Is buying a rental property even worth it?

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Topic Author
wkimdds
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Is buying a rental property even worth it?

Post by wkimdds »

What do you guys think? I thought about buying a rental property but there's too much risks

1. There is a chance that your unit won't be fully rented out during your ownership

2. There is maintenance cost, property tax and etc. If something breaks down, you gotta fix it

3. You can be stuck with a scumbag tenant and go through eviction and etc which can cost you alot of money and lost income.


I think it would be worth it to buy my own place for primary residence but believe index fund beats RE in terms of predictability, maintenance and etc.
Ramjet
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Re: Is buying a rental property even worth it?

Post by Ramjet »

Rates are pretty low, you can probably make the numbers work depending what part of the country you are in

Cheap housing still to be had here in NE Ohio, at least compared to most of the country
VT & HFEA
chevca
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Re: Is buying a rental property even worth it?

Post by chevca »

Not worth it to me. But, I don't want to be a landlord.
bighatnohorse
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Re: Is buying a rental property even worth it?

Post by bighatnohorse »

By the nature of your question I would advise against it. There are no scumbag tenants when wisely chosen. If you're predisposed to think of people that way then you will probably find them.
Rentals can provide many deductions. Over long term may appreciate and provide financial security during tumultuous stockmarket events.
Stick with REITs.
FoolMeOnce
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Re: Is buying a rental property even worth it?

Post by FoolMeOnce »

wkimdds wrote: Thu Mar 05, 2020 1:42 pm What do you guys think? I thought about buying a rental property but there's too much risks

1. There is a chance that your unit won't be fully rented out during your ownership

2. There is maintenance cost, property tax and etc. If something breaks down, you gotta fix it

3. You can be stuck with a scumbag tenant and go through eviction and etc which can cost you alot of money and lost income.


I think it would be worth it to buy my own place for primary residence but believe index fund beats RE in terms of predictability, maintenance and etc.
You price all those things into your projections and then determine if a property is worth it. Costs aren't a reason to avoid an investment, they are a line item on the balance sheet.
carminered2019
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Re: Is buying a rental property even worth it?

Post by carminered2019 »

calculate your ROI to see if it's worth it.
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unclescrooge
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Re: Is buying a rental property even worth it?

Post by unclescrooge »

Having owned 18 investment properties, I will caution against jumping in with both feet. Or even dipping in your toe.

Make sure you understand the numbers and your ROI. Unless you are getting a double digit return I would not touch it. There are some places where you can get those easily. Those places have seen a decline in population, median income and employment rates for 20 years... Be extremely cautious about those areas.

On the other hand, if you are extremely handy and can do most repairs/upgrades yourself, you should buy a fixer and add value through your own sweat equity.
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wkimdds
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Re: Is buying a rental property even worth it?

Post by wkimdds »

unclescrooge wrote: Thu Mar 05, 2020 2:12 pm Having owned 18 investment properties, I will caution against jumping in with both feet. Or even dipping in your toe.

Make sure you understand the numbers and your ROI. Unless you are getting a double digit return I would not touch it. There are some places where you can get those easily. Those places have seen a decline in population, median income and employment rates for 20 years... Be extremely cautious about those areas.

On the other hand, if you are extremely handy and can do most repairs/upgrades yourself, you should buy a fixer and add value through your own sweat equity.

That's what I thought. Good ROI means [poor --admin LadyGeek] location, bad tenant, dying city.
Good location with lots of wealthy people and easy to rent out to good tenant - usually low ROI.
And, all these pro-tenant laws especially in NYC or CA makes me think I should go full out on index fund and just buy RE for my own home and that's it.

What's your thoughts on commercial RE?
tibbitts
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Re: Is buying a rental property even worth it?

Post by tibbitts »

My thought is that owning an investment property is a job, and unless you have some special "hook" (can d-i-y, hire contractors at wholesale, have a connection in the property management business, etc.) you can't compete with other people who have those tools available to them. You may still make out okay, but that could also be more luck than skill.
illumination
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Re: Is buying a rental property even worth it?

Post by illumination »

For me, rentals are not worth it. I did really well on my last rental, and was in a big upward cycle, but it really wasn't much more than just dropping it into the S&P500. If I could have done it all over again, I would have taken the hit and just done the stock market. It was a lot of headaches, repairs, taxes, maintenance, and a tenant I wanted to strangle :D Every friend but maybe one that has dabbled with rentals said they couldn't wait to sell the property and move on.

If you approach it like another job or side hustle, it can be worth it. I have no doubt people routinely outperform something like total market with their rental portfolio. The problem is, where and what you buy starts becoming like picking winning stocks. Not every region appreciates and much of your performance can be out of your control if an area takes a bad turn. Also, leverage can really be worked to your favor, but you could also say the same with a margin account with equities. So it's not really apples to apples.

I know one married couple that manages like 10 of them and it's basically their side career. It's not a passive investment by any means.
MathWizard
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Re: Is buying a rental property even worth it?

Post by MathWizard »

I've never wanted to get into rental property.

1) Too much invested in a single illiquid investment

2) Way too much hassle.

A whole market index fund is far superior.

1) It is highly liquid
2) It is passive.
3) You have the workforce in all the public companies working for you.
(Facebook, Google, IBM, etc. all are working to generate earnings, of which you
get your share.)

What's not to love?
The Broz
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Re: Is buying a rental property even worth it?

Post by The Broz »

I thought about doing this someday, as my Uncle has done very very with his rental and a buddy of mine has had mixed results. I eventually decided against it - at least for now. Personally, I think it would be too much aggravation. Even with a property manager, I think I would just always dread seeing their number pop up on my phone or seeing an email in my inbox - like "dammit, what now?" And I am about as un-handy as a man can be.
scubavol
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Re: Is buying a rental property even worth it?

Post by scubavol »

20 years ago, I purchased a duplex and moved into one side of it. Since then, my neighbors have been kind enough to buy my house for me. Those numbers worked out.

Through the mid-2000’s I looked at many additional properties but couldn’t figure out how people were making things work at those prices. Eventually we found out- they weren’t.

The owner-occupied thing, in a property I could easily afford were it always vacant, has been a great help to me in LBYM.
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Sandtrap
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Re: Is buying a rental property even worth it?

Post by Sandtrap »

wkimdds wrote: Thu Mar 05, 2020 1:42 pm What do you guys think? I thought about buying a rental property but there's too much risks

1. There is a chance that your unit won't be fully rented out during your ownership

2. There is maintenance cost, property tax and etc. If something breaks down, you gotta fix it

3. You can be stuck with a scumbag tenant and go through eviction and etc which can cost you alot of money and lost income.


I think it would be worth it to buy my own place for primary residence but believe index fund beats RE in terms of predictability, maintenance and etc.
1. Very true
2. Very true
3. Not a matter of if but when.

If one wants to be a business owner, businessman, in the "business of owning R/E residential income property. . . then great.
If not that. . . then not so great.

Know what one is getting into before deciding to jump in.
j :happy
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ddurrett896
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Re: Is buying a rental property even worth it?

Post by ddurrett896 »

Ex landlord here. Just sold property last month and have no plans on doing it again.

The work isn't that bad, however laws are becoming more and more pro-tennant making it more risky.
khangaroo
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Re: Is buying a rental property even worth it?

Post by khangaroo »

We're currently "house-hacking" (a buzzword for renting out a part of your house) where we live in the basement unit and our tenant (my fiance's coworker) lives in the top unit. We were EXTREMELY lucky to find this place because it has two separate entrances and the bottom unit was partly finished so we got the place at a steal given the location - we live in Portland, OR a very hot and expensive real estate market. I've always wanted to own real estate because my parent's had a small commercial property and ingrained in me that real estate is a path to wealth. Regarding your 3 points, here are my responses.

1. There is a chance that your unit won't be fully rented out during your ownership
Yes, that is why you save a portion of your rental income to cover these vacant times. Just like how you would create an emergency fund to cover 3-6 months of expenses if you lost your job, you would save an amount to cover x months of vacancy.

2. There is maintenance cost, property tax and etc. If something breaks down, you gotta fix it
Being in the construction industry, I'm comfortable with most common issues but I have connections to get other things fixed that are above my expertise. As a previous poster said, it's good to build your connections whether it's a contractor or property manager to help with misc. issues. Once again, you should save a portion of your rental income to cover these items.

3. You can be stuck with a scumbag tenant and go through eviction and etc which can cost you alot of money and lost income.
There is a lot of risk in real estate. This is not a passive investment unless you hire a property manager to handle all of those issues but you will be paying for that service thus reducing your profit. We've only had one tenant so far and she's been absolutely amazing so I don't have much experience in that. I think if you have a solid tenant screening process then that will help reduce some of your nightmares.

I would say that real estate investing is not for the faint of heart or if you're afraid to get your hands dirty - that's why they made REITs! If you're interested, do some more research at Bigger Pockets and this forum (this question has been asked hundreds of time). Also, define what your goals are with real estate investing. Mine is to ultimately create my own real estate company that includes a property management arm and house hacking has been a good way to get my feet wet.
Broken Man 1999
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Re: Is buying a rental property even worth it?

Post by Broken Man 1999 »

Some big companies are going all-in on single-family dwellings. Recent article in NYT revealed some eye-popping percentages the various companies now own in some areas. Think REITs for single-family homes.

Also reported how they concentrate on good areas with stable neighborhoods with good schools. IOW, these companies aren't buying in sketchy areas, they are well positioned to pay top dollar. Unfortunately some of the players have become slumlords by allowing the properties to go downhill.

So, now the game is being played much differently as small fry are competing against the pros in select areas.

I never had any interest in being a landlord, and certainly not now.

I'll try to find the NYT article and post a link, very interesting info.

I live near Tampa, and Tampa was one of the areas that had a high percentage of sales of single-family homes to these companies.

Broken Man 1999

ETA: Here is the link to the article I mentioned in original post!

https://www.nytimes.com/2020/03/04/maga ... lords.html
Last edited by Broken Man 1999 on Sun Mar 08, 2020 11:03 am, edited 1 time in total.
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unclescrooge
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Re: Is buying a rental property even worth it?

Post by unclescrooge »

wkimdds wrote: Thu Mar 05, 2020 3:49 pm
unclescrooge wrote: Thu Mar 05, 2020 2:12 pm Having owned 18 investment properties, I will caution against jumping in with both feet. Or even dipping in your toe.

Make sure you understand the numbers and your ROI. Unless you are getting a double digit return I would not touch it. There are some places where you can get those easily. Those places have seen a decline in population, median income and employment rates for 20 years... Be extremely cautious about those areas.

On the other hand, if you are extremely handy and can do most repairs/upgrades yourself, you should buy a fixer and add value through your own sweat equity.
That's what I thought. Good ROI means [poor --admin LadyGeek] location, bad tenant, dying city.
Good location with lots of wealthy people and easy to rent out to good tenant - usually low ROI.
And, all these pro-tenant laws especially in NYC or CA makes me think I should go full out on index fund and just buy RE for my own home and that's it.

What's your thoughts on commercial RE?
Your thoughts are correct.

Commercial is good, but high barrier to entry. You need very deep pockets to effectively get in. Or you can be a minority owner in someone else's project - something that is often a terrible idea.

You can also buy into a TIC property or a DST, but the fees on these things are outrageous. I've seen entry loads of 18% in the last year.

There are a couple of private real estate funds (think REITS, but without the liquidity) I might put money in. However these are income plays and will likely underperform a diversified 7030 stock bond portfolio over the long-term.
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unclescrooge
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Re: Is buying a rental property even worth it?

Post by unclescrooge »

Broken Man 1999 wrote: Thu Mar 05, 2020 4:48 pm Some big companies are going all-in on single-family dwellings. Recent article in NYT revealed some eye-popping percentages the various companies now own in some areas. Think REITs for single-family homes.

Also reported how they concentrate on good areas with stable neighborhoods with good schools. IOW, these companies aren't buying in sketchy areas, they are well positioned to pay top dollar. Unfortunately some of the players have become slumlords by allowing the properties to go downhill.

So, now the game is being played much differently as small fry are competing against the pros in select areas.

I never had any interest in being a landlord, and certainly not now.

I'll try to find the NYT article and post a link, very interesting info.

I live near Tampa, and Tampa was one of the areas that had a high percentage of sales of single-family homes to these companies.

Broken Man 1999
This has been happening since 2010. I wonder what will happen if they decide to start selling all these homes?
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unclescrooge
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Re: Is buying a rental property even worth it?

Post by unclescrooge »

MathWizard wrote: Thu Mar 05, 2020 4:25 pm I've never wanted to get into rental property.

1) Too much invested in a single illiquid investment

2) Way too much hassle.

A whole market index fund is far superior.

1) It is highly liquid
2) It is passive.
3) You have the workforce in all the public companies working for you.
(Facebook, Google, IBM, etc. all are working to generate earnings, of which you
get your share.)

What's not to love?
Stock investing is boring, doesn't make for good cocktail banter and doesn't have the ” pride of ownership" factor.

Which is why it will always outperform more glamorous investments. :beer
Hockey10
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Re: Is buying a rental property even worth it?

Post by Hockey10 »

I was a landlord for 11 years.

When I look back on it now and compare the ease of owning a total stock market index fund vs. owning a triplex, I wish I had never bought the triplex. I made some money on it and never had a problem finding tenants, but the hassle factor made the total experience something that I wish I had never gotten into. Maybe my feelings on it would have been different if I had hired a property manager, instead of doing all of the property management myself.
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Will do good
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Re: Is buying a rental property even worth it?

Post by Will do good »

We were landlords for ~20 years, during that time our area RE value was flat and maybe even down a little. We made more with our investment portfolio than the apartments.

But I may feel differently if my building were in San Jose, Denver or any of the hot areas where my building would have 5x or even 10x return during those 20 years. I bet Sandtrap did a little better than us in his Hawaii RE investments :mrgreen:

For RE, it's really about location, location, location.
DVMResident
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Re: Is buying a rental property even worth it?

Post by DVMResident »

I was a landlord and made a ton that beat out my AA by many fold. This finds from RE investments accounts for nearly 1/3 of my net worth. However, this forum tends to run anti-real estate and skew towards towards telling not to invest. Bigger Pocket is pro-real estate. Where you ask the question will determines your answer.

If you’re serious, read the following in order:
(1) 50 Real Estate Investing Calculations: Cash Flow, IRR, Value, Profit, Equity, Income, ROI, Depreciation, More
(2) NOLO tax guide for every land lord
(3) NOLO Landlord legal guide (state specific)

Then cross-post prospective investments here, which will be negatively skewed, and in Bigger Pockets, which will be more rosy. You will need to weigh each set responses based on their respective prejudices.

Personally, I find the real estate market overheated and have not found a property worth the investment since ~2014. Who knows when it will change.
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Phineas J. Whoopee
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Re: Is buying a rental property even worth it?

Post by Phineas J. Whoopee »

To what extent do you want a career, or side career, in the landlord business?
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Re: Is buying a rental property even worth it?

Post by stoptothink »

wkimdds wrote: Thu Mar 05, 2020 3:49 pm
unclescrooge wrote: Thu Mar 05, 2020 2:12 pm Having owned 18 investment properties, I will caution against jumping in with both feet. Or even dipping in your toe.

Make sure you understand the numbers and your ROI. Unless you are getting a double digit return I would not touch it. There are some places where you can get those easily. Those places have seen a decline in population, median income and employment rates for 20 years... Be extremely cautious about those areas.

On the other hand, if you are extremely handy and can do most repairs/upgrades yourself, you should buy a fixer and add value through your own sweat equity.

That's what I thought. Good ROI means [poor --admin LadyGeek] location, bad tenant, dying city.
Good location with lots of wealthy people and easy to rent out to good tenant - usually low ROI.
My brother's rental is in LCOL area, but it is a high-end home (~$650k home in Rock Springs, Wyoming). Not a lot of wealthy people in the area, but definitely families working in oil & gas with pretty significant incomes. You'd think high income would be safe(r), but in 7yrs I think my brother has had to evict 3 of 5 tenants and at least 2 have left pretty significant damage. This is with 2 separate property managers. Even with a good tenant, rent barely covers PITI. He has lost his behind on it, but I think his plan is to ultimately move back so he has held onto it.
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Sandtrap
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Re: Is buying a rental property even worth it?

Post by Sandtrap »

ddurrett896 wrote: Thu Mar 05, 2020 4:33 pm Ex landlord here. Just sold property last month and have no plans on doing it again.

The work isn't that bad, however laws are becoming more and more pro-tennant making it more risky.
Yes. Landlord-Tenant codes have evolved to make it difficult for landlords. Perhaps a pushback from the days when unscrupulous slum lords took advantage of everyone. Now, the opposite for whatever reason.
Also: Difficult ADA requirements, service animal laws, Bed Bug Laws, etc, etc.

Perhaps what happens when folks try to legislate good business practices and good behavior. Not sure.
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Sandtrap
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Re: Is buying a rental property even worth it?

Post by Sandtrap »

DVMResident wrote: Thu Mar 05, 2020 5:59 pm I was a landlord and made a ton that beat out my AA by many fold. This finds from RE investments accounts for nearly 1/3 of my net worth. However, this forum tends to run anti-real estate and skew towards towards telling not to invest. Bigger Pocket is pro-real estate. Where you ask the question will determines your answer.

If you’re serious, read the following in order:
(1) 50 Real Estate Investing Calculations: Cash Flow, IRR, Value, Profit, Equity, Income, ROI, Depreciation, More
(2) NOLO tax guide for every land lord
(3) NOLO Landlord legal guide (state specific)

Then cross-post prospective investments here, which will be negatively skewed, and in Bigger Pockets, which will be more rosy. You will need to weigh each set responses based on their respective prejudices.

Personally, I find the real estate market overheated and have not found a property worth the investment since ~2014. Who knows when it will change.
+1
Although there are a handful or more of forum posters in bogleheads.org who run from a neutral to positive POV toward R/E income property.
j :happy
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Sandtrap
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Re: Is buying a rental property even worth it?

Post by Sandtrap »

Will do good wrote: Thu Mar 05, 2020 5:55 pm We were landlords for ~20 years, during that time our area RE value was flat and maybe even down a little. We made more with our investment portfolio than the apartments.

But I may feel differently if my building were in San Jose, Denver or any of the hot areas where my building would have 5x or even 10x return during those 20 years. I bet Sandtrap did a little better than us in his Hawaii RE investments :mrgreen:

For RE, it's really about location, location, location.
+1
He did. :shock:

Location, location, location
timing
luck
location, location, location
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Re: Is buying a rental property even worth it?

Post by Sandtrap »

unclescrooge wrote: Thu Mar 05, 2020 2:12 pm Having owned 18 investment properties, I will caution against jumping in with both feet. Or even dipping in your toe.

Make sure you understand the numbers and your ROI. Unless you are getting a double digit return I would not touch it. There are some places where you can get those easily. Those places have seen a decline in population, median income and employment rates for 20 years... Be extremely cautious about those areas.

On the other hand, if you are extremely handy and can do most repairs/upgrades yourself, you should buy a fixer and add value through your own sweat equity.
+1
Great points.
j :happy
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Re: Is buying a rental property even worth it?

Post by knpstr »

wkimdds wrote: Thu Mar 05, 2020 1:42 pm What do you guys think? I thought about buying a rental property but there's too much risks

1. There is a chance that your unit won't be fully rented out during your ownership

2. There is maintenance cost, property tax and etc. If something breaks down, you gotta fix it

3. You can be stuck with a scumbag tenant and go through eviction and etc which can cost you alot of money and lost income.


I think it would be worth it to buy my own place for primary residence but believe index fund beats RE in terms of predictability, maintenance and etc.
You buy a property where all the above happens and you still make a decent return.
Very little is needed to make a happy life; it is all within yourself, in your way of thinking. -Marcus Aurelius
ChiKid24
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Re: Is buying a rental property even worth it?

Post by ChiKid24 »

Lots of comments here about not wanting to be a landlord or have a side job. As a real estate INVESTOR, nor do I. I run the numbers on all my investments assuming a % of gross rent to cover a management team who handles the landlord aspect of it. To me, that cost of business is a fair trade off to keep me from having to deal with landlord issues like vacancy, minor repairs, tenant issues, etc.

Lots of tax benefits in rentals that you don't get with index fund investing, it's also a great source of passive income that will pay me a nice stream at retirement. All that said, I don't believe it should be 100% of your asset allocation, but putting some portion of money into an asset that doesn't necessarily swing with the stock market isn't a bad idea.

As another poster mentioned, check out the BiggerPockets forum if you want to learn more and speak with others that are more pro real estate.
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unclescrooge
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Re: Is buying a rental property even worth it?

Post by unclescrooge »

ChiKid24 wrote: Thu Mar 05, 2020 6:57 pm Lots of comments here about not wanting to be a landlord or have a side job. As a real estate INVESTOR, nor do I. I run the numbers on all my investments assuming a % of gross rent to cover a management team who handles the landlord aspect of it. To me, that cost of business is a fair trade off to keep me from having to deal with landlord issues like vacancy, minor repairs, tenant issues, etc.

Lots of tax benefits in rentals that you don't get with index fund investing, it's also a great source of passive income that will pay me a nice stream at retirement. All that said, I don't believe it should be 100% of your asset allocation, but putting some portion of money into an asset that doesn't necessarily swing with the stock market isn't a bad idea.

As another poster mentioned, check out the BiggerPockets forum if you want to learn more and speak with others that are more pro real estate.
If your household income is over $150k the tax benefits are drastically reduced. Also, for high income earners, you want to reduce income and real estate works against you in this regards.
ChiKid24
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Re: Is buying a rental property even worth it?

Post by ChiKid24 »

unclescrooge wrote: Thu Mar 05, 2020 7:31 pm
ChiKid24 wrote: Thu Mar 05, 2020 6:57 pm Lots of comments here about not wanting to be a landlord or have a side job. As a real estate INVESTOR, nor do I. I run the numbers on all my investments assuming a % of gross rent to cover a management team who handles the landlord aspect of it. To me, that cost of business is a fair trade off to keep me from having to deal with landlord issues like vacancy, minor repairs, tenant issues, etc.

Lots of tax benefits in rentals that you don't get with index fund investing, it's also a great source of passive income that will pay me a nice stream at retirement. All that said, I don't believe it should be 100% of your asset allocation, but putting some portion of money into an asset that doesn't necessarily swing with the stock market isn't a bad idea.

As another poster mentioned, check out the BiggerPockets forum if you want to learn more and speak with others that are more pro real estate.
If your household income is over $150k the tax benefits are drastically reduced. Also, for high income earners, you want to reduce income and real estate works against you in this regards.
Curious what tax benefits are drastically reduced at income over $150k? Perhaps my CPA is doing something wrong, but here are the benefits I receive:

I collect rent on one unit of $2,500 a month or $30,000 a year. From that, I'm able to deduct the following expenses: Mortgage interest, property taxes (without any cap), insurance, property management fees, repairs, advertising expenses. I net about $500/month cash on this unit, but also have someone covering my $900/month mortgage (which includes principal). I pay no taxes on any of it as I offset the $500 "profit" with depreciation which results in $0 net profit and $0 taxes. None of these property deductions are impacted by my overall income, so all the gain is tax free or deferred.

When I sell the property down the road, the presumed gain I'll get is taxed at long-term capital gain rate. I also have to pay ordinary income tax on the total depreciation deduction I have taken, but I typically avoid all of that and defer it by doing a 1031 exchange. Essentially I roll the sale of the property into the purchase of another (usually larger) property and pay $0 in taxes, deferring them to the subsequent sale of that property (or rolling it again via a 1031 exchange).

So essentially I pay $0 tax on the annual income I receive, I have someone else paying off my mortgage which increases my equity in the property (even without any appreciation), I hopefully get some appreciation (which has been very nice the past 10 years), and I defer any taxes when I sell the property by rolling it into another. This is for a single property. There are additional benefits if you have multiple properties and do the investing inside an LLC. To my knowledge, none of this is dependent on my household income being under $150k.
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tvubpwcisla
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Re: Is buying a rental property even worth it?

Post by tvubpwcisla »

If you have never been involved in a real estate lawsuit with a bad tenant, then yes, rental properties are great.

If you have been involved in a real estate lawsuit with a bad tenant, then no, rental properties are horrible.

I would never do one. Way too much work and risk for the potential upside. One bad tenant can and will destroy your entire life.
ddurrett896
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Re: Is buying a rental property even worth it?

Post by ddurrett896 »

Sandtrap wrote: Thu Mar 05, 2020 6:40 pm
ddurrett896 wrote: Thu Mar 05, 2020 4:33 pm Ex landlord here. Just sold property last month and have no plans on doing it again.

The work isn't that bad, however laws are becoming more and more pro-tennant making it more risky.
Yes. Landlord-Tenant codes have evolved to make it difficult for landlords. Perhaps a pushback from the days when unscrupulous slum lords took advantage of everyone. Now, the opposite for whatever reason.
Also: Difficult ADA requirements, service animal laws, Bed Bug Laws, etc, etc.

Perhaps what happens when folks try to legislate good business practices and good behavior. Not sure.
j :happy
More on the lines of capped rental increase, extended grace period for unpaid rent and squatters.
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wkimdds
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Re: Is buying a rental property even worth it?

Post by wkimdds »

ddurrett896 wrote: Thu Mar 05, 2020 8:09 pm
Sandtrap wrote: Thu Mar 05, 2020 6:40 pm
ddurrett896 wrote: Thu Mar 05, 2020 4:33 pm Ex landlord here. Just sold property last month and have no plans on doing it again.

The work isn't that bad, however laws are becoming more and more pro-tennant making it more risky.
Yes. Landlord-Tenant codes have evolved to make it difficult for landlords. Perhaps a pushback from the days when unscrupulous slum lords took advantage of everyone. Now, the opposite for whatever reason.
Also: Difficult ADA requirements, service animal laws, Bed Bug Laws, etc, etc.

Perhaps what happens when folks try to legislate good business practices and good behavior. Not sure.
j :happy
More on the lines of capped rental increase, extended grace period for unpaid rent and squatters.




Some states are pro-tenant. Your rent increase is capped. In Oregon you gotta pay moving expenses for tenant.


And look up some videos on youtube about squatter. You will realize theres a lot of subhuman scumbags out there.
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Sandtrap
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Re: Is buying a rental property even worth it?

Post by Sandtrap »

ddurrett896 wrote: Thu Mar 05, 2020 8:09 pm
Sandtrap wrote: Thu Mar 05, 2020 6:40 pm
ddurrett896 wrote: Thu Mar 05, 2020 4:33 pm Ex landlord here. Just sold property last month and have no plans on doing it again.

The work isn't that bad, however laws are becoming more and more pro-tennant making it more risky.
Yes. Landlord-Tenant codes have evolved to make it difficult for landlords. Perhaps a pushback from the days when unscrupulous slum lords took advantage of everyone. Now, the opposite for whatever reason.
Also: Difficult ADA requirements, service animal laws, Bed Bug Laws, etc, etc.

Perhaps what happens when folks try to legislate good business practices and good behavior. Not sure.
j :happy
More on the lines of capped rental increase, extended grace period for unpaid rent and squatters.
+1
Have had bad experiences with this. Court protected!!!!
Many tenants know how to play "the game".
RBD for landlords despite trying to be "fair".
j :D
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mesaverde
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Re: Is buying a rental property even worth it?

Post by mesaverde »

Here's my own personal experience. For seven years I had a rental in a high cost of living/highly educated area. As others posted previously, your ROI is reduced in an area like this... the ROI on my rental was ~5.5%. Having higher quality tenants in an area like this can be less of a hassle, but it's still a hassle and the ROI is often too low to justify the hassle. It is a 2nd job and I already have a professional job that I love. The older I get the more valuable time has become. I decided that being a landlord was NOT how I wanted to spend another minute of my time. Even with the best of tenants it's still a hassle. 1.5 years ago I sold the rental and invested the equity in a Vanguard index fund. I feel like it improved my quality of life. Being able to travel or do whatever I want without hassle is golden.

A good friend has 60+ rental properties within an LLC. This is his full time job... two property managers work for him and he has a great relationship with workers who can fix/rebuild anything on the cheap. He routinely buys dumps, rebuilds them, and rents them out. He enjoys this. I can see how doing this full time can be enjoyable. To each their own.
"Learn from the past, live in the present, plan for the future"
flaccidsteele
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Re: Is buying a rental property even worth it?

Post by flaccidsteele »

wkimdds wrote: Thu Mar 05, 2020 1:42 pm What do you guys think? I thought about buying a rental property but there's too much risks
Spoken like someone who doesn’t own rentals. There are risks but not the ones you listed
wkimdds wrote: Thu Mar 05, 2020 1:42 pm 1. There is a chance that your unit won't be fully rented out during your ownership

2. There is maintenance cost, property tax and etc. If something breaks down, you gotta fix it

3. You can be stuck with a scumbag tenant and go through eviction and etc which can cost you alot of money and lost income.

I think it would be worth it to buy my own place for primary residence but believe index fund beats RE in terms of predictability, maintenance and etc.
I purchased rentals during the credit crisis, the risk was low because the price was low

The risk is over paying, not the items you listed. All of those issues existed during the credit crisis

Rentals were low risk during the credit crisis because property cash flow was high relative to price

I’m Canadian and have rental properties in the US. I don’t personally handle any of those issues that you listed. The property management company does

If a landlord has problems with rentals - they overpaid. As far as I’ve known, being a landlord means seeing money fall into my account monthly
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat
jb1
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Re: Is buying a rental property even worth it?

Post by jb1 »

Again.

Have rental properties is a business.

Investing in stocks is not.

Carry on.
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Sandtrap
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Re: Is buying a rental property even worth it?

Post by Sandtrap »

mesaverde wrote: Fri Mar 06, 2020 5:23 am Here's my own personal experience. For seven years I had a rental in a high cost of living/highly educated area. As others posted previously, your ROI is reduced in an area like this... the ROI on my rental was ~5.5%. Having higher quality tenants in an area like this can be less of a hassle, but it's still a hassle and the ROI is often too low to justify the hassle. It is a 2nd job and I already have a professional job that I love. The older I get the more valuable time has become. I decided that being a landlord was NOT how I wanted to spend another minute of my time. Even with the best of tenants it's still a hassle. 1.5 years ago I sold the rental and invested the equity in a Vanguard index fund. I feel like it improved my quality of life. Being able to travel or do whatever I want without hassle is golden.

A good friend has 60+ rental properties within an LLC. This is his full time job... two property managers work for him and he has a great relationship with workers who can fix/rebuild anything on the cheap. He routinely buys dumps, rebuilds them, and rents them out. He enjoys this. I can see how doing this full time can be enjoyable. To each their own.
+1
Good points.

This is one of the not common (considering how many own a few rentals) business situations that make sense as a "business". But, to do it, one has to be a full-time "businessman". It is in no way a passive activity.

One of the difference between a business owner and an employee is that the business owner never stops thinking or being aware of his company, whereas. . . an employee has the luxury of putting work completely out of thought on weekends, after punching out, vacations, etc. (of course these 2 scenarios have many exceptions as many might point out).
The point here is to emphasize that physical R/E investment and management is a "business" with all that entails.

*(standard disclaimer: there are so many ways to do these sorts of things.)
j :happy
Last edited by Sandtrap on Fri Mar 06, 2020 12:49 pm, edited 1 time in total.
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Harry Livermore
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Re: Is buying a rental property even worth it?

Post by Harry Livermore »

I agree with the others who have commented on it being more akin to a side business than an investment, although it surely qualifies as both.
We have had pretty good luck with ours. See some of my detailed posts on my experience:
viewtopic.php?f=1&t=296130&p=4861889#p4861889
viewtopic.php?f=2&t=284615&p=4626452#p4626452
viewtopic.php?f=1&t=291202&p=4771013#p4771013
If you are handy, nearby, and enjoy interacting with people, it might be for you.
Cheers
FoolMeOnce
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Re: Is buying a rental property even worth it?

Post by FoolMeOnce »

Do these "business owner" and "lots of work" points apply if you use a property manager (and aren't at the scale of that friend above with 60+ properties)?
rascott
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Re: Is buying a rental property even worth it?

Post by rascott »

wkimdds wrote: Thu Mar 05, 2020 1:42 pm What do you guys think? I thought about buying a rental property but there's too much risks

1. There is a chance that your unit won't be fully rented out during your ownership

2. There is maintenance cost, property tax and etc. If something breaks down, you gotta fix it

3. You can be stuck with a scumbag tenant and go through eviction and etc which can cost you alot of money and lost income.


I think it would be worth it to buy my own place for primary residence but believe index fund beats RE in terms of predictability, maintenance and etc.
Starting my 15th year as a landlord....

1) possibly for a month at worst.... unless this is a really undesirable property. Which means you bought wrong. Vacancy expense is something that should be planned for just like every other expense.

2) Uh yes.... that should be part of your business plan. Every business you own in the stock market has expenses to.

3) Shouldn't happen a lot if you have a decent property and know what you are doing in screening. I've not had one go to eviction in 15 years yet.... have had a couple that I served pay or quit notices to, but they resloved without much issue.

Predictability..... maybe. My rent checks come in pretty predictably too.

From your questions and tone I wouldn't advise it.

My returns have greatly exceeded the stock market.... like not even close....as the amount of my own money I actually have invested is minuscule compared to the current cash flow and equity position. If you aren't using some level of leverage and can't obtain quality financing, real estate isn't a great deal. And if you aren't buying really good distressed deals.... well under market, also unlikely to have much success. This was of course much easier to do in years gone past.
rascott
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Re: Is buying a rental property even worth it?

Post by rascott »

tvubpwcisla wrote: Thu Mar 05, 2020 8:02 pm If you have never been involved in a real estate lawsuit with a bad tenant, then yes, rental properties are great.

If you have been involved in a real estate lawsuit with a bad tenant, then no, rental properties are horrible.

I would never do one. Way too much work and risk for the potential upside. One bad tenant can and will destroy your entire life.
State dependent..... in my landlord friendly state we can get a non paying tenant out within 30-45 days.... and the sheriff will be there to help escort them out, if needed. The judges don't waste their time with excuses... did you pay? No? Eviction. Next.

In some tenant friendly states it can be a serious issue.
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flossy21
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Re: Is buying a rental property even worth it?

Post by flossy21 »

What if I told you there was a real estate rental investment with a nearly 100% guaranteed rock solid tenant for life?

I have a family member who owns a US Post Office building that is rented out to the postal service. It's in a rural location servicing a town of <500 people.

Here's a listing of similar properties for sale...

https://www.loopnet.com/post-offices-for-sale/
flaccidsteele
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Re: Is buying a rental property even worth it?

Post by flaccidsteele »

rascott wrote: Fri Mar 06, 2020 11:30 am
tvubpwcisla wrote: Thu Mar 05, 2020 8:02 pm If you have never been involved in a real estate lawsuit with a bad tenant, then yes, rental properties are great.

If you have been involved in a real estate lawsuit with a bad tenant, then no, rental properties are horrible.

I would never do one. Way too much work and risk for the potential upside. One bad tenant can and will destroy your entire life.
State dependent..... in my landlord friendly state we can get a non paying tenant out within 30-45 days.... and the sheriff will be there to help escort them out, if needed. The judges don't waste their time with excuses... did you pay? No? Eviction. Next.

In some tenant friendly states it can be a serious issue.
+1 this is the correct answer
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat
flaccidsteele
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Re: Is buying a rental property even worth it?

Post by flaccidsteele »

Sandtrap wrote: Fri Mar 06, 2020 9:18 am
mesaverde wrote: Fri Mar 06, 2020 5:23 am Here's my own personal experience. For seven years I had a rental in a high cost of living/highly educated area. As others posted previously, your ROI is reduced in an area like this... the ROI on my rental was ~5.5%. Having higher quality tenants in an area like this can be less of a hassle, but it's still a hassle and the ROI is often too low to justify the hassle. It is a 2nd job and I already have a professional job that I love. The older I get the more valuable time has become. I decided that being a landlord was NOT how I wanted to spend another minute of my time. Even with the best of tenants it's still a hassle. 1.5 years ago I sold the rental and invested the equity in a Vanguard index fund. I feel like it improved my quality of life. Being able to travel or do whatever I want without hassle is golden.

A good friend has 60+ rental properties within an LLC. This is his full time job... two property managers work for him and he has a great relationship with workers who can fix/rebuild anything on the cheap. He routinely buys dumps, rebuilds them, and rents them out. He enjoys this. I can see how doing this full time can be enjoyable. To each their own.
+1
Good points.

This is one of the not common (considering how many own a few rentals) business situations that make sense as a "business". But, to do it, one has to be a full-time "businessman". It is in no way a passive activity.
Depends on the price

I’m a Canadian landlord with US rentals

It has to be passive. I wouldn’t be able to do it otherwise
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat
FoolMeOnce
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Re: Is buying a rental property even worth it?

Post by FoolMeOnce »

flossy21 wrote: Fri Mar 06, 2020 11:43 am What if I told you there was a real estate rental investment with a nearly 100% guaranteed rock solid tenant for life?

I have a family member who owns a US Post Office building that is rented out to the postal service. It's in a rural location servicing a town of <500 people.

Here's a listing of similar properties for sale...

https://www.loopnet.com/post-offices-for-sale/
Interesting. From my limited knowledge, seem like pretty decent cap rates for low risk properties. What's an argument against these?
igotashoe
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Re: Is buying a rental property even worth it?

Post by igotashoe »

We bought 15 rentals between 2010-2012. A mix of 4-plex’s, duplex’s, condo’s, and single family’s in both nice parts of the city and not so nice. As RE has appreciated we’ve offloaded the poor performing properties and stick to single families, all of which do very well. We had a 4-plex in a great area that was a total nightmare. Constant turnover and maintenance. The properties in the part of town that is not so nice were also a nightmare. That said we did as well in them as putting it in the stock market. The sweet spot for us has been leveraged single families and those have significantly outperformed the stock market. Get a good property manager, find a good location, and it’s been very little work or headache. We plan to balance RE investment equity and stocks at about 50/50 going forward. Personally I love real estate, I get a huge kick out of it and start feeling itchy if we haven’t bought or sold anything in awhile, drives my wife nuts. Understand it’s not for everyone. What’s worked for us is buying in good areas, good schools, jobs, and no crime.
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