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Message
How to get started in rental properties
Posted on 5/9/23 at 11:32 pm
Posted on 5/9/23 at 11:32 pm
Hello all,
I am graduating college soon, and have a job lined up making very decent money. I plan to live at my parents or brothers house for a bit because I will be working 4 weeks on at a time so I can't imagine spending money on housing when I will be gone for half the year.
I have always wanted to own rental properties, but do not know where to start. I have read a lot online but still a little confused.
Would it be smart to live with my parents and pretty much pocket my entire salary and then use that to buy a duplex or something similar in cash after a couple years? Would getting a mortgage be better so that I can write off the interest on taxes? I plan to form an LLC once I do this for the protection. Once I have cash flow, do I just hire myself as an employee of the LLC to receive the money?
I know these may be dumb questions, but I am still a little confused. Thank you for any help
I am graduating college soon, and have a job lined up making very decent money. I plan to live at my parents or brothers house for a bit because I will be working 4 weeks on at a time so I can't imagine spending money on housing when I will be gone for half the year.
I have always wanted to own rental properties, but do not know where to start. I have read a lot online but still a little confused.
Would it be smart to live with my parents and pretty much pocket my entire salary and then use that to buy a duplex or something similar in cash after a couple years? Would getting a mortgage be better so that I can write off the interest on taxes? I plan to form an LLC once I do this for the protection. Once I have cash flow, do I just hire myself as an employee of the LLC to receive the money?
I know these may be dumb questions, but I am still a little confused. Thank you for any help
9
Posted on 5/9/23 at 11:42 pm to bmann
First thing you want to do is figure out a market. There a lot of cities where houses are priced to where you won't be able to get positive cash flow on a rental. I'd go on Zillow and look at whatever city you were thinking of investing in and looking at houses in the area and price range you think you can afford, and get a sense of what those payments are. Then flip over to "for rent" and see what comparable houses rent for. If the estimated rent isn't at least $400 more than the mortgage, you'll likely end up negative over the course of a year.
Start looking up Bigger Pockets forum and podcast. Their shows are all on YouTube and you can glean a ton of info from there.
Most investors will recommend against buying cash. Buying one house for 250k is silly when you can buy five houses for 50k down each they say. While I wouldn't go that extreme early on, you get the idea.
Start looking up Bigger Pockets forum and podcast. Their shows are all on YouTube and you can glean a ton of info from there.
Most investors will recommend against buying cash. Buying one house for 250k is silly when you can buy five houses for 50k down each they say. While I wouldn't go that extreme early on, you get the idea.
This post was edited on 5/9/23 at 11:48 pm
Posted on 5/9/23 at 11:52 pm to Thundercles
Thank you for the response, I have done a lot of research on the market and how to calculate if a rental will be profitable or not.
Can you expand on why buying in cash is not the best option? Is it because spreading the money over multiple properties with a good downpayment and getting a loan for the rest is going to create more cash flow than just buying 1 in cash?
Can you expand on why buying in cash is not the best option? Is it because spreading the money over multiple properties with a good downpayment and getting a loan for the rest is going to create more cash flow than just buying 1 in cash?
Posted on 5/10/23 at 12:37 am to bmann
Once you get going you’ll find your biggest problem is not what type of rental properties to look for but what to do with all the fricking cash!!
Posted on 5/10/23 at 7:47 am to bmann
quote:
Can you expand on why buying in cash is not the best option? Is it because spreading the money over multiple properties with a good downpayment and getting a loan for the rest is going to create more cash flow than just buying 1 in cash?
Yes, this is called leveraging your debt.
Look into the house hack opportunity using a FHA on a mutlifamily property, up to 4 door unit. You can rent out 3 while using your 4th as a primary residence. Extremely easy for the first time buyer to get into the business with minimal down.
My family friend works 28 on and 10 off. He did this and then after 1 year turned his primary unit into an Airbnb and rents it out short term as well when hes offshore. Has turned into a cash cow.
Posted on 5/10/23 at 8:12 am to bmann
Posted on 5/10/23 at 8:40 am to Paul Allen
great frank lopez quote from scarface.
And you'll find out your biggest problem is not bringing in the stuff, but what to do with all the fricking cash!
Posted on 5/10/23 at 8:52 am to Paul Allen
quote:
Once you get going you’ll find your biggest problem is not what type of rental properties to look for but what to do with all the fricking cash!!
While reading this, I thought for sure it was going to say "Once you get going you’ll find your biggest problem is not what type of rental properties to look for but dealing with tenants."
Posted on 5/10/23 at 8:59 am to bmann
quote:
Would it be smart to live with my parents and pretty much pocket my entire salary and then use that to buy a duplex or something similar in cash after a couple years?
Are you accounting for a residence for yourself as well? Or would you still be living with your parents? I was in your situation. Okay money and didn't pay rent for 18 months due to being away for training 80% of the time. I saved enough in that time for a downpayment on my house, engagnement ring, and a small safety net. I would not have had money for a downpayment on a duplex much less paying cash for one.
Also, paying cash really puts all your eggs in one basket in terms of investment. With a decent interest rate and intelligent approach, you can use the mortgage to diversify your investments while limiting risk exposure.
Posted on 5/10/23 at 9:55 am to bmann
quote:
I am graduating college soon, and have a job lined up making very decent money
How much?
quote:
I have always wanted to own rental properties, but do not know where to start. I have read a lot online but still a little confused.
This place will have good info. Bigger pockets I feel like can be overwhelming for a new person but some good nuggets.
quote:
Would it be smart to live with my parents and pretty much pocket my entire salary and then use that to buy a duplex or something similar in cash after a couple years?
Do you want to live with your parents? Do they want you to live with them?
quote:
I plan to live at my parents or brothers house for a bit because I will be working 4 weeks on at a time so I can't imagine spending money on housing when I will be gone for half the year.
The reason I'd start off with a primary is 1. Getting into a place you can do minimums down- 3.5%-5% instead of the 20-25% most do for investments. Not to mention your rate on owner occupied will be far better.
Live it in for 1 year then look into leasing it.
quote:
Would getting a mortgage be better so that I can write off the interest on taxes?
You can deduct the mortgage interest, yes.
quote:
I plan to form an LLC once I do this for the protection. Once I have cash flow, do I just hire myself as an employee of the LLC to receive the money?
I know these may be dumb questions, but I am still a little confused. Thank you for any help
Make sure to do not co mingle any of the $.
1. I'm glad you're looking into this.
2. Don't get overwhelmed with info or everything having to be perfect. This is common with rookie investors- they have paralysis of anaylsis and it stops them from ever taking action.
You need to have a solid base of reserve funds. Things break, you'll want to update.
Are you in a relationship? Marriage on the table?
Posted on 5/10/23 at 10:54 am to Billy Blanks
Start with ONE and go from there.
Also OP, you will be gone half the time. Who will manage the property(s) while away?
Also OP, you will be gone half the time. Who will manage the property(s) while away?
This post was edited on 5/12/23 at 8:16 am
Posted on 5/10/23 at 3:30 pm to Billy Blanks
How much? About 150-170K a year.
Do you want to live with your parents? Do they want you to live with them? They are 100% ok with me living at their house. I'd rather not live there but being able to pocket a lot of my salary right when I start would be very nice as well.
Are you in a relationship? Marriage on the table? Not in the near future.
The more I read it sounds like buying a duplex or fourplex and renting the other sides out would be my best starting point. Especially since I realize that it may not be the best idea to buy these properties in cash.
Posted on 5/10/23 at 3:33 pm to ItzMe1972
Also OP, you will be gone half the time. Who will manage the property(s) while away?
That is an issue that I will have to solve. I assume I will have to hire a property manager. Do you know if it is possible to have a property manager that works with my schedule since it would not be necessary in my 4 weeks off? Or is that a situation where you give them a percentage of the profits and they are always in charge even if I am off?
That is an issue that I will have to solve. I assume I will have to hire a property manager. Do you know if it is possible to have a property manager that works with my schedule since it would not be necessary in my 4 weeks off? Or is that a situation where you give them a percentage of the profits and they are always in charge even if I am off?
Posted on 5/10/23 at 4:40 pm to bmann
quote:
Do you know if it is possible to have a property manager that works with my schedule since it would not be necessary in my 4 weeks off? Or is that a situation where you give them a percentage of the profits and they are always in charge even if I am off?
Any experienced property management group is going to require a standing contract and is likely worth the money for someone with no experience in this. They will handle 95% of the work for you when it comes to running the property, usually in exchange for 10% of the rent and a tenant placing cost.
Even if you were able to be home it's likely worth the money unless you're available to deal with tenant questions all hours of the day and handy / resourceful enough to get things fixed on your own or quickly find the right guy at the right price.
To do that, just google search "property management service in [insert town/city]".
Posted on 5/10/23 at 4:52 pm to Billy Blanks
quote:
2. Don't get overwhelmed with info or everything having to be perfect. This is common with rookie investors- they have paralysis of anaylsis and it stops them from ever taking action.
This is where I live
Posted on 5/11/23 at 10:19 am to bmann
quote:
Once I have cash flow, do I just hire myself as an employee of the LLC to receive the money?
No. Why would you convert rental income to wage income? Both subject to income taxes, but wage income also subject to payroll taxes.
By the time that you save up enough to purchase rental property, you may be ready to move out of parents/brother's or they may be ready for you to move out, so I bet you'll end up buying your own place by then.
Posted on 5/11/23 at 10:22 am to Lazy But Talented
quote:
2. Don't get overwhelmed with info or everything having to be perfect. This is common with rookie investors- they have paralysis of anaylsis and it stops them from ever taking action.
This is where I live
You can engineer or in a similar career where people struggle to see gray area?
Posted on 5/11/23 at 10:34 am to bmann
Not to completely hijack, but how much time in advance do you legally have to give a tenant before increasing rent in Louisiana?
Eta
Tenants can not produce lease agreement and the gentleman i purchased the lemon from does not reply to emails. I’ve searched the paperwork from taking over the property and can’t find a thing
says no heads up required
Eta
Tenants can not produce lease agreement and the gentleman i purchased the lemon from does not reply to emails. I’ve searched the paperwork from taking over the property and can’t find a thing
says no heads up required
This post was edited on 5/11/23 at 10:54 am
Posted on 5/12/23 at 8:06 am to bmann
Condition of property matters a lot. Lost money just trying to maintain rental properties above fully rented cash flow.
Posted on 5/12/23 at 1:42 pm to bmann
You are a good candidate for house hacking. I would look there first. No need to hire yourself. As owner of the LLC you may receive distributions. You will be able to write off the interest as well.
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