Anyone here own any rental property, apartment buildings, etc?

[JonesersRX7]

Joneses - I understand what you are saying, but I think the logic behind this argument is not sound. I own 12 houses and a couple duplexes and condos all acquired in 2009-2010. The quality of tenant I can find who wants to rent a house is much better than someone renting an apartment. The amount of "stuff" home renters acquire is way more (they get their own big garage and a backyard) so they are less likely to move. I make my tenants pay all their own utilities and landscaping.

A tenant is a tenant.. as long as the rent is on time I don't care. And after you take a look at a couple dozen rent rolls you would be surprised how many tenants stay in their apartment for years on end.

And the most important argument. The buyer pool for a single family home is almost everyone. Single family home purchase decisions are not made upon cash-flow, but emotions. Very few buyers buy multi-family because they like the color of the house or the size of the master bedroom.

This... is no where near the most important argument. The buyer pool? I would much rather deal with a experienced business person that is buying on income and not off of color. I would much rather deal with something that I can apply forced appreciate via lowering expenses and have that equate to 10's of thousands of dollars of income then have the house 2 doors down lower my comp. value.

That being said, they're two different games and both are good. Right now, at least in California the profitable game is buy a house that used to sell for $300,000 - $400,000 for $50,000 - $100,000 and let it pay for itself until it's time to sell. Once prices get to a point where they won't cash-flow, I will stop buying them.

Multi-family here is still selling around a 7 cap. You go to Orange County and it's 5 or 6 cap.

The most important argument.... real estate is more than the 20 square miles you live. And you will never catch me buying any RE in New York or "New York West" aka California. RE and Tenant laws in both those states are fucked.

 

[Compound]

If you are looking at real estate purely from an investment perspective, also take a look at REITs. You can easily get diversified exposure to residential and commercial, and don't have to deal with the hassle of individual properties.

That said, there are clearly benefits to owning individual properties: massive leverage, tax benefits, ability to rehab, specialized knowledge of a certain area, etc.

 

[supportomatic]

I owned a decent size apartment complex for a while and it was the biggest nightmare I ever owned, even with a property manager. I should've never bought that thing. I went the opposite direction in that I started in real estate investing and ended up online. I've never looked back. Now the only real estate I own is the house I live in.

 

[soulscience]

I am posting a brief brief overview. If you are at ALL serious about doing this you should invest no less then 3-5k in your education as something that will be the most expensive thing you ever buy should be learned, studied and researched so you have a very solid understanding of what you are doing. This is a business and you need to invest and treat it as such.

And where would you even spend this money? I think don graziosi's course costs about that...

I'd recommend two books for sure,:

The Real Estate Investor's Pocket Calculator, Thompsett.
Landlording, Robinson.

This will set you back a whole $50, everything else you're gonna have to learn from experience, unless you're working for someone.

With regards to multi family... and imho is the only way to go with income residential property. I would much rather have a group of tenants spreading the vacancy risk then one single tenant. Its also much easier to increase the value of MF props compared to SFR's

I'd say it's only easier to increase MF props in value if they're in bad condition, otherwise SF wins out for sure. Vacancy risk is mostly managed by buying in a decent location, and having quality accomodations. Not jacking up rents as soon as you take ownership as you mentioned is also a good way to keep them sending checks. You also mitigate this risk by doing due diligence on your city/town/county's trending to make sure people are going to need to be renting in the future. Vacancy is almost never an issue for me.

The quality of tenant I can find who wants to rent a house is much better than someone renting an apartment. The amount of "stuff" home renters acquire is way more (they get their own big garage and a backyard) so they are less likely to move. I make my tenants pay all their own utilities and landscaping.

Agreed, SF tenants are generally better. Building on you're arguments here, eventually, these tenants can become buyers (has happened to me) and you can skip broker's fees.

And the most important argument. The buyer pool for a single family home is almost everyone. Single family home purchase decisions are not made upon cash-flow, but emotions. Very few buyers buy multi-family because they like the color of the house or the size of the master bedroom.

Absolutely! Multi family guys won't outbid each other based on emotions. this is part of my argument above.

Multi-family here is still selling around a 7 cap. You go to Orange County and it's 5 or 6 cap.

That's pretty low, i'm guessing you're betting on rising home prices to make your nut?

A tenant is a tenant.. as long as the rent is on time I don't care.

That's a retarded statement. Obviously you love making your PM's car payments.

I would much rather deal with an experienced business person that is buying on income and not off of color. I would much rather deal with something that I can apply forced appreciate via lowering expenses and have that equate to 10's of thousands of dollars of income then have the house 2 doors down lower my comp. value.

The building is the most valuable asset, not the rent roll. Often in here in NY the rent roll is the weakest link due to stabilization issues, etc..

The most important argument.... real estate is more than the 20 square miles you live. And you will never catch me buying any RE in New York or "New York West" aka California. RE and Tenant laws in both those states are fucked.

I'm in NY and sitting pretty. I also have a lot of experience with tenant laws here, and if you know what you're doing you're fine.

If you are looking at real estate purely from an investment perspective, also take a look at REITs. You can easily get diversified exposure to residential and commercial, and don't have to deal with the hassle of individual properties.

Yea, you generally don't make much money, either.


Also, If you're looking at 1.1, 1.2, 1.3 DSCRs for income property, that's way to low. 1.2 essentially means you're only making enough to pay the bank right? who's gonna pay you? (no one will give you an investment mortgage for less than like 1.6 right now anyway.)

 

[JonesersRX7]

And where would you even spend this money? I think don graziosi's course costs about that...

I'd recommend two books for sure,:

The Real Estate Investor's Pocket Calculator, Thompsett.
Landlording, Robinson.

This will set you back a whole $50, everything else you're gonna have to learn from experience, unless you're working for someone.

Not sure who don graziosi is.

Dave Lindhahl and Karen Hanover have solid information. And with regards to experience... "experience" is costly in this game.

I'd say it's only easier to increase MF props in value if they're in bad condition, otherwise SF wins out for sure. Vacancy risk is mostly managed by buying in a decent location, and having quality accomodations. Not jacking up rents as soon as you take ownership as you mentioned is also a good way to keep them sending checks. You also mitigate this risk by doing due diligence on your city/town/county's trending to make sure people are going to need to be renting in the future. Vacancy is almost never an issue for me.

Pretty broad stroke of assumptions there. I wasn't going into detail about what my company looks for when buying. But here is a general idea... C to B and B to A. Emerging markets and value plays FTW. I used increasing rents as an example and "jacking up rents as soon as ownership is taken" is not something anyone can do as you have to honor the current leases. Makes me think you own a couple SFR's and have never bought an apartment complex and have attempted to rip apart my post based on your extremely limited knowledge and I hesitate to even waste anymore time on this reply.. but I will because it's Friday and I am bored.

Agreed, SF tenants are generally better. Building on you're arguments here, eventually, these tenants can become buyers (has happened to me) and you can skip broker's fees.

Lease options are a great strategy and have wholesaled many props to investors that have gone on to do so.

Absolutely! Multi family guys won't outbid each other based on emotions. this is part of my argument above.

How many times have you sold a house the past 2 years that a bidding war has taken place? Really? This is your "argument" ? I will give you the benefit of the doubt and ass u me that you sell through those auction companies. I have done a little bit of research and here in Phoenix the average sold price compared to a house sold through a Realtor is actually LESS.

That's pretty low, i'm guessing you're betting on rising home prices to make your nut?

This is called a speculator not an investor. Buy on cash flow and you will never have to worry about appreciation. Just sayin'...

That's a retarded statement. Obviously you love making your PM's car payments.

Originally Posted by JonesersRX7
A tenant is a tenant.. as long as the rent is on time I don't care.

LOL -- you are stretching here pimpin'. I was simply talking about the fact that a tenant is a tenant. Nothing about the efficiency of the management company.

The building is the most valuable asset, not the rent roll. Often in here in NY the rent roll is the weakest link due to stabilization issues, etc..

Not sure where the multi family stick crawled up your ass but I NEVER said that the RR was to be valued as an asset. I was linking the fact that tenants in apartments also renew their lease year after year much like your average SFR renter.

I'm in NY and sitting pretty. I also have a lot of experience with tenant laws here, and if you know what you're doing you're fine.

Is this where I say "Cool Story Bro" ? You do this long enough you will get sued. I am not the only one that chooses to stay out of NY E and NY W.

Also, If you're looking at 1.1, 1.2, 1.3 DSCRs for income property, that's way to low. 1.2 essentially means you're only making enough to pay the bank right? who's gonna pay you? (no one will give you an investment mortgage for less than like 1.6 right now anyway.)

[/QUOTE]


Huh? Find someone that has access to a wider range of paper. Or learn how to raise private money if you can't get financing? As far as even going into DSCR and you saying 1.3 only pays the bank.. meh.. I am out of energy on this reply and am going to go take my daughter to the park to fly a kite before we pick up her sister from school.

Not sure why you are trying to argue that singles are better than multi family. Wasn't what this thread was about... and I never said that one was better than the other and really comes down to the investor. MF happens to be my choice because of larger incomes and was a natural progression over the past 5 years.

 

[cucaloco]

Quote:
Originally Posted by cucaloco
Multi-family here is still selling around a 7 cap. You go to Orange County and it's 5 or 6 cap.

That's pretty low, i'm guessing you're betting on rising home prices to make your nut?

I think you guys mis-read my post. I was saying in California, I'd much rather buy a house at 14% cap, then buy multi-family at 5% cap.


No one is going to come to a conclusive answer on what is better investment for a particular person: SFH, multi-family residential, or commercial. Frankly, it's like picking which sport is better, not apples-to-apples and depends on so many factors. There is profit to be made in every one of those options, especially if you focus on distressed situations.

Owning commercial property all the numbers are multiplied substantially. Including initial investment.

 

[schockergd]

For me , SFD properties in my area are much easier to rent than apartments.

Most single family homes are rented by working class people, compared to apartments , which seem to be desired more by transient types.

The return on a apartment complex is great , however for me , the appreciation on SFD properties coupled with better tenants is a great thing.

Look at buying a lower-end single family home , or a duplex first.......have it for 3-6m then make a choice on whether it's something you want to continue.

Rentals are not for everyone, and unlike IM , you can only learn so much through books online and through other sources. The best rental book IMO is "one minute to rental property riches" by a guy quite close to my neighborhood.

 

[BlueYonder]

The amount of rent you can charge is also determined by other variables.

The quality of the public schools in the area is an important factor. The school district I'm in is highly rated, and this is reflected in the sky-high Long Island school taxes that are breaking people's backs (and paying teachers $150,000 a year). I read recently that people in certain zip codes in New York City's Greenwich Village pay more because they can send their kids to highly rated public schools, saving on private school tuition.

Also, I read that residences closest to metropolitan areas had the least amount of price depreciation. The farther you traveled home from NYC, e.g., the bigger the hit your house value took. People in the NY metro area were traveling to the Poconos to buy homes because it was the best they could afford, and those people traveling 2 1/5 house each way to NYC lost the most value on their homes. Ouch!

Do you have to empty a house of all your possessions if you want to rent it? I have a few pieces of furniture and artwork I would like to keep in the house. Don't want to buy a houseful of stuff to call it "furnished." My father's paintings fill a whole room. This is really a vexing problem.

 

[craigmc]

One might try looking into mobile homes to get their feet wet. Buy the book "Deals on Wheels" Lots of go info in that.

 

[JonesersRX7]

One might try looking into mobile homes to get their feet wet. Buy the book "Deals on Wheels" Lots of go info in that.

If you have had success much props. I have never had the slightest interest in mobile homes as I try to avoid going to the DMV when ever possible.

 

[BigWill]

One might try looking into mobile homes to get their feet wet. Buy the book "Deals on Wheels" Lots of go info in that.

Going to pick that up. Been looking at mobile for a while. Thanks

 

[soulscience]

Jonesers,

Just bustin' balls man. Obviously you know what you're doing.

With regards to jacking up rents, I meant "as soon as" the first terms come up, which of course is the first time you'd be able to actually raise rents.

2/2 houses I've sold recently have had competitive bidding take place. Wouldn't call them "wars" but prices were driven up. I just walked away from a new property because of this. Depends on the amount of "investors" in your market, and their experience level. I like my returns high, so i usually lose these battles, but my cap rates don't suffer. Arizona, like FL in my experience, seems to be one of those places where the current supply greatly exceeds the demand, so i can see why you might not have this problem there.


In reference to DSCR, my meaning was that 1.3 probably doesn't pay YOU (except possible appreciation of the asset.) That might not even pay all your expenses. As an investment, I'd want this number a lot higher than 1. so would the bank. I don't use banks as my only source of capital, but If a bank thinks you're not gonna make enough money, why would you source other paper to push a crappy deal?


Also, I own mostly multifams. 3-6 unit range. I only argued that it's harder to improve their value than SFs. Also that SF tenants are more long term, which has its pros and cons. It's hard to argue against MFs in my opinion, I like them WAY more for buy and hold purposes, less roofs, less boilers, less maintenance in the long term, MORE rent.





Long island is speculative right now, esp. on the north shore. I would suggest starting somewhere with lower home prices otherwise you'll tie up too much capital starting out. I have a friend who's an LI teacher, started at 80k.

You don't have to empty the house, but i'd take out anything you care about unless it's short term. If it's big you could build an 'owner's closet' in the basement or attic that is locked.




Mobile homes like buying the lot? or renting the trailers? Both of those kinda sound like a hassle, but there's lots of money in hassles.

 

[Refrozen]

I wanted to bump this with a few questions for you guys.

What time period do you look for profitability? I'm looking at lower end single family properties/apartments/condos/townhouses right now, all in probably less than $200k, and I'm seeing that the 5-8 year mark for profitability seems to be pretty much the best I can do in my area. The rent-to-price multiplier seems to be about 200-400x.

What kind of things influence future prices? Any tips/reading to recommend/research on this? Say a (public) university is about to open in an area, will prices skyrocket or will it just drive out people who can actually afford the higher rates? How do you judge locations on a longer term potential?

I was just starting to enjoy this thread and it seems to be dying off.

 

[cucaloco]

BiggerPockets.com is a great forum to checkout.

Read the threads about the 50% rules and the 2% rule. Any house you're all-in for $200k is going to very hard to achieve true cash-flow. You'd need rent of $4k/mo for it to meet he 2% rule. I do break the rule a bit, most of the stuff I buy is about 1.5%. Some places Indiana and Tennessee you will find properties that meet the 2% rule a lot easier.

Focus on buying under market value. Typically you want to buy at 65% of repaired value less repairs. So if a house needs $20,000 of work and would be worth 200k in pristine condition you need to pay 200,000 * .65 = 130,000 - 20,000 = 110,000. So if you can buy a house for 130,000 total investment you wake up with 35% equity. You can flip it at a profit (15%-ish), or probably cash-flow rent it.

How are you paying for the property and how many do you want to do? Every property you buy a negative cash-flow limits your future growth. The right answer is to factor in future appreciation at 0. No one can predict exactly when appreciation will come, so you need the property to profit along the way.

There are some great value plays in the down market. For example I bought a condo for $35,000 that rents for $1,050/mo in California earlier this month. I don't really like condo's, but the prices are way down sometimes you just can't say no.

Dave Lindhal who was mentioned earlier has some great opinions on paths of progression and developing neighborhoods. He recommends buying on the outskirts of the development area in the direction path of progression is heading.

 

[cucaloco]

2/2 houses I've sold recently have had competitive bidding take place. Wouldn't call them "wars" but prices were driven up. I just walked away from a new property because of this. Depends on the amount of "investors" in your market, and their experience level. I like my returns high, so i usually lose these battles, but my cap rates don't suffer. Arizona, like FL in my experience, seems to be one of those places where the current supply greatly exceeds the demand, so i can see why you might not have this problem there..

I have had 5-10 offers on each of my last 10 retail deals. One had 32. I've even had people pay out of pocket over appraised value on 3 or 4. Banks are not foreclosing very aggressively and limiting what is released creating a false Sellers market.

 

[alwiser]

cucaloco, thanks for the forum link man.

 

[soulscience]

What time period do you look for profitability? I'm looking at lower end single family properties/apartments/condos/townhouses right now, all in probably less than $200k, and I'm seeing that the 5-8 year mark for profitability seems to be pretty much the best I can do in my area. The rent-to-price multiplier seems to be about 200-400x.

i don't understand, are you trying to cover your down payment before taking profits or something?


200k w 40k down is like 1050 a month, 12.6k/yr.

on 200k you should try to be collecting like 20k/year at least.

4k on maintenance, ins, etc..

3.4k/yr profit, before appreciation, n.i. decreased mortgage balance.


that's some really basic guesswork right there, but looks like you'd be profitable pretty instantly, that's like 8 or 9% you're making there on money invested, plus you're slowly paying off that house.


That said, i would try to get a much cheaper price on the house, or one with a lot of easily curable repairs. you're gonna be getting at least 9-10% of what the house is WORTH when you rent it (annually,) not what you paid for it.


'curable' repairs are those that make the house worth more than it was before, while not exceeding that price difference in cost. (large margins are good here.)

This is the reason I said above that SFs' values can be increased more easily, simply because they generally have more curable offenses than MFs.

a little money will a long way here, look at refacing kitchen cabinets, new countertops, and new appliances, maybe new tile bathrooms if they're not clean. new thermostats. rents will go UP. house value will go UP. your margin will go UP.

Also, replace carpet with laminate flooring, sourced in large lots from a discount supplier. carpet just gets nastier and nastier and nastier, laminate is cheap, quick to install looks decent, and doesn't retain any stank. If the home's price rises, you can pull it out an replace with hardwood in the future, brand new for potential buyers. You can then rotate it BACK in to another new rental, without having to buy new shit, comes together like legos.

 

[BlueYonder]

A few changes I made to the house added to curb appeal and viability as a problem-free rental.

Replacing the cracked, weedy cement front paving with a new brick path was a change that gave the front the look of expensive housing. This was a big two day project.

Removing overgrown trees, especially those growing close to the house, gives me peace of mind that they will never overturn during a storm. Also, one was cracking the foundation, and dropping leaves into the gutters; another damaged the garage roof which now has to be replaced. My father was a shade and privacy lover, and went overboard with the plantings. Inspect the property you're interested in for threatening trees and overgrowth. Tree removal can cost you hundreds of dollars each.

Lots of houses from the 1950s such as mine have solid, quality wood floors under their old carpets and linoleum. I have solid oak covering most of the downstairs, and a refinishing will finish them off. They put higher quality flooring into older houses, something to keep in mind.

This winter there was an awful no heat/chimney problem. I had the chimney spout replaced and he capped it to prevent animals from getting trapped in there. Permanent solution.

Wooden cellar door kept rotting. Out it went, replaced by solid steel with a cement foundation. Permanent solution.

The more permanent solutions you can make to a rental the less headaches you'll have.

 

[HundredProof]

I have about 15 and growing houses right now, I manage them all myself. Property management here is typically 8%. Usually once I get a tenant in it's not very much work, but renting them out sucks, be prepared for 10-20 phone calls a day from all kinds of crazy people.

15? WTF ? You running a Real Estate Service?

 

[fm1234]

I have a couple of condos and single family houses. Because I split my location during the year, I use a property manager, but honestly, if you're not scaled up and are reasonably local to the property, do it yourself. It's a good education, not just because you should know how to handle the businesses in which you're involved, but because realtors and managers are cunts out for a cut of your money, and it helps to know the shortcuts and tricks that are going to potentially be pulled on you once you've scaled up to the point that you're outsourcing property management.

As far as books and courses go, I say John Reed FTW. He also has an awesome page ripping open claims made by real estate and other similar gurus, which is a fun read if you have a weekend to spend wiping tears of laughter from your eyes.


Frank