- My Forums
- Tiger Rant
- LSU Recruiting
- SEC Rant
- Saints Talk
- Pelicans Talk
- More Sports Board
- Fantasy Sports
- Golf Board
- Soccer Board
- O-T Lounge
- Tech Board
- Home/Garden Board
- Outdoor Board
- Health/Fitness Board
- Movie/TV Board
- Book Board
- Music Board
- Political Talk
- Money Talk
- Fark Board
- Gaming Board
- Travel Board
- Food/Drink Board
- Ticket Exchange
- TD Help Board
Customize My Forums- View All Forums
- Show Left Links
- Topic Sort Options
- Trending Topics
- Recent Topics
- Active Topics
Started By
Message
re: UPDATED: Landlords, what ROI do you expect from your properties? 401k withdrawal question
Posted on 8/3/20 at 6:29 am to Jp1LSU
Posted on 8/3/20 at 6:29 am to Jp1LSU
I try to reinvest in newer properties every year to lower my tax hit and to continue expanding. Been working so far and all houses stay occupied. Still in the early stages but I enjoy the business. Some people don’t have time to deal with it but I haven’t needed a property manager yet. I will look into it eventually when it becomes too time consuming from my actual job.
1
Posted on 8/3/20 at 7:32 am to GAFF
Real Estate has risks, like the stock market, but you can make a lot of money with very little of your own if the pieces fall into place. I bought a couple of Dollar General buildings about 8 years ago for about $700,000 each. At the time, you could find them with a pretty good cap rate if they were nearing a lease renewal. I ended up getting mine around a 9% cap and with the lease renewals, the rent typically goes up by 10% every 5 years. Mine now are about a 11% cap after the lease renewals.
So keeping the numbers simple, for 20% down ($140,000 down - $560,000 note) I financed the balance on a 20 year amortization. Dollar General pays the taxes and insurance and the rent is about $6250 a month on a note that is about $3800 a month. Maintenance is minimal on a metal building, so I make about $2300 a month after the note and minor maintenance costs are paid on a building that someone else is paying the note on.
The down sides? The huge risk is if Dollar General doesn’t renew the lease. If that happens you can be stuck with a $700,000 metal building. You have to do your research on the specific property and try to determine the store income. Too little sales at a store is definitely bad, too large of an income might mean they want to build a larger store down the street and not renew your lease. There is also the risk of having a large expense item such as replacing a HVAC unit or having to resurface a parking lot. I’ve been pretty fortunate.
I’m surprised more people don’t invest in some real estate.
So keeping the numbers simple, for 20% down ($140,000 down - $560,000 note) I financed the balance on a 20 year amortization. Dollar General pays the taxes and insurance and the rent is about $6250 a month on a note that is about $3800 a month. Maintenance is minimal on a metal building, so I make about $2300 a month after the note and minor maintenance costs are paid on a building that someone else is paying the note on.
The down sides? The huge risk is if Dollar General doesn’t renew the lease. If that happens you can be stuck with a $700,000 metal building. You have to do your research on the specific property and try to determine the store income. Too little sales at a store is definitely bad, too large of an income might mean they want to build a larger store down the street and not renew your lease. There is also the risk of having a large expense item such as replacing a HVAC unit or having to resurface a parking lot. I’ve been pretty fortunate.
I’m surprised more people don’t invest in some real estate.
Posted on 8/3/20 at 8:37 am to MrJimBeam
my properties yearly net return is about 18-25% (after all expenses except income tax)
Posted on 8/3/20 at 8:56 am to GAFF
Realistic: 7.5% Net
Posted on 8/3/20 at 8:56 am to audioaxes1
quote:
my properties yearly net return is about 18-25% (after all expenses except income tax)
I'm calling BS if for any reason because you have a 7% margin of error which is huge. If true good for you, but that's not realistic long term especially for newbies to expect. Also if true, you are likely very leveraged with loans. While fine, in OP's scenario I'm fairly certain if you buy a property with a retirement account it has to be a cash buy and therefore no leverage and a drastically reduced ROI.
OP, most people shoot for somewhere about 12% ROI on residential rentals. It should be somewhat greater than 7-9% because you can likely get that in equities and bonds and this is more work and risk. I mean you can get 50% or higher ROI if you buy a property low, rent it out, and then sell it high very easily. I've done that, but to say its normal wouldn't be fair.
Posted on 8/3/20 at 9:06 am to baldona
quote:He likely has multiple properties. Some probably bring in 18, some 25.
I'm calling BS if for any reason because you have a 7% margin of error which is huge
Posted on 8/3/20 at 9:22 am to jimbeam
quote:
He likely has multiple properties. Some probably bring in 18, some 25.
That’s what I thought. That is believable for really low cost residential real estate. Not my thing, but low income houses and trailers have a high return. I wouldn’t want to be a slum lord.
Posted on 8/3/20 at 9:43 am to baldona
quote:
I'm fairly certain if you buy a property with a retirement account it has to be a cash buy
Posted on 8/3/20 at 9:45 am to Ramblin Wreck
quote:
I bought a couple of Dollar General
Thanks for the example! Sounds like a good deal.
OP many people use the brrr method and make over 100% roi.
Posted on 8/3/20 at 10:06 am to Rust Cohle
To the poster who mentioned the Dollar Generals, that would be amazing. I’m afraid my balls aren’t that big. I could never have peace of mind if I knew that I might be on the hook for that large a note. I’m looking mainly at sfh and multi-family but your example is great.
I’ve read a lot about the brrr method. They’re hard to come by and I’ve found that many of the people who used that method and now have many holdings started in the 07-09 period. Still a great method tho.
I’ve read a lot about the brrr method. They’re hard to come by and I’ve found that many of the people who used that method and now have many holdings started in the 07-09 period. Still a great method tho.
Posted on 8/3/20 at 10:24 am to GAFF
(no message)
This post was edited on 8/5/20 at 10:18 am
Posted on 8/3/20 at 10:47 am to GAFF
quote:
I’ve read a lot about the brrr method. They’re hard to come by and I’ve found that many of the people who used that method and now have many holdings started in the 07-09 period. Still a great method tho.
They still exist. I just bought my first a month ago for 48,000 in south Louisiana. I’m doing majority of the work myself except for the roof, and it’s gonna take around 15k worth of work to get it where I want it. Gonna rent between 1000/1100. ROI 29%. This number will change once I cash out refi. But, it will still be positive cash flow.
Free RE calculator
I bought this property off the mls. They exist you just gotta find the right one with enough wiggle room in price. This one they started off asking 75000.
I’ve acquired an obsession with RE. I’m only a month into my first property, but the numbers don’t lie. If I can replicate this over and over, I’ll be very wealthy.
Posted on 8/3/20 at 2:14 pm to jimbeam
exactly, multiple properties, bought all cash when values were lower. I will say it does not include capex as I have so far avoided any major expenditures
Posted on 8/3/20 at 2:31 pm to audioaxes1
I’d maybe factor in x% or $ per month to account for that
Page 2 of 2
Popular
Back to top
Follow TigerDroppings for LSU Football News