Todd, I too have become a landlord by renting my Dad's old home. It required a LOT more work and cash than yours but the financials were hard to ignore.

During remodeling several people per day come to the house wanting to buy or rent, and there was no sign, advertisement, etc. An on-line rental availability map showed that there were only two similar rental rental properties in a 1.5 mile radius, and outside of that the neighborhood gets really ugly. Hence, premium rental income and a selective tenant process is much easier to get.

If all goes well in 26 months all of the cash outlay will be paid off. Like cars my labor is "free", but for me it's the price of admission and sweat equity since nothing had been done in the house since it was new in 1953. If I had to pay someone to do it all it would have been hard to justify.

My friend and I are now looking at purchasing a commercial building as a combined rental and storage (for us) facility. We both want a place to go after we retire to keep ourselves busy, and our current home properties won't allow expansion. By leveraging the home rental there should be little out-of-pocket expense but a good long-term ROI if the commercial tenant rent can cover the bulk of the loan.

There are advantages and disadvantages in property rentals. Both revolve around the tenant. Get a good one and it's a good deal. Get a bad one and it's a real PITA, especially in California where the tenant has significantly more rights than the landlord. Texas is much more landlord-friendly. To lure in the tenants that I wanted a few more things were added to the property than planned, but they are upgrades that over time will pay for themselves. So far the tenants have been good.

If one can afford to purchase and fix a property for rental it's a great time to do it if the income can cover costs. I don't see home prices going a whole lot lower in most markets, people are always going to need rentals, and as home values rise from the ashes, the appreciation is a great nest egg. Just like stocks though, it has to be the right property, in the right area, with the right tenants, etc., so due diligence is needed to make sure it's not a money looser.

Thanks for sharing Todd.... And Carl!!

Real estate should be a part of everyones plans if they can swing it -- or have the stomach for property management. It's certainly a smart strategy for a real estate professional like Todd.

I don't want the potential hassles of the actual management - so choose to invest in LLC's with professional management. There are also real estate ETF's (exchange traded funds i.e., stocks) where an individual can invest - collect a dividend - and have the possible upside appreciation. Just google Real Estate ETF's and you should get all manor of hits for this type of investment.

The property I carry the mortgage on in Oregon --- has yet to find a tenant -- and this month marks the one year anniversary... EMPTY. So it's not all roses and perfection. When my brother in law bought the property -- I asked him point blank - "can you afford the mortgage with NO TENANT" for a year or more?" The answer was "EASY". While it's not my problem - I just collect the payments - I'd prefer to see the investment for Jay go the way it was "planned". Eventually he will get a tenant and things will be fine. Commercial buildings/tenants are a LOT different than "renters" in a house. He's had offers -- but the tenant improvements are baked in the offer and a couple have been over 100K before the tenant will move in. He's not interested in putting out that kind of cash up front but has taken a serious look at the proposals.

I tried for over a year - to buy a commercial building that I could lease out a portion -- and keep 2500 square feet for my own use. The numbers just don't work and the vacancy rates for light industrial are quite high and the prices have NOT come down in order to make them work. Any investment like this must have full consideration of the NEGATIVE CASH FLOW that can be a part of these purchases. They're not like stocks -- if things don't go the way you planned - they can be "white elephants" and you must be able to carry the costs out of pocket. If you're smart - and a little bit lucky - you can get a rental with a great tenant that stays for years... and if you're really lucky the value can double or triple -- all while paying a nice tax benefit (if the idiots in Washington DC don't ruin that).:cheers:

You bring up some great points. I've heard the CA nightmares from clients over the years. Luckily, Nevada is a landlord state. You can have them out within 30 days of missing a payment. I always say that you pick your tenant when you buy a property. What looks good on paper doesn't always reflect in the real world. I didn't get this one on the market either. The neighbors Dad came over and said, I want it before I was half done fixing it up.

Our commercial market is super saturated with tenants being lured from old properties into new. I don't know much about it but I'm sure there is money to be made, there always is somewhere.

I like your idea on the ETF and I know you have brought it up to me in the past. At this point I'm going to be the grunt but I'll certainly keep it in mind for the day I can take advantage with more liquidity.

County 1 $109,500 10/31/12
County 2 $248,000 07/11/07
County 3 $119,950 02/01/99

I purchased the above property for less than it sold for new in 1999. Interest rates are really the lowest they have ever been. The taxes are $1155 a year. Windows of opportunity are only open so long. This is likely a once in a lifetime opportunity for me. I fully intend to take advantage of it.

california is definitely a tenant's state. I bought a triplex at trustee sales recently. 2 units were occupied and 3rd one was vacant (was told by neighbor) by the time I got trustees deed and recorded. some one had moved in and demanded cash for keys and so did the others ( rediculous amount otherwise I would have payed out). in california tenants get a 90 day notice before you can even begin eviction process. I will not buy rent controlled real estate , that is another ball game
so any how , got an eviction lawyer working on it.
3 units 1B - 1B each, 2000sqft , 10,000sqft lot
plan A
Rehab them completely. refi and hopefully get all my investment back while generating about $1000.00 a month.

plan B same as above but add another unit. zoning and lot size allows it. need to work out numbers w architecture and $$$ / sqft etc....

I got a pretty decent deal so I think there is enough room to get all of my initial investment and I'll do 90% of the work my self.
It is really hard to get to get a deal at auction like todd said. people are paying market value and above at times. A lot of Hedge fund money out there, I hear.
If you know the game and stay persistent it pays off. hoping to get out there again soon. just not to sure where market is going and don't want to get caught at the peak of the " W "

ABSOFRIGGINLUTELY!


BUY 'EM AS FAST AND AS OFTEN AS YOU CAN! This is possibly the one and only time in your life for prices AND rates to be this low!


:cheers: :thumbsup:

I hear you on the industrial property prices Greg. They have not come down in Los Angeles Co. like home prices have. The one we had our eye in is in the same complex that my friend already owns one in (it's an industrial "condo" building), but a 2100ft^2 building goes for well into the $200k's + taxes + association dues. Ouch.

Todd got lucky on his tenant. I would have done exactly the same if that offer came but I had to take a different approach. The current tenants are a nice young couple with a three-year old son. Both have full time jobs and a good income. They paid cash for the move-in but have insufficient funds for a down payment for a home. With escalating home prices combined with how difficult it is to get a loan, if they can't qualify now, they likely won't any time soon. So, give them a few more property "upgrades" that they like (he even came over to help with one of them) to entice them in and hope that they will be long-term.

So, am I working on the Camaro today as it sits in a million pieces in the garage? No, I'm dumping data into Quickbooks for all of the remodeling costs, rent income, tax and insurance payments, etc. There's no free lunch.

I'm also a cheap SOB sometimes. I've never liked paying for things that I can do myself, and taxes was one of them. No more. My tax accountant is worth every penny. I go in two times during the calendar year, in addition to the normal tax season sessions, to do a "check up." Yeah, it does cost, but I'm certain that the money paid is more than offset by both the monies the accountant finds/saves me and the reduced stress of dealing with it. In other words, find a good tax accountant and save yourself money and the hassle factor.

Boy, I may be moving to my forever Home in the next few years....Things are just too good right now with prices and rates..

I had planned to wait seven to ten years or so when I bought in February 2009...I am not ready but I may need to start getting ready.. Bernanke said he would keep rates low into 2015, but I think I may have to jump sometime late in 2013...Or at least sometime in 2014...

I have said in past posts that the key to REALLY making money is the ability to look around your own area of expertise... or knowledge... and see where there are POTENTIALS for investment. One of our members is in the oil biz - obviously he is keenly aware of what's going on there... Todd just posted about his real estate investing - and he is obviously an expert in his own industry.

Personally -- since I haven't worked for 20+ years :woot: I'm no expert in anything except how to manage the money we've already made... I'm also keenly into the high tech world, with friends etc in or invested in many of the start-ups that are central here in the Seattle area.

Having said that.... I was reading the paper today and spotted (and read) this article on something I know absolutely nothing about (I've been a proud member of AA for 28 years now). But I wanted to post it as an example of THINKING about investing -- and how you must look deeper and think larger picture around investing. Let me sum it up simply - APPLE sells lots of stuff... but in order to sell lots of stuff - they have to buy lots of parts to build their stuff ---- so if you can figure out what they're buying - there may be an investment in a supply line etc. THAT IS WHY I'M POSTING THIS ARTICLE.... because it reminded me of this kind of thinking.

Here's my bottom line --- personally I'm not interested in investing in any particular facet of this business -- but you can bet that I'm going to look in to the financial backers (VC's - angel investor groups etc) and I will look to put some money to work with one or two of them. When I say put some money to work -- I'm talking about 100 grand or so.... TINY for me.... but if a guy can get in on the bottom floor -- 100 can get you a 10 bagger... and then that's real money, I don't care who you are! :unibrow:

For investing 102 -- some of you might have enough that you want to speculate just a bit -- and maybe look into the grow light industry -- or hydroponics suppliers -- or??

http://seattletimes.com/html/localnews/2019809614_marijuanainvestor02m.html

Can individual foreign stocks be purchased through an on-line brokerage service, i.e. Ameritrade, etc? Specifically I'm looking at perhaps purchasing a Japanese stock but I'm having a heck of a time finding a definitive answer. I have not signed up for an on-line broker service so if they are available through the standard channels I apologize for not digging deeper.

Carl,


It "depends".....


Give me a name or email me a name or PM me whatever...


There are a few Japan "ETF's"... and then there are also what are known as ADR's (American Depository Receipts). But without a name nobody could do any research for ya.

It's these kinds of tales that keep me out of the individual unit investments.... I invest in large apartment LLC's that are professionally managed -- get really nice returns (7 and 8% annual cash interest) ... upside cap, if any when they're sold... income tax depreciation.... and no phone calls about someone's toilet plugged up!:D
:cheers:

That's where investing into an organized property maintenance company would come into play. :D

With proposition 19 in play back in 2010 your other reference would have been a great move but you would have to keep it low key. I was planning a nice 10,000 sq ft green house where we would cultivate "artichokes" and sell to whole sale sellers. Since 19 failed I will not risk the move. I love my guns too much on that risk. I haven't been a user since the 80's but I think it could have been a good cash crop.

Since we are on a commercial flow, what would you do with 12 acers of high desert just out side of Lancaster? 5 miles from hwy 395 and hwy 15?

Mini-mall? Retail coops? Self Storage complex?

You don't even want to hear what I think about investing in Landcaster, or that area, let alone investing in ANYTHING that's in California...

I love California - but not as an investor. Way too many tree huggers and laws there. The criminals have "rights" - the renter that doesn't pay has "rights" - the border hoppers have "rights". No thanks!

Dump the property and buy some good stocks.... :woot:

Haha....No doubt...That is why I will one property...The one I live in..I may move in the next few years to my forever home, but I will not keep this one..
Mainly for the reasons you mentioned..

I don't need a squatter laughing at me while he doesn't pay for several months...My health cannot take the stress and I won't do the jailtime for what I would do...

I would still stay in California due to family, but I don't have the stomach for the laws and rights given to squatters...

Some of my clients that are high end boutique resalers have said there are two California's for investing, coastal and "other". They've all said stay away from " other". There are exceptions to that of course, but when were in the game of numbers...

When I buy such property. I have already taken into account eviction , holding time , repairs etc... All that has to be factored in. As long as the numbers make sense and oppurntunity strikes and if I have the means I'll be all in.

For example on above mention property. If there is no drastic change in market. I should get all of my investment back in six months. it will pay for it self while generating a profit and if there is a bit of room maybe ill pay my self a bit on the front end. With today's interest it would be a sin not to keep it. If I could keep one or two of those a year. Maybe I'll be able to get a professional management firm when I'm 45:D
Plan C , which is not really in my plans would be to sell and profit an avarage of $70k before taxes.
Now that is just my point of view we are all at a different stage,money wise career, family goals etc... So most definitely not for everyone but do what you know works for you. :thumbsup:

Good post Frank... and the part I like the best is that you understand that everyone has differences. So ideas are just that... ideas -- and they can be
modified... used in part or in whole etc.

Doing what someone understands and has intimate knowledge of - to me - is the best way to invest. They see and understand the pitfalls. They have a better sense of changes - good or bad etc.

The main part of this entire thread is just to get going and do SOMETHING - save - invest - start early. Make your own "luck".

:cheers:

I like your statment about making your own luck.

I was speaking to a physician client of mine yesterday and he was talking about how lucky he is to have his position. Then he started talking about all the training, meetings, interviews, and decisions he made over the years.

I went on to tell him luck likely had some play but a majority of his luck was self made. You don't get lucky being a couch potato.

If you want things to change, YOU must change. Whether it's you skill set, education, health, relationships, finances, whatever....

My brother in law builds and invests in Mini Storages. He has people that have been doing just that - for 25 or 30 years now. They have a very specific set of demographics/cost per square foot/size of property etc that absolutely must be adhered to. Any time they've ignored them - the property hasn't worked out.

Having said that...

These things are the most amazing cash cows I've ever seen. Most of the time Eric tells me that they're all rented out before they ever get an occupancy permit finished. The ones they build have on site live in management. For most of the units there is very little effort on managements part... the few that fail to pay get locked up and the contents sold to people that do that kind of work. He told me once that the biggest job is keeping the electronic gates working 24/7.

LUCK..

If you read my signature, you understand what I think of luck..
It is the meeting of preparation and opportunity..

It takes both to make it work..

I have been lurking in this thread for a while but I figure now is as good of time as any to join in and contribute anything I can (which is minimal).

What I've done may be considered crazy to some but when you have minimal cash flow you really have to think outside the box. The old saying of be aggressive when others are scared and be scared when others are aggressive has worked for me. I had some great help from not only my boss who also has rentals but a great family friend who at his peak had over 20 SFR's being rented.

BTW: I fit the "other" classification that 'glassman' mentioned above since I am 70 miles East of L.A.

Just a little back story:

*Bought my first house in 2001 with a 80/10/10 loan (primary residence)

*Refi'd house #1 in 2002 to a 15 year loan compiling all 3 loans (rates had dropped far enough that my payment stayed the same)

*Refi'd house #1 again in the Summer of 2010 (this is where many would call me crazy but I went back to a 30 year loan to keep cash flow more positive).

*We bought a bigger primary residence (house #2) with only the minimum required for an FHA loan in December 2010. Using an FHA loan allowed me to keep more cash in hand. IMO too many people are hung up on saving just enough to have 20% down and then they don't have any cash left over for back up. I'd rather not tie up that cash (since I didn't have a lot of it). This was my first swing at a rental property so I was preparing myself for the worst. I wasn't in a position to wait while I saved more any longer because my local market had already started climbing back up by this time.

*I was able to rent house #1 within a few days of listing it. It is a house I am familiar with since I lived in it for 10+ years so I know it inside & out. It is a great SFR with RV storage, 800 sq ft air conditioned shop, big easy to maintain yard. Which made it easy to pretty much have the pick of the litter when it came to applicants.

*The rent payment for house #1 was making the P&I payments on both #1 & #2 houses plus a little extra.

*The newest little bonus came about a month ago. I was able to refi house #2 at a point and a half lower rate AND the house had appreciated enough to get rid of PMI. This dropped the total payment including PMI roughly 20%.

*I've had a few little hiccups at house #1 over the last 2 years. Clogged kitchen sink (plumber called), water heater was leaking from the valve (just needed to be tightened down LOL), I had to replace a garage door spring and I had a leaking stand up shower that I ended up upgrading to a tub (full bath now instead of a 3/4) anyway but overall nothing too crazy. Should the proverbial poop hit the fan I still have the money I didn't spend on the down payment as a cushion.

*I would love to pull the trigger on house #3 as an upgrade for my family and then rent #2 but there just isn't enough inventory right now in my area. For instance there have been less than 10 listings matching my search criteria in the last 90 days. My current residence is very similar to the original only bigger, RV storage, shop, and of course a big easy to maintain yard so renting it should also be no problem either.


*********************************************

Up until this thread I never thought I would ever invest in the stock market. I would like to thank all involved and especially Greg for the ever-so influential way of putting things into perspective. I not only have been researching stocks the last few months but have also gotten my rather stubborn on the subject wife to come on board as well. She would have laid over dead before investing in the stock market but she has read through most of this thread and is now asking me how much a week we should be investing. :cheers:

I am starting to familiarize myself with the Yahoo & Google finance pages to find my comfort zone and follow basic trends. However, there is one small thing I've noticed that is different between these two sites and that is the Dividend. The Yield is always the same but the Dividend amount is always substantially higher on Yahoo's page. I am sure it is just some small difference in the way it is written but for this reason I have leaned towards Google instead (mainly because Greg has posted specific amounts and they have matched Google exactly). If anyone can explain the difference so I can understand it would be much appreciated.

-J

J - Yahoo quotes dividends as an annual amount, whereas Google shows what you are "expected" to get on a quarterly basis.

:thumbsup: I figured it was something simple, thanks.

HUGE KUDOS TO YOU MY FRIEND!


Here's my one though I will add to your investing... Diversify. Don't just do all single family rentals. Stocks will add income - usually over time they grow - but more importantly for YOU - they will be LIQUID. So - I'd build a portfolio of dividend paying stocks.... to add to your housing empire. Seldom do all facets of investing work in conjunction with each other. Housing can go up - stocks might be down - interest rates WILL go up from here which will cause your housing to take a "hit" if they rise too quickly or too far... So you want BALANCE in investing. What happened to MANY MANY people is that all their liquidity dried up when they needed it most... that's a very very bad thing!

If your two houses go up enough -- you might try parlaying them into a fourplex or something similar but don't keep borrowing on them. The key here is to build a retirement cash flow - and that happens when your renters pay off the balance and YOU become the bank!

I have a friend that lives in a 12 million dollar house -- he started out doing EXACTLY what you've done. He parlayed that into 1000's of apartments. It didn't happen over night -- and his apartments are the type I invest in -- LLC's with investors -- his company puts the deals together - and they manage them. Sweet deal. :woot: :cheers:

Yeah, The property has been in the familly for years (25) and I have been paying the property tax on it for 6 years. I just hate seeing it there sitting. Maybe i'll figure what to do with it. My buddy says dirt bike track but my thoughts are the whole place is a dirt bike track.

A very good customer of mine manages the local Public Storage. He says the company does very well. But then again we are in the middle of Silicon Valley. 10x30 goes for $575 a month.

I have been a little reluctant to look at multiplexes even though the ROI is usually much higher than a SFR. Both of my mentors have had bad luck with them and in my area multiplexes are typically in the not so desirable areas. That's not to say that it is not a possibility but it may be down the road once I have a little more time (confidence) under my belt.


The one thing I have been really thinking about lately is starting an LLC for the rental property. Many of the regulars at biggerpockets have recommended starting one for any rental venture. The problem I see is that technically you will need one for each property. What are your thoughts about that?

Property management is another subject I have been thinking about. For the time being I am more than happy to manage the one property by myself. With the future possibility of managing multiple properties in my spare time it may be worth every penny.

You must fully understand the market that you're investing in -- that has to be first and foremost. Sounds to me like you've already got a decent handle on that. If multiplexes are not to your liking - then absolutely stay away from them.


LLC's -- Yes and no. If let's say you already had all the properties -- and you bundled them into one LLC and then sold shares in the LLC to investors (if they were willing to buy them) it COULD work... but multiple properties like that in one LLC would become unwieldily. What if you wanted to just sell one bleeder - or one that had an outsized gain etc. Too many issues there. So YES -- it would be better to have one property within one LLC. The problem with that is that a lot of the profit/cash flow would be burned with accounting and regulations etc so what would be the point.

LLC's are better left for larger investments where you need a larger pool of cash/investors and the cash flow etc can sustain the legal requirements.

All these really are is a way to borrow the downstroke and improvement cash at a % - from "others" - while picking up a management fee and your 51% of the upside without a lot of cash out of your pocket. The investors put up the down etc. BUT ----- management has a lot of up front out of pocket expenses before they ever get to package "the deal". The LLC needs to be set up - prospectus production - accounting - up front earnest money - and blah blah blah. AND more importantly -- you'd better know who your investors are going to be up front. You don't do a deal like this and then go begging for investors! So there is a lot of work etc to get to that point.

I've looked at two deals in the last 3 months -- one in Tucson with $100K per share minimum - and one in the Bakkens with a 1MM minimum that was new construction. Both of these are multi million dollar deals. They both were at 7% return annually -- and of course your share of the upside if any and the tax offset depreciation along the way.

I turned them both down because of the idiots in congress and the POTUS -- since I don't know what the eventual tax changes - if any - are going to be. These kinds of investments are terribly illiquid and as an individual investor - you have ZERO say so. You're just along for the ride.

I thought you were asking about forming an LLC to hold each rental property in for asset protection vs what Greg is talking about.

I would absolutely form separate LLC's (or at least one) to protect your personal residence and assets from any lawsuits or accidents that could result.

All it takes is one big incident to ruin a lot. An LLC is cheap when you look at it that way.

Convertiable Senior Notes..?
 

When a Company issues these what does it mean to the rest of the stock?
Meaning since these are are more secure then comoon shares... would it drive down their price?

Problem... say you have Co. x shares of stock.. Co. X issues new Senior notes... will that drive your share price down?

^^^ This :thumbsup: Asset protection was the primary goal and maybe a little extra anonimity as well.

That depends on what their overall balance sheet looks like -- and the reason for issuance. If they're borrowing money for the WRONG reasons then yes - it would affect the stock negatively.

Notes pay INTEREST and as such need to pay a higher rate than dividends because of the tax treatment (interest is ordinary income - dividends are taxed at the dividend rate).

Sorry -- I thought you were asking about investment LLC's.... you're asking about asset protection.

Be very careful about the intended use of LLC's for asset protection when you are the sole control. They don't work very well for cases like that. Be certain you get a lawyer and tell them what you're trying to do. Listen carefully to his response.

My advice is to simply carry an umbrella policy for liability. They're very inexpensive -- and more importantly - since the carrier doesn't want to pay out - they will defend you as well. Look at your coverage as the more you have the less the carrier will want to be liable for - so they'll defend more vigorously...

If you have a 1MM policy somebody will sue you for 2MM -- the insurance company is only on the hook for a mill... big whoop.... but if you have a 10MM policy - somebody will sue you for 20MM and that puts some deep hooks in the carrier.... and they're going to work hard to not have to pay out and certainly don't want to pay out 5 or 6MM even in a settlement! So they let the dogs out!:cheers:

Pretty good - easy to understand RETIREMENT info here...


http://www.nbcnews.com/business/7-re...nked-1C7480802


I couldn't agree more with TWO statements --- START EARLY -- and BONDS suck for retirement... we live too long and they have no growth to handle inflation. That retirement planning is so yesterday!

Apple Tax
 

This is pretty funny --- not as in a joke --- but it matches what's happened in my household. The entire family is "hooked" on Apples (AAPL) products. The article calls this the "Apple tax".

I don't currently own any of the shares. I can't figure out what's going on with the wild swings this stock has gotten into. We'll see if it levels out or goes UP once the year ends (people locking in the 15% gain tax).

http://www.nbcnews.com/business/appl...sion-1C7535330

The Apple phenom has me baffled to some degree........I see the younger generations taking extreme measures to create their own individuality. Tattoos, piercings, hair styles, attire, etc. Yet they all want to be the same when it comes to their personal electronic device image. :_paranoid

I'm not pro fruit primarily due to heavy proprietary nature of the brand. JMHO that's obviously not hip. :D

Disclaimer: Wife = iPhone. 14 year old son MacBook, iTouch, iPhone. 11 year old daughter iPod, iTouch, iPad, MacBook..........those would cover my front or rear suspension needs nicely for years to come. :rolleyes:

I don't think it's about individuality - I think it's about what "works". Once you go Mac you never go back. :lol:

BTW -- That comes from a guy whom often thanks Bill for his house and a few other niceties!

So you're Bi-Electronical? :willy: :D

I don't know.... I've never looked!:rofl: :faint:

I've never had a problem with PC's. Apple products are nice but, to me, not necessary or worth the money. I'm old school like that though. I have no smart phone and have no intentions of getting one. I read maps instead of paying for GPS devices. I also don't like touch screens compared to buttons. That's ok though, I'll put the money I save having my old cell phone into my savings and stocks. :D

I'm not a techi, but innovation has made Apple stellar the last decade.5. The new products, not so innovative. Great products though. It's hard to say whether it will go up from here, but my monies not going into it.

Mike