| $ on the way and looking at real estate |
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nogreed
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| $ on the way and looking at real estate |
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In the next year, maybe two, I will be coming into roughly 500 – 700k dollars. It is currently in the form of rental properties which will be put on the market very soon. The value has been estimated, and based on that the total will be split between remaining family members, so my numbers are not real accurate… could be more could be less. Regardless, it probably won’t be much less and I have decided solely based on my big lack of knowledge regarding stocks, bonds and money markets to invest in rental properties. My thought is to buy outright (assuming its over 500k) 5 condos or townhouses at the 100k price range, hire a property management company to handle all the background checks, collecting of rent, and all the other good stuff. The area I’m looking to buy in is highly populated so there shouldn’t be any problem with vacancies and should rent for around the 1,000 an month range, probably a bit more.
Does anyone have any thoughts or ideas that might assist me? Please give my your honest opinions, I have read a lot on how coming into money like this can adversely affect relationships with family and friends so I don’t want to turn to any of them for advice or tell them for that matter so this forum is my go to place now to help me stay smart with investing and keeping my current relationships in good standing. Thanks
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Thu Sep 22, 2011 3:00 pm |
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nogreed
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I should also mention, eventually I would like to flip a house at a time while also collecting cash from renting the others. This would not be until I began (hopefully) to generate good "quit my full time job" cash flow so I could do the renovation work myself as kind of a keep me working but for myself and to make myself money.
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Thu Sep 22, 2011 3:21 pm |
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coaster
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| mod's note |
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This could probably have been combined into one topic. Nevertheless, here is the other half:
http://www.money-talk.org/msg84628.html#84628
~Tim~
Eye Candy : Why Whimsy
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Thu Sep 22, 2011 3:52 pm |
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nogreed
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Your right, I have been in other forums that are very anal about keeping posts where they belong. Sorry
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Thu Sep 22, 2011 4:33 pm |
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oldguy
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quote:
and I have decided solely based on my big lack of knowledge regarding stocks, bonds and money markets to invest in rental properties. My thought is to buy outright (assuming its over 500k) 5 condos or townhouses at the 100k price range,
It might be best to first fix the 'lack of knowledge' issue with securities - they are closely related to real estate.
In othr words, investing capital into a market (any market) requires the same financial skills. An important part of investing is risk. The Rule is - 'risk and return are directly proportional". Another rule - 'diversify' - that is the way to control and manage risk. First you must decide how much risk you want - ie, do you want low risk and a 5%/yr return? Or do you want higher risk and an 11% return?
Don't buy outright - learn to leverage your investing, especially in today's market - you can borrow capital at <5% fixed rate for 30 years. So don't tie up your own capital.
'Flipping' and doing the reno yourself is a separate occupation. The labor has a value of roughly $12/hr. So if you are skilled at construction and need/want a $12/hr job that works. Or, if you already have a job, say for $20/hr, it is better to keep making $20/hr and hire someone to do your $12/hr work.
I've found that it works to use multiple crews so that the work is done timely. You can have the cleaners, the inside painters, the outside painters, floor crew, carpet crew, the kitch appliance/granite crews all there at once, and get the unit ready to go in about 5 days. And then put it on the market at a price so that it will sell in 3 weeks. That way your money, from close to close, is tied up for only one month - that allows you to 'turn' that money 8, 10, or 12 tiimes a year. Also true if you are going to rent it - it is expensive to reno it yourself on weekends, it might take 2, 3, 4 months - and at $1000/m in lost rent, that adds up.
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Thu Sep 22, 2011 4:42 pm |
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littleroc02us
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This is an area I'm very interested in. I have some experience in lanlording my sister's rental due to her location and knowledge. I also have extensive experience and knowledge in home repair. If this is the area you would like to spend your money in I would seriously gain some knowledge and educate yourself in the local statutes and take some classes in management and lanlording. I wouldn't just jump into this as a career unless you feel your ready for the book keeping, management and fixit knowlegde required. As for how to buy these properties I would pay cash for each of them that way all you pay is taxes and insurance. You will want to form an LLC so that you are covered if you were to be sued. The biggest issue I know of is in your state you will want to learn what happens if someone does sue you for breaking their leg due to a deck that isn't up to code breaks while their standing on it. The cash flow you do end up earning is money in the pocket and personally I would rather not leverage as suggested by others due to the fact you don't need to. What's the difference, you can simply lower your risk by having paid for properties and when you recieve your rent checks by the dozen you can simply invest them and make millions by retirement. Personally I'm not one that compares rate of return as much as lowering the risk and still retiring a multi millionaire. so what if you lose a couple hundred thousand because you didn't take the risk. Your never gaurenteed anything even if you do take the higher risk/reward option. That game isn't for me, that's why I don't suggest it. So pay for them in cash, get educated and become a millionaire many times over.
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
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Thu Sep 22, 2011 7:31 pm |
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globaldoc2001
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I think an investment made on the real estate is the wisest choice you can make. In the long term, it will definitely grow. I always say, that the population rises, but the lot area of the country does not. This means that the demand for lots will be higher, so prices gain through time.
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Fri Sep 23, 2011 5:25 am |
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nogreed
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Thnaks for all your replies. I dont think I was entitrely clear, yes I want to buy outright, but one at a time to get the feel for things. I will be buying a house with some of the money to live in which will be the only one I want to pay on. As for rentals I feel if I paid outright its not money missing cause I never really had, better than sitting on it in my opinion. Plus when rent checks roll in they are straight to my bank account and not going back into the mortgages. I don’t doubt leveraging may be more profitable and deff. something I will need to look more into. Also, I would use a property management co, which I would think would handle most issues of being sued among other problems one could encounter, but maybe not so its something I will consider and research further. And as for the renovation work done myself, that is an idea for way down the road when I have a number of rental properties and am without a doubt financially secure and could quit my current job. I am knowledgeable in most aspects of construction and would be more of a project to keep me busy and also generate some return, but again way down the road and not in my sights just yet. In case you couldnt tell, I want to take the slow and steady road so I dont get in over my head and can learn as much as possible along the way.
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Fri Sep 23, 2011 11:15 am |
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oldguy
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quote:
As for rentals I feel if I paid outright its not money missing cause I never really had, better than sitting on it in my opinion.
It might be better to take a Finance or a Business night class at your local community college before you commit. It sounds like you are trying to get the money 'placed' quickly , maybe you fear that you will lose it - or that you will spend it if it is sitting in a savings account.
And it is good that you are having these concerns. The average wage earner that wins the lottery, gets a settlement, an inheritence, etc, loses it in about 7 yrs. They break the lump sum into pieces and place it in what they perceive to be 'good' places. Eg, win a million net - $50k to payoff credit cards, $100k to payoff house, $20k to payoff car, $100k to payoff mom's house, $100k for a motorhome to treat yourself, and so on. And lastly, keep $50,000 to "invest for the future". Ironically, if the million had been kept intact (instead of dissipated), invested at 11%/yr, it would be $2 Million in about 6 yrs, $4M in about 12 yrs.
Again - take the time to learn about Finance before you go out and pay cash for some rental houses.
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Fri Sep 23, 2011 3:28 pm |
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nogreed
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quote:
Originally posted by oldguy
quote:
As for rentals I feel if I paid outright its not money missing cause I never really had, better than sitting on it in my opinion.
It might be better to take a Finance or a Business night class at your local community college before you commit. It sounds like you are trying to get the money 'placed' quickly , maybe you fear that you will lose it - or that you will spend it if it is sitting in a savings account.
And it is good that you are having these concerns. The average wage earner that wins the lottery, gets a settlement, an inheritence, etc, loses it in about 7 yrs. They break the lump sum into pieces and place it in what they perceive to be 'good' places. Eg, win a million net - $50k to payoff credit cards, $100k to payoff house, $20k to payoff car, $100k to payoff mom's house, $100k for a motorhome to treat yourself, and so on. And lastly, keep $50,000 to "invest for the future". Ironically, if the million had been kept intact (instead of dissipated), invested at 11%/yr, it would be $2 Million in about 6 yrs, $4M in about 12 yrs.
Again - take the time to learn about Finance before you go out and pay cash for some rental houses.
You say invested at 11%/yr... invested in what though?
Yes, I might have 500k. Buying up 5 rentals and majority of the money is gone, however at a little over a grand/month per house thats 5k a monnth. So in 10 years ill not only have my 500k back but also sitting on 500k (at least) worth of houses I could always sell.
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Tue Sep 27, 2011 3:10 pm |
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Offshore-Wealth.com
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| REAL ESTATE Is HIGHLY RISKY INVESTMENT In THIS ECONOMY |
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Interesting,
No matter how wealthy you are, you can lose it all in a heartbeat in real estate market, just ask Donald Trump. Sure, long term you are safe, but that depends on what one conciders long term, 10 years, 20, 30 or more?
At this point in time I wouldn't touch any real estate for many economists are indicating we could easily see another 25% drop in real estate prices. We also have not seen the full brunt of pending commercial collapse, so with unemployment rates on rise, foreclosures going through the roof, I would wait another year before jumping into the real estate game as a newbie.
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Last edited by Offshore-Wealth.com on Tue Oct 04, 2011 6:07 pm; edited 1 time in total |
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Sat Oct 01, 2011 10:23 pm |
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samurai
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| Re: REAL ESTATE Is HIGHLY RISKY INVESTMENT In THIS ECONOMY |
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quote:
Originally posted by Offshore-Wealth.com
Interesting,
No matter how wealthy you are, you can lose it all in a hearbeat in real estate market, just ask Donald Trump. Sure, long term you are safe, but that depends on what one conciders long term, 10 years, 20, 30 or more?
At this point in time I wouldn't touch any real estate for many economists are indicating we could easily see another 25% drop in real estate prices. We also have not seen the full brunt of pending commercial collapse, so with unemployment rates on rise, foreclosures going through the roof, I would wait another year before jumping into the real estate game as a newbie.
Success to all,
I've heard the same. About 4 months ago, I've been trying to learn as much as I can about our real estate market. I've taken a few seminars too about landlording, flipping and purchasing properties. I've started to liquidate some of my holdings to buy a few commercial properties.
But the market may take a bigger plunge soon...and so I will bide my time.
The best way to predict the future is to create it.
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Sun Oct 02, 2011 2:24 am |
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coaster
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| Re: REAL ESTATE Is HIGHLY RISKY INVESTMENT In THIS ECONOMY |
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quote:
Originally posted by samurai
But the market may take a bigger plunge soon...and so I will bide my time.
Investing on "buts" or on "mays" ... i.e. waiting for the perfect opportunity, as one sees it in one's own mind ... it will never come. The time to invest is:
1) is there an opportunity now?
2) is the opportunity a good value?
3) can you afford to invest in it now not using money you can't afford to lose?
4) are you willing to wait for the market to recognize you were right about the opportunity?
5) are you willing to get out and take a loss if you discover you were wrong about the opportunity?
That's how you know when the time is right. It will never be perfect; it will never be without unknowns; it will never be about risk; you will not know until after the fact. But if you wait until you know, then it's too late, and the opportunity is gone.
I doubt it's much different for real estate than it is for stocks. Recognizing the right answers to #1 to #5 is different and takes some experience and a different knowledge set. But I'm pretty sure the basics are the same, whether you're buying land, a building, a stock, or a cow. 
~Tim~
Eye Candy : Why Whimsy
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Sun Oct 02, 2011 4:35 am |
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globaldoc2001
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I think the real estate is the wisest choice you can really make. As I get to see the situation, I think the only steady investment you can have is the real estate. It is actually the land itself, and not the structure. As you know, the structures have life expectancy in them. It is really more of the lot.
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Sun Oct 02, 2011 2:36 pm |
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jfurnish
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[quote="nogreed"] quote:
Originally posted by oldguy
quote:
As for rentals I feel if I paid outright its not money missing cause I never really had, better than sitting on it in my opinion.
You say invested at 11%/yr... invested in what though?
Yes, I might have 500k. Buying up 5 rentals and majority of the money is gone, however at a little over a grand/month per house thats 5k a monnth. So in 10 years ill not only have my 500k back but also sitting on 500k (at least) worth of houses I could always sell.
Stick with your original plan. You will learn quick enough and it is a solid plan. Start slow buy only one or two a year.
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Mon Oct 03, 2011 2:51 am |
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