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re: How to get into rental property?
Posted on 3/20/23 at 10:03 am to TigerMan327
Posted on 3/20/23 at 10:03 am to TigerMan327
Do you have any books or podcasts you can suggest to learn more about all different aspects of owning Real Estate?
1
Posted on 3/20/23 at 1:15 pm to Silverback911
2% is a hard find. mine are between 1.4 and 1.9% which is mixed SFH and MFH.
1% is ok.
many places now are at just .7% and .8% terrible RTV.
make 1% the minimum. learn how to run numbers for COC and PCF.
you can get good cash flow from a higher priced property but it does not mean the COC is good based on all that money down.
buy right or do not buy at all. we have discussed it ad infinitum here before.
LINK
1% is ok.
many places now are at just .7% and .8% terrible RTV.
make 1% the minimum. learn how to run numbers for COC and PCF.
you can get good cash flow from a higher priced property but it does not mean the COC is good based on all that money down.
buy right or do not buy at all. we have discussed it ad infinitum here before.
LINK
This post was edited on 3/20/23 at 1:23 pm
Posted on 3/20/23 at 1:22 pm to TigerMan327
you buy rentals for CASH FLOW. if you want instant capital then get into flipping. never count on appreciation with rentals. never buy for that.
as the old saying goes from many great RE minds
" it's the cash flow stupid"
as the old saying goes from many great RE minds
" it's the cash flow stupid"
Posted on 3/20/23 at 1:26 pm to TigerMan327
quote:
I like the idea of buying in better landlord friendly states and having PMs do everything.
yup. invest nationwide. do not stay pigeon holed in areas where rentals are not profitable, non landlord friendly state etc. use checklist in my link above.
Posted on 3/20/23 at 3:00 pm to Fat Bastard
How do you find your deals out of state? Are you researching yourself then sending remote inspectors to check it out or using turnkey style companies?
Posted on 3/20/23 at 3:46 pm to Silverback911
Are there different types of loans people take advantage of for rental properties?
Posted on 3/20/23 at 4:06 pm to Lazy But Talented
quote:
Are there different types of loans people take advantage of for rental properties?
Most would get a commercial RE investment loan. Lots of the regional banks are full to the brim with low rate loans from when money was cheap and have quit offering RE investment loans all together though.
Posted on 3/20/23 at 5:39 pm to TigerMan327
TigerMan, can you recommend a good property manager? I'm paying 10% plus being killed with maintenance fees.
Posted on 3/20/23 at 5:45 pm to JoieDeVivre
I can help with 1-4 family investment loans, small multi family or commercial deals. Most of what I broker is stated income with no tax returns needed. Credit score based, appraisal, application and lease (or underwritten on market lease). Typically 80% on purchases, 75% on refi’s if the cash flow is there. Rates are a tad higher because of little to no underwriting but it’s a much easier process.
Lnobles@redstickag.com
Have done business with several folks on here.
Lnobles@redstickag.com
Have done business with several folks on here.
Posted on 3/20/23 at 5:56 pm to I Love Bama
quote:
I would not recommend using 1% for a newbie.
What would you reccomend for a newbie.
Real Estate is something I've thought about. But I see a lot of clients who have to buy absolute crapholes to even have a chance of being cash flow positive, which bring with it craphole renters, who destroy properties and you end up pushing any cash flow back into the property between renters.
So if you and FB are saying "cash flow" then is it an issue of, you have to have a critical mass of properties to make the cash flow work out?
It seems like a lot of work. to rent out a crappy house to a crappy tenent for $100 a month in cash flow. Now it was 20 houses a month and $2,000 a month I can start to see how it works... but you got to build up to 20 houses.
Posted on 3/20/23 at 7:34 pm to LSUFanHouston
Donyoyr due diligence on your tenants. These guys posting are way smarter than I am but I can give you that much. Once upon a time in Shreveport I used the air force base for tenants. One moved out, another was moved in, and the government fixed anything and went after the former tenants. Not sure if that is still there or not.
Posted on 3/20/23 at 7:38 pm to I Love Bama
quote:
For example, take your ALL in cost (every dollar you spend to purchase and get the house ready to rent) and multiple that by 2%. That is the price you have to rent it for.
So
is this an accurate example?
Property sale price : 200,000
My “spend” -
Down pay : 50,000
Annual “spend”
Insurance: 3,000
Tax : 1,500
Annual mortgage: 12,000
Maintenance 3,000
Advertising 500
Total annual spend 70,000. X 2% 1,400/month or 16,800/year.
That is a return of 33.6% on the down payment and 84% on the annual “spends”
Posted on 3/20/23 at 7:57 pm to JoieDeVivre
I only have experience with one at the moment and they aren’t located in Louisiana 
Posted on 3/20/23 at 8:39 pm to SlidellCajun
Pretty sure it's the 2% of mortgage amount, not just down payment. 16,800 Rent vs 20K annual spend is a negative return
This post was edited on 3/20/23 at 8:41 pm
Posted on 3/20/23 at 9:01 pm to bostitch
This is a very broad and general statement from a 25 year lender:
I would say step one is calculate how much you can borrow before your return as the return is really predicated on how much you can leverage. More leverage equals more return. Property Cash flow is going to drive that leverage number as you can’t just go with a blanket 80% LTV on everything today. I would say 9 times out of 10 anything over 80% leverage isn’t going to cash flow these days. You also can’t charge more than market rents as any lender is going to underwrite to market rents vs actual rents 9 times out of 10. I think residential mortgage guys even count only 75% of annual rents for the income but I don’t work very much on the residential mortgage side (ie the guys you use for your personal residence loans), just the commercial side.
This is how soft money lenders will look at it. Banks are usually going to count ever single expense that’s out there including a maintenance expense and toss in a vacancy allowance.
So…..
Rental income
Less taxes, insurance, and Hoa
Equals net operating income.
Net operating income divided by annual debt service (principal and interest payments only) has to be a minimum of 1.05x. (1.20x if you’re going bank financing).
Once you determine how much leverage a property can handle then you can run your returns.
To answer your question, it’s hard to quickly eyeball a property these days in terms of % of the purchase price is needed for rent. What I would do is build a spreadsheet and input that for above to calculate how much you can borrow given those parameters.
I would say step one is calculate how much you can borrow before your return as the return is really predicated on how much you can leverage. More leverage equals more return. Property Cash flow is going to drive that leverage number as you can’t just go with a blanket 80% LTV on everything today. I would say 9 times out of 10 anything over 80% leverage isn’t going to cash flow these days. You also can’t charge more than market rents as any lender is going to underwrite to market rents vs actual rents 9 times out of 10. I think residential mortgage guys even count only 75% of annual rents for the income but I don’t work very much on the residential mortgage side (ie the guys you use for your personal residence loans), just the commercial side.
This is how soft money lenders will look at it. Banks are usually going to count ever single expense that’s out there including a maintenance expense and toss in a vacancy allowance.
So…..
Rental income
Less taxes, insurance, and Hoa
Equals net operating income.
Net operating income divided by annual debt service (principal and interest payments only) has to be a minimum of 1.05x. (1.20x if you’re going bank financing).
Once you determine how much leverage a property can handle then you can run your returns.
To answer your question, it’s hard to quickly eyeball a property these days in terms of % of the purchase price is needed for rent. What I would do is build a spreadsheet and input that for above to calculate how much you can borrow given those parameters.
This post was edited on 3/20/23 at 9:06 pm
Posted on 3/20/23 at 10:50 pm to LSUFanHouston
quote:
So if you and FB are saying "cash flow" then is it an issue of, you have to have a critical mass of properties to make the cash flow work out?
no, you can have a great cash flowing property owning just 1, for awile until something major hits. but it is best IF you do add to your positions over the course of time. for example: with SFH, there is an old saying. " you either have 10 of them or you have none"
that is because AT times, you can have maintenance that can eat away your positive cash flow on a single property. You need that buffer of a bigger portfolio over time to take those hits of a new roof and HVAC. it is why i suggest getting MFH as well and not just SFH. I have never really had any vacancy issues but we all have maintenance issues. small and large. it comes with the territory. but you know how it works on taxes and helps. i have had some evictions also my PM and attorneys handle. does not cost much and i have won all my judgements in court. it is not bad with the right team setup.
quote:
It seems like a lot of work. to rent out a crappy house to a crappy tenent for $100 a month in cash flow. Now it was 20 houses a month and $2,000 a month I can start to see how it works... but you got to build up to 20 houses.
it is why you need set points for price you are willing to pay and the expected positive cash flow. all my cash flows are roughly around 500 per door a month with mortgages on them. when i started it was 350 a month PCF minimum for properties in a certain range. as my rents have been raised the last 10 years it is pretty good now. I would not take less than 200 a door and that is with a cheap entry point for something,
Posted on 3/20/23 at 10:54 pm to bostitch
quote:
Pretty sure it's the 2% of mortgage amount, not just down payment.
no. the percentage we are discussing is called a RTV aka RENT TO VALUE. IOW. rent percentage of the total purchase price.
This post was edited on 3/20/23 at 10:57 pm
Posted on 3/21/23 at 11:12 am to Fat Bastard
And in the OPs example he used down-payment instead of the purchase price of the home. I used the wrong word, mortgage vs purchase price. Don't be a count
Posted on 3/21/23 at 12:18 pm to bostitch
quote:
And in the OPs example he used down-paymen
u can use that to calculate your COC return after you figure out your PCF for the year. you can even include closing costs if you want with the DP to get a COC.
quote:
I used the wrong word, mortgage vs purchase price.
ok, so you messed up. i answered based on what you provided.
quote:
Don't be a count
not at all. see above. only trying to help your arse.
Posted on 3/21/23 at 5:04 pm to Fat Bastard
Anyone on here ever build a duplex or quadplex?
Not counting lot, I wonder what a duplex or quad would cost to build these days.
Not counting lot, I wonder what a duplex or quad would cost to build these days.
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