readergirl
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Post by readergirl on Jan 1, 2023 20:32:17 GMT -5
It is strange. My husband always thought rental real estate was the golden goose. We now own 2 houses. Yet, with interest rates now at 3% (whoever thought that would be thought of as high), after all expenses, we can make as much in CDs as in real estate. Strange? Is this normal? And I am not talking low end rentals. 2k a month, each house.
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CCL
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Post by CCL on Jan 1, 2023 21:09:28 GMT -5
Don't forget you will also have to pay income taxes on the interest from CDs.
If you can only make 3% after expenses on the rentals, why bother? $2000 x .03 = $60 per month isn't worth my time.
I've always felt like rental properties would be a pain, too much work and $$$$ keeping them up.
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Artemis Windsong
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Post by Artemis Windsong on Jan 1, 2023 23:34:58 GMT -5
CCL - I agree.
I do know some people who hire management companies to manage their rentals. I don't have the name of the seminars where people were taught how to buy rentals for income.
I have 2 friends who have had rentals for a long time. We have heard of some aggravation with renters.
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raeoflyte
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Post by raeoflyte on Jan 2, 2023 9:47:05 GMT -5
I think rentals are a long game. Any money you make from them in the early years basically goes back into the rental.
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Bonny
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Post by Bonny on Jan 2, 2023 13:04:14 GMT -5
It is strange. My husband always thought rental real estate was the golden goose. We now own 2 houses. Yet, with interest rates now at 3% (whoever thought that would be thought of as high), after all expenses, we can make as much in CDs as in real estate. Strange? Is this normal? And I am not talking low end rentals. 2k a month, each house. Aren't they closer to 7%? The 2%-3% rates were a historical low. High was in 1979-82ish years...17% for FHA & VA. SFH are hard to make work as income property. Most people buy betting on appreciation which may or may not happen. I also think most people have no clue that sucessfully managing property is a lot of work.
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Post by The Walk of the Penguin Mich on Jan 2, 2023 14:00:34 GMT -5
My sister currently has her house rented for $2800/mo. She isn’t making any money off of this, but it’s covering her mortgage while she is housesitting for us. She is ok with that.
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CCL
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Post by CCL on Jan 2, 2023 16:43:32 GMT -5
It is strange. My husband always thought rental real estate was the golden goose. We now own 2 houses. Yet, with interest rates now at 3% (whoever thought that would be thought of as high), after all expenses, we can make as much in CDs as in real estate. Strange? Is this normal? And I am not talking low end rentals. 2k a month, each house. Aren't they closer to 7%? The 2%-3% rates were a historical low. High was in 1979-82ish years...17% for FHA & VA. SFH are hard to make work as income property. Most people buy betting on appreciation which may or may not happen. I also think most people have no clue that sucessfully managing property is a lot of work. I thought she meant the CD rates are at 3%. That's a bit confusing, too, because you can do better than that right now.
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giramomma
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Post by giramomma on Jan 2, 2023 17:12:07 GMT -5
I read somewhere once that in normal markets, houses appreciate about 3% a year. Of course, the pay off is when you no longer have a mortgage on the house. I wish we could have done that with our first place. Our mortgage was like 30K. Once that was paid off, we could rent it it out for $800/month, and have $500/month cash flow every month. We just couldn't swing giving up that equity.
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readergirl
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Post by readergirl on Jan 2, 2023 17:34:11 GMT -5
Yes, 3% is low. I just mean that is the same as the net rental income after all the expenses. And there is not mortgage. And when you sell the rental property, 8-9% will go for closing costs. Which really makes the CDs sound even better. Not wondering which appliance needs replacing next. But when we bought the rentals a year and a half ago, interest rates were much lower. And I still wasn't crazy about the rentals. Not really my idea. But guess who gets every text and phone call from the management company.
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Deleted
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Post by Deleted on Jan 3, 2023 9:22:02 GMT -5
I think rentals are a long game. Any money you make from them in the early years basically goes back into the rental. I agree- a lot of the return is from increase in the market value of the property. If you bought two years ago, that's probably negative. There are enough posts here from CG and Bonny (who had a tenant trash her apartment in France before moving out) to scare me out of the landlord business. My brother owns a rental in FL but it's a huge, beautiful place where he and DSIL once lived and they have a good long-term tenant. There's also no mortgage so he's not strapped for cash if the rent isn't coming in.
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Post by The Walk of the Penguin Mich on Jan 3, 2023 12:34:49 GMT -5
I think rentals are a long game. Any money you make from them in the early years basically goes back into the rental. I agree- a lot of the return is from increase in the market value of the property. If you bought two years ago, that's probably negative. There are enough posts here from CG and Bonny (who had a tenant trash her apartment in France before moving out) to scare me out of the landlord business. My brother owns a rental in FL but it's a huge, beautiful place where he and DSIL once lived and they have a good long-term tenant. There's also no mortgage so he's not strapped for cash if the rent isn't coming in. CG’s advantage is that she and her husband can do 99% of the maintenance on their rentals. However, it wouldn’t be quite so advantageous to her if she had to hire this out. Dondub has a lot of rentals, and they’ve been good for him. But his market is very different from the rest and he got into it a long time ago. I doubt that it would have been so lucrative if he had to break into the market now.
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Post by minnesotapaintlady on Jan 3, 2023 13:34:07 GMT -5
Being a landlord is not for me, but a lot of my family have rentals in all kinds of markets (hot areas and LCOL areas) and are doing quite well with them. The key is having them paid off. I know Phil always mortgaged them all to the hilt, but if you're having to pay that expense it really cuts into the monthly profit. My uncle rents out houses in Lincoln, NE which is a low housing cost area, but he owns them all outright and has about a dozen or more. You get 12 clearing $500-$600/month and that's a nice income. He's also 78 and still hasn't hired a management company. One of my aunts whose husband was in the military bought a house everywhere they were stationed and then rented them out when they left, so they have houses in Texas, Florida, Washington, Hawaii, and not sure where else. I know they were in Guam, but I think they sold that one. All theirs are paid for and rent for a lot.
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Tiny
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Post by Tiny on Jan 3, 2023 16:05:55 GMT -5
It is strange. My husband always thought rental real estate was the golden goose. We now own 2 houses. Yet, with interest rates now at 3% (whoever thought that would be thought of as high), after all expenses, we can make as much in CDs as in real estate. Strange? Is this normal? And I am not talking low end rentals. 2k a month, each house. I'm not sure you are comparing apples to apples. You need to see how owning the rentals effects your yearly income taxes. You need to think about the long term plans for the rentals. Will you be able to shelter some of the gain by selling a rental that has appreciated a ton and rolling it into a nicer more expensive "rental" property? Rental property isn't always about the amount of the rent you get to keep and spend. (you do want your rental property to cash flow positive though...) I, too, feel that investment property is a long game.
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Bonny
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Post by Bonny on Jan 3, 2023 16:12:56 GMT -5
I think rentals are a long game. Any money you make from them in the early years basically goes back into the rental. I agree- a lot of the return is from increase in the market value of the property. If you bought two years ago, that's probably negative. There are enough posts here from CG and Bonny (who had a tenant trash her apartment in France before moving out) to scare me out of the landlord business. My brother owns a rental in FL but it's a huge, beautiful place where he and DSIL once lived and they have a good long-term tenant. There's also no mortgage so he's not strapped for cash if the rent isn't coming in. That wasn't me. I think you mean debthaven. Fortunately I haven't had anyone "trash" my units but I've had my share of issues. They are definitely work. There's no "kicking back and collecting rent checks" like some people think.
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Post by Deleted on Jan 3, 2023 16:32:59 GMT -5
That wasn't me. I think you mean debthaven . Fortunately I haven't had anyone "trash" my units but I've had my share of issues. They are definitely work. There's no "kicking back and collecting rent checks" like some people think. Thanks for the correction and I agree that being a landlord isn't "passive income" unless you give up a large chunk of the proceeds to management companies. MPL's relative is collecting decent income but the general rule, last I checked, is that monthly rent should be about 1% of a home's value. So, $500 in rent per month means the house is worth $50,000. If the house is paid for that's $50,000 that could be earning money in the market (well, maybe not last year's market ) without your having to deal with tenants and maintenance. Certainly not an easy road to riches.
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debthaven
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Post by debthaven on Jan 3, 2023 16:47:22 GMT -5
Yes that would indeed be me whose tenant trashed a 1BR apartment to the tune of 42K, many (15?) years ago. Thanks @athena53 and Bonny for the memories LOL. Bonny and I met for the first time just after it happened. In retrospect, the tenant probably didn't trash the place, her pimp/dealers probably did. What a nightmare!!! We have since sold most of our rentals. They were hard work, but most of them did pay off in the end, and give us some extra cash when we sold, except for the last one which we sold at a loss. That one was actually purchased by the RE agent we hired to sell it. He had connections, he created a one-man volunteer HOA (himself), and he gutted and rebuilt it. Last I heard he was living in it while saving up for a bigger place. He converted it from a big studio to a small 1BR. That's much easier to do if you can do the renovations yourself or if your contacts give you a great price, since he's in the business. It was probably the deal of the century for him, but he had the connections and the knowledge to bring both that apartment and the building into the 21st century, and make everything legal (it hadn't been for many years). We (and the other owners) had never managed, although we tried VERY hard, for MANY years. RE is not for the faint of heart. Best of luck to you whatever you decide!
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NomoreDramaQ1015
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Post by NomoreDramaQ1015 on Jan 3, 2023 17:17:42 GMT -5
My FIL made a lot of money in rentals. DH thought he wanted to do it but I pointed out his dad had 5 brothers who he went in with to buy money pits FOR CASH. They would then repair them themselves and rent them out.
He was able to make profit right from the get go. We'd have to take out mortgages that we'd then have to cover AND hire someone to repair the house because we are not handymen.
I'd end up being the one having to manage it all DH can't even keep track of what he spends at the gas station and he also tends to be a bleeding heart so would be an easy mark for bad tenaets. I already have to be the bad guy with everything else I am not going to become the evil landlady too.
Plus as it stands currently it is WAY cheaper to buy than rent here. The house next to us is trying to rent for $1500 or something like that a month. We own our house to the tune of $647 a month. I think the longest someone has stayed is 6 months before they move on.
I am not interested in doing all that math.
I will never be wealthy like Phil but I am okay with that. I already vibrate due to my anxiety I don't need the bonus stress of being a landlord I don't care how much it supposedly could make me.
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jerseygirl
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Post by jerseygirl on Jan 3, 2023 17:51:54 GMT -5
DD and SIL have 3 condo units at a nearby ski resort . They bought foreclosures and renovated themselves. They rent on air b&b and do very well. Also have a BIG Victorian with 12 BRs and 10 baths with 3 living rooms and a huge kitchen They rent this out to reunion family events, schools etc it’s also near the ski resort They also have businesses contracting for kitchen bath renos painting etc They’re both hugely active and talented. In their ‘spare’ time they mountain bike, ski and ice skate Like others have said rentals are good if paid for (no mortgage) can do the work yourself and are ok with involvement. The rentals require answering AirB&B, cleaning and doing any needed repairs yourself for most part
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Post by minnesotapaintlady on Jan 3, 2023 19:27:46 GMT -5
That wasn't me. I think you mean debthaven . Fortunately I haven't had anyone "trash" my units but I've had my share of issues. They are definitely work. There's no "kicking back and collecting rent checks" like some people think. Thanks for the correction and I agree that being a landlord isn't "passive income" unless you give up a large chunk of the proceeds to management companies. MPL's relative is collecting decent income but the general rule, last I checked, is that monthly rent should be about 1% of a home's value. So, $500 in rent per month means the house is worth $50,000. If the house is paid for that's $50,000 that could be earning money in the market (well, maybe not last year's market ) without your having to deal with tenants and maintenance. Certainly not an easy road to riches. He doesn't rent them for 5-600. That's what he shoots to profit after setting aside money for property taxes, insurance and a sinking fund for maintenance. Yeah, the money could be in the market, but some people like having more tangible investments. He's like CG's husband and likes to keep busy working on the properties. He buys places for cheap and fixes them up before renting. It's kind of a profitable retirement hobby for him.
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dondub
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Post by dondub on Jan 4, 2023 11:51:49 GMT -5
I agree- a lot of the return is from increase in the market value of the property. If you bought two years ago, that's probably negative. There are enough posts here from CG and Bonny (who had a tenant trash her apartment in France before moving out) to scare me out of the landlord business. My brother owns a rental in FL but it's a huge, beautiful place where he and DSIL once lived and they have a good long-term tenant. There's also no mortgage so he's not strapped for cash if the rent isn't coming in. CG’s advantage is that she and her husband can do 99% of the maintenance on their rentals. However, it wouldn’t be quite so advantageous to her if she had to hire this out. Dondub has a lot of rentals, and they’ve been good for him. But his market is very different from the rest and he got into it a long time ago. I doubt that it would have been so lucrative if he had to break into the market now. This is true. After college I bought a depressed 13U in Seattle, but a great location. Owner financing. Sold on a trade after 43 years! A long game as someone said. Bought a 24U all cash from proceeds and a duplex all cash from our HELOC, and started paying that down right away. Got married along the way and Donnadub owned a home. Turned that into a rental, then traded into a tri-plex and then traded into an 8U. Have owned that 18 years. All of these, in the long game, have provided increasing cash flow and appreciation in our PNW environment. COVID, although causing some issues due to our state moritorium, has had an interesting effect. As people moved out of Seattle for cheaper digs, in the new work from home paradigm, the now 38units are a hot commodity as demand has spiked. It’s not for everyone. I lived in the 13U for 8 years and learned a ton about managing and repairs/rehab. It was my full time job. Lots of transition over the years now has us with 3 PM companies TCB. It’s been quite the ride.
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readergirl
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Post by readergirl on Jan 7, 2023 12:01:22 GMT -5
Yes, we net about 5-600/month each property after all expenses. Which is not bad, not great. The problem is his brain thinks $2000, and wants to spend like you have that much, never taking into account expenses. But I have always been the money person, and it pains me to see the difference in reality. His, and mine.
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Pink Cashmere
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Post by Pink Cashmere on Jan 7, 2023 21:28:40 GMT -5
I bought a house when I was 29yo. It was supposed to be my starter house, but when I decided I wanted to retire more than I wanted a bigger, fancier house, I started considering it my “forever house” and started making improvements with that goal in mind.
But even then, I had the vague idea that if I ever moved for whatever reason, I would try to keep that house as a potential source of income in retirement, when it would be paid off, and an asset I could sell if I ever needed to.
The timing regarding when I bought it with a 30 year mortgage, meant it would be paid off around the time I am eligible to retire.
I did move a few years ago, and I still have not sold the house. My plans for it are all messed up, because I got tangled up with family living in it, but that’s a whole ‘nother story.
But my experience with my family living in that house has made me rethink all of the plans I had for that house if I did ever move out. Maybe it is because I still have a mortgage payment for the next few years and my family is basically destroying the house, but I am thinking now that maybe I don’t have it in me to be a landlord, regardless.
I know the general wisdom is to not rent to family or friends, but my situation kind of just happened, my family was there before I moved, and basically refuses to move out, even though I did. Fair market rent in this area for the house is a bit more than I ask my family to pay, and it’s been a struggle to even get that.
When the housing market tanked years ago, the value of my house decreased so much that I joked that it was only worth about $5. I didn’t like that, but it wasn’t a really big deal, because it was my home and I wasn’t planning on selling it any time soon. Today, it is finally “worth” more than I paid for it again, and I could sell it and have a little change in my pocket. But I really don’t want to sell it yet. It’s my ace in my back pocket, if I ever run into serious trouble, and it’s hard to let that go.
Still, most days, I wish I could just throw the whole house away and be done with it. But it’s not quite that simple, unfortunately.
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Regis
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Post by Regis on Jan 8, 2023 7:03:07 GMT -5
I bought a house when I was 29yo. It was supposed to be my starter house, but when I decided I wanted to retire more than I wanted a bigger, fancier house, I started considering it my “forever house” and started making improvements with that goal in mind. But even then, I had the vague idea that if I ever moved for whatever reason, I would try to keep that house as a potential source of income in retirement, when it would be paid off, and an asset I could sell if I ever needed to. The timing regarding when I bought it with a 30 year mortgage, meant it would be paid off around the time I am eligible to retire. I did move a few years ago, and I still have not sold the house. My plans for it are all messed up, because I got tangled up with family living in it, but that’s a whole ‘nother story. But my experience with my family living in that house has made me rethink all of the plans I had for that house if I did ever move out. Maybe it is because I still have a mortgage payment for the next few years and my family is basically destroying the house, but I am thinking now that maybe I don’t have it in me to be a landlord, regardless. I know the general wisdom is to not rent to family or friends, but my situation kind of just happened, my family was there before I moved, and basically refuses to move out, even though I did. Fair market rent in this area for the house is a bit more than I ask my family to pay, and it’s been a struggle to even get that. When the housing market tanked years ago, the value of my house decreased so much that I joked that it was only worth about $5. I didn’t like that, but it wasn’t a really big deal, because it was my home and I wasn’t planning on selling it any time soon. Today, it is finally “worth” more than I paid for it again, and I could sell it and have a little change in my pocket. But I really don’t want to sell it yet. It’s my ace in my back pocket, if I ever run into serious trouble, and it’s hard to let that go. Still, most days, I wish I could just throw the whole house away and be done with it. But it’s not quite that simple, unfortunately. You want to throw the house away and be done with it, your "renters" are a PITA, and you have another house you're living in. Why can't you play this card now, get rid of your stress about the house and invest the money, which would probably yield more than if you kept the house and sold it later? Maybe it's just me, but I'd rather have money in the bank if I get into serious trouble instead of a house that I'd have to sell to get said money.
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