairs and things that wear out. Carpet for example needs to be replaced every couple of years. You have to asssume some vacancy, some costs to get the place let, some turnover costs like cleaning and repainting.

One of the biggest drawbacks of condos are HOA fees. Single family homes on the other hand don't have this issue but you've got to deal with the constant stream of home repairs and general maintenance.

[Poseidon]

Read this thread and watch the video. Going the low end route works, if properly engaged.

https://www.thefastlaneforum.com/communi...647/unread

[Dr Mantis Toboggan]

Sorry to go a little OT, but what do you guys think about REITs? I'm trying to make RE about 30-40% of my total investment portfolio on a DCA basis but don't have enough capital for a down payment on a dedicated investment property yet, my thinking is move some money from stocks into REITs, let it grow while continuing to contribute, and then pull some of it out for a direct investment once I have enough saved up/find the right place.

[BBinger]

(01-31-2019 01:09 PM)Dr Mantis Toboggan Wrote:  

Sorry to go a little OT, but what do you guys think about REITs? I'm trying to make RE about 30-40% of my total investment portfolio on a DCA basis but don't have enough capital for a down payment on a dedicated investment property yet, my thinking is move some money from stocks into REITs, let it grow while continuing to contribute, and then pull some of it out for a direct investment once I have enough saved up/find the right place.

REITs have almost no liquidity after their initial offering. When you want to sell, almost everyone bidding is going to be bidding with a discount if there are any buyers for your particular REIT at all.

Stocks can go down, but they are still liquid. You can get out of a stock position as easily as you get in thanks to the big market for stocks. With REITs... the major player is usually the issuer and that leads to unfavorable marketmaking for REIT investors.

[Dr Mantis Toboggan]

(01-31-2019 02:04 PM)BBinger Wrote:  

(01-31-2019 01:09 PM)Dr Mantis Toboggan Wrote:  

Sorry to go a little OT, but what do you guys think about REITs? I'm trying to make RE about 30-40% of my total investment portfolio on a DCA basis but don't have enough capital for a down payment on a dedicated investment property yet, my thinking is move some money from stocks into REITs, let it grow while continuing to contribute, and then pull some of it out for a direct investment once I have enough saved up/find the right place.

REITs have almost no liquidity after their initial offering. When you want to sell, almost everyone bidding is going to be bidding with a discount if there are any buyers for your particular REIT at all.

Stocks can go down, but they are still liquid. You can get out of a stock position as easily as you get in thanks to the big market for stocks. With REITs... the major player is usually the issuer and that leads to unfavorable marketmaking for REIT investors.

Hmm, thanks. So sounds like the right ones could be worthwhile as a long term investment but probably not great to try to use it as a holding fund for future direct investments?

[BBinger]

(01-31-2019 04:29 PM)Dr Mantis Toboggan Wrote:  

(01-31-2019 02:04 PM)BBinger Wrote:  

(01-31-2019 01:09 PM)Dr Mantis Toboggan Wrote:  

Sorry to go a little OT, but what do you guys think about REITs? I'm trying to make RE about 30-40% of my total investment portfolio on a DCA basis but don't have enough capital for a down payment on a dedicated investment property yet, my thinking is move some money from stocks into REITs, let it grow while continuing to contribute, and then pull some of it out for a direct investment once I have enough saved up/find the right place.

REITs have almost no liquidity after their initial offering. When you want to sell, almost everyone bidding is going to be bidding with a discount if there are any buyers for your particular REIT at all.

Stocks can go down, but they are still liquid. You can get out of a stock position as easily as you get in thanks to the big market for stocks. With REITs... the major player is usually the issuer and that leads to unfavorable marketmaking for REIT investors.

Hmm, thanks. So sounds like the right ones could be worthwhile as a long term investment but probably not great to try to use it as a holding fund for future direct investments?

Maybe? Finding the right ones would be difficult if they even exist. REITs exist and get marketed heavily because the people making and marketing make good money off of them. If your portfolio isn't big enough to effectively DIY something like a REIT buy acquiring diverse real estate holdings of you own, outsourcing the work with a retail REIT is likely to just leave you with paper that carries value so long as you don't try to redeem the value for cash.

Liquidity is king when you are looking for a place to park your money in anticipation of a future investment.

[the_ox]

(02-02-2018 11:58 AM)jbkunt2 Wrote:  

Thanks for the info. I am not sure you can get a 1% rent v purchase price in Chicago.

I found this studio for 130k which I can rent for $1,110 - 1,150:

Does this look worth a go?

Just out of curiosity, you guys from US usually get a mortgage for such kind of studio?

What I'm thinking is that buying a house and let the rent pay the mortgage itself, but I want to hear opinion from yous.

Here in Dublin seems to be an option.

[earlgrey]

(01-31-2019 02:04 PM)BBinger Wrote:  

REITs have almost no liquidity after their initial offering. When you want to sell, almost everyone bidding is going to be bidding with a discount if there are any buyers for your particular REIT at all.

Stocks can go down, but they are still liquid. You can get out of a stock position as easily as you get in thanks to the big market for stocks. With REITs... the major player is usually the issuer and that leads to unfavorable marketmaking for REIT investors.

Huh? What the fuck are you talking about? REITs have no liquidity? AMT which is 61.8B in mkt cap has no liquidity? SPG which is 51.7B in mkt cap has no liquidity?

(01-31-2019 05:10 PM)BBinger Wrote:  

Maybe? Finding the right ones would be difficult if they even exist. REITs exist and get marketed heavily because the people making and marketing make good money off of them. If your portfolio isn't big enough to effectively DIY something like a REIT buy acquiring diverse real estate holdings of you own, outsourcing the work with a retail REIT is likely to just leave you with paper that carries value so long as you don't try to redeem the value for cash.

Liquidity is king when you are looking for a place to park your money in anticipation of a future investment.

The amount of people on RVF talking about shit they know nothing about has hit an extreme. AMT, SPG, IYR can't be redeemed for cash? They only trade on NYSE which makes them practically a scam.

[Brodiaga]

For REITs, try VNQ from Vanguard. No issues with liquidity. There are also mutual fund options of the same REIT. As a general rule in the US, REITs are not tax efficient and should be held in tax advantaged accounts.

[BBinger]

(02-01-2019 01:29 PM)earlgrey Wrote:  

(01-31-2019 02:04 PM)BBinger Wrote:  

REITs have almost no liquidity after their initial offering. When you want to sell, almost everyone bidding is going to be bidding with a discount if there are any buyers for your particular REIT at all.

Stocks can go down, but they are still liquid. You can get out of a stock position as easily as you get in thanks to the big market for stocks. With REITs... the major player is usually the issuer and that leads to unfavorable marketmaking for REIT investors.

Huh? What the fuck are you talking about? REITs have no liquidity? AMT which is 61.8B in mkt cap has no liquidity? SPG which is 51.7B in mkt cap has no liquidity?

(01-31-2019 05:10 PM)BBinger Wrote:  

Maybe? Finding the right ones would be difficult if they even exist. REITs exist and get marketed heavily because the people making and marketing make good money off of them. If your portfolio isn't big enough to effectively DIY something like a REIT buy acquiring diverse real estate holdings of you own, outsourcing the work with a retail REIT is likely to just leave you with paper that carries value so long as you don't try to redeem the value for cash.

Liquidity is king when you are looking for a place to park your money in anticipation of a future investment.

The amount of people on RVF talking about shit they know nothing about has hit an extreme. AMT, SPG, IYR can't be redeemed for cash? They only trade on NYSE which makes them practically a scam.

Ones listed on the NYSE are fine in this respect, they get market makers to ensure liquidity. Many smaller REITs don't get this, if you go to the wrong broker and ask for REITs they might have incentives to offer REITs traded OTC and not traded on NYSE.

[Elmore]

I have a mid-to-long term plan on buying a small rural property somewhere beautiful, doing it up and renting out via AirBnB. The initial outlay can be minimal compared to letting a live in property, and if you make it look superficially nice while playing on its 'rustic' appeal, then you can get a pretty good yield to outlay. I see plenty of 'get away from the natural world' properties advertised on there which are basically buffed up shacks. Have some arty decor, and decent photos, and can get a nice little sideline. Seen people do this with caravans on country properties and the like.

Anyone do similar?

[TopPanda]

I bought my rental property in 2006. I bought in a town about an hour from London.

So how did it turn out for me?

I bought at the [previous] top of the market and it lost a lot of value in the 2008 - 2009 crash. However it's now worth more than I paid for it. Not much more though - capital gains have been poor.

I was blessed by taking out a tracker mortgage so my repayments were mostly made at an interest rate of just 2.25%. I've cleared 78% of my mortgage and the place is profitable.

I've had 3 months without a tenant. Small properties rent out so quickly in the UK that the estate agent doesn't need to bother putting it in the window or on RightMove.

Currently there's a Polish single mom in mine. She's got a kid apparently. I've never met them. I let my agent do all the day to day management.

As for my financial return, it's been a real dog. I'd guess I'm making ~5%. Rental property isn't tax efficient, and I'm forever replacing stuff. I've replaced practically the entire flat - including the toilet seat (!).

Would you be pleased with a 5% return? Since 2008 I've made 8.2% a year on stocks. I'd have made a lot more but it's taken me years to get a good strategy up and running.

If I'd have stuck all my cash into stocks and bonds I'd now have an extra 100K (30% more than my current net worth). Hindsight is a wonderful thing.

[jcrew247]

Panda, can you use the home equity to take out another loan to buy more real estate. Or you can use that loan for other expenses?