Ya bro it's that easy. We are all real estate millionaires here. We just all got bored with it so we dabble in IM to keep busy.
Where to invest about $200,000?
- Thread starter ILOVENICKICAKES
- Start date
Numbers didn't make sense in Canada when I took into account taxes (on rental income + property), maintenance fees (assume 2%/year), interest on mortgages (assume 2.25%/year), management fees, tenant defaults, etc.
This may vary based on your location, but taxes typically are highest on passive income. Your mortgage isn't entirely tax deductible. With all of these expenditures, there's no way I was maintaining positive cashflows without significant downpayments. Also don't focus on the increase in equity too much, that's just cherry on top when you sell the units down the road. It doesn't help your current cash flow situation. Maybe FTC-Hater can chime in, that dude can shed a lot of knowledge on real estate investments. I admittedly only know what friends have shared with me.
A guy I know with $100MM+ net worth (built with real estate) sticks to this criteria:
1. Monthly rental income of each unit should be $800-$1.2k, anything below that and you're risking default. Anything higher than that and the tenant won't stick around for long (they can likely afford a downpayment soon). With the $800-$1.2k/month mark, the tenant can't afford to get their own place but can keep paying rent for a long time.
2. Keeping in mind tenant defaults, it's actually safer to buy out entire buildings than it is to buy a few units. This guy buys out entire buildings ($10MM+ each).
3. Buy properties with good locations, poorly maintained but structurally sound with a 10% downpayment. Banks cover the rest. He renovates the interiors before selling each one to his investment pool (refer to the next point).
4. The guy never has more than 20% equity in any of his buildings. The rest of the units are owned by various investors. That way, he can spread his risk across multiple buildings in case one doesn't work out. He also makes money off the investors by inflating the price after renovations of each unit, and charging them management fees.
Another friend of mine is in real estate construction. Which again seems to be far more lucrative than buying and renting. But that's beyond the topic of this discussion.
This may vary based on your location, but taxes typically are highest on passive income. Your mortgage isn't entirely tax deductible. With all of these expenditures, there's no way I was maintaining positive cashflows without significant downpayments. Also don't focus on the increase in equity too much, that's just cherry on top when you sell the units down the road. It doesn't help your current cash flow situation. Maybe FTC-Hater can chime in, that dude can shed a lot of knowledge on real estate investments. I admittedly only know what friends have shared with me.
A guy I know with $100MM+ net worth (built with real estate) sticks to this criteria:
1. Monthly rental income of each unit should be $800-$1.2k, anything below that and you're risking default. Anything higher than that and the tenant won't stick around for long (they can likely afford a downpayment soon). With the $800-$1.2k/month mark, the tenant can't afford to get their own place but can keep paying rent for a long time.
2. Keeping in mind tenant defaults, it's actually safer to buy out entire buildings than it is to buy a few units. This guy buys out entire buildings ($10MM+ each).
3. Buy properties with good locations, poorly maintained but structurally sound with a 10% downpayment. Banks cover the rest. He renovates the interiors before selling each one to his investment pool (refer to the next point).
4. The guy never has more than 20% equity in any of his buildings. The rest of the units are owned by various investors. That way, he can spread his risk across multiple buildings in case one doesn't work out. He also makes money off the investors by inflating the price after renovations of each unit, and charging them management fees.
Another friend of mine is in real estate construction. Which again seems to be far more lucrative than buying and renting. But that's beyond the topic of this discussion.
This actually sounds very interesting. How did he manage to swing a 10% down payment or is it just through investor relationships, etc...?
That's the kind of stuff I wanna get into.
It also seems like it'd make more sense buying a franchise and watch it appreciate that way. That gets rid of a lot of issues with unpredictable cash flow but I'm guessing workers will be another problem to deal with.
I wonder now if it's possible to "mortgage" the real estate the franchise is on once you pay cash for it. I'm sure there's a way...
I wonder now if it's possible to "mortgage" the real estate the franchise is on once you pay cash for it. I'm sure there's a way...
To keep up with inflation.
Don't count on capital gains.
Invest in cheap low end properties, rent them out to Mexicans, don't pay taxes, and get that cash flow.
Minimum downpayment is 5% here. With his portfolio, banks are ecstatic to finance his projects at 10%. Especially with his investment pool the majority of units are pretty much guaranteed to sell out after renovations.
The whole idea was that you can leverage 5X your cash and profit that much. Plus you can still mark you property as depreciated even if you have an appraiser saying it went up by 20gs that year lol.
Someones been reading rich dad poor dad??
Rent it to Mexicans and don't pay taxes.. you don't need depreciation this way.
Even on my worst, dumbest day, I can run circles around you without breaking a sweat.
Lol you clearly have no experience if you want to buy a franchise. You can't even wipe your own ass unless you have the permission form HQ. Don't get me wrong one of my mate's dads ran a Maccers franchise for a year, made him a shit ton of money but he said he will never do it again. It takes up too much of your time and he barely slept 4-6 hours a night, the rest of the time he was constantly on his feet or dealing with some small stupid matter.
Granted franchises are already branded, have procedures and seem like a safe bet but in reality you have little to no control. Your better off taking your experience in marketing and setting up your own business targeting a specific area.
Granted franchises are already branded, have procedures and seem like a safe bet but in reality you have little to no control. Your better off taking your experience in marketing and setting up your own business targeting a specific area.
If you are serious about this you are fooling yourself. You're completely ignoring all other costs related to owning even ONE property. Utilities, taxes, repairs, upgrades etc.. etc.. etc.. the list goes on and on and on. You think you will be able to pay off all the houses and make a bunch of easy $, but you are very wrong.
A LOT of $ will be coming out of YOUR pocket for a long time before you see any kind of profit. As I said, IF you are serious about this, think about it very carefully and look at everything. Look at all costs involved and do some calculations to see if this is something that you can truly afford.
Of course, it's highly doubtful that any lender will lend you all of that and definitely not 5 different lenders. Unless you have millions in collateral you'd be lucky if they lend you anything. The problem is is you are thinking too big.. NEVER start to big.. Get one house and start your plan from there. As you start making $ you add a 2nd.. When you start making much more and know 100% that this will continue to be profitable and the addition of more properties would benefit you then go for it.
Do not, I repeat DO NOT look at it as easy money because you will fail miserably.
If you haven't already established your bug out plan you should use the money to do that first, i.e. set up offshore company and banking, establish a place to live somwhere you like and start the process to get a second passport. You might need to take a lot of fun trips to find a nice spot and set things up and then put some decent deposits into foreign banks accounts.
If you haven't done that yet then you are completely at the mercy of whatever bad stuff happens particularly if you have a big investment in real estate. If you have done it then you not only have a safe exit plan but some fun places to visit and good opportunities for profit, assuming you have chosen well.
If you haven't done that yet then you are completely at the mercy of whatever bad stuff happens particularly if you have a big investment in real estate. If you have done it then you not only have a safe exit plan but some fun places to visit and good opportunities for profit, assuming you have chosen well.
Well, normally I would, but it's not really my money it's my dad's. He's already got his dual citizenship and he's leaving the country for good after all the paperwork is done.