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AgsMyDude
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3:03p, 2/22/13
AG
quote:
On the question about starting in rental property: One way is to buy your first house with an eye on that being your first rental property. A few of the advantages doing this:

You'll have a lower mortgage rate since it's your primary residence. You can fix it up while you live there.

When I first moved to California (in the '80's), a guy told me that he still owns every house he ever bought, starting with this strategy. He would buy a better house each time, live in it for a few years, rent it out and buy another better house. His goal was to eventually have a house with an ocean view. (He had several back then).


I am considering doing this exact same thing. Buy a house, live it in for ~3/4 years, try to get a solid way through the mortgage. Move out, rent it out, let the renters pay the mortgage for me on that property basically while living in/owning my primary residence.

Has anybody on here done this? I was wondering how much cut you would have to give for a realtor, or do you write up leases/manage it yourself?
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JDCAG (NOT Colin)
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4:26p, 2/22/13
AG
Just make sure to really throw down a lot of extra principle each month. Otherwise you will own hardly any of it after 3-4 years (anymore than your initial down, that is)
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Zona81
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10:53a, 2/23/13
AG
On my first rental property, I tried to lease it and manage it myself. Did that for a few years and then hired a property management company. To me, it's worth it-- especially if you have more than one unit.

They screen the tenant, work up the lease, take care of the nuisance calls on the little stuff, play hardball when the rent is late. And play real hardball when a major rent problem (like eviction) is necessary.

If you get a good one, they should have a good roster of electricians, HVAC contractors and plumbers that do a decent job at reasonable rates.

Most of all, it's a peace of mind thing. After a while, I didn't even want to know my tenant. Once you know them, it's too easy for them to take advantage of a late payment; it's too easy for you to waive a reasonable rent increase because you have a relationship with the tenant. At least it was for me.
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techno-ag
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2:01p, 2/23/13
AG
Blue star Zona. If you don't want to be a landlord full time, a property management company is the way to go.
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JDCAG (NOT Colin)
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2:29p, 2/23/13
AG
How do they take their cut? Percentage or a flat fee? We can't do this now but would like to in the future and don't want to deal with the day to day stuff when and if we get there.
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Dan Scott
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2:36p, 2/23/13
AG
If you manage a lot of property I think that'd be smart but not one. I've only been a landlord a couple weeks now renting out old my old place but I don't see 1 property being too hard to manage. Maybe a bit naive there but as your portfolio grow then itd be nice to sit back collecting the money while somebody else does the dirty work
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TXAGFAN
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5:55p, 2/23/13
AG
Dan everything is great until you're taking off out of town and they have an issue.
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GarlandAg2012
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9:48p, 2/23/13
AG
I will likely be forming an LP with a friend from school and starting the real estate game in College Station. We contacted all the area property managers and for residential RE the standard in CS is a percentage of the monthly rent for management fees.
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GarlandAg2012
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9:49p, 2/23/13
AG
quote:
If you manage a lot of property I think that'd be smart but not one. I've only been a landlord a couple weeks now renting out old my old place but I don't see 1 property being too hard to manage. Maybe a bit naive there but as your portfolio grow then itd be nice to sit back collecting the money while somebody else does the dirty work


My dad managed his own rent house for a while...it's great when you have good renters. Once you get one bad set though, it makes you wish you had a management company. At least in his experience.
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JDCAG (NOT Colin)
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12:41a, 2/24/13
AG
quote:
My dad managed his own rent house for a while...it's great when you have good renters. Once you get one bad set though, it makes you wish you had a management company. At least in his experience.


That's what I would be afraid of.

I doubt it's a problem to pick up a check (or have one dropped off) - my concern would be when they trash the place and refuse to pay, don't answer the door when their rent is late or get aggressive at that point. People are loose canons more and more often and I think I'd be willing to take a percentage of the profit for peace of mind.

Of course, I imagine that it is pretty easy to put yourself in a situation where your cut after the management fees are small (or non-existent) if you had a sizable mortgage payment on the place.
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Diet Cokehead
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1:52a, 2/24/13
AG
Company match of 6% of my salary plus real estate. That from 21 years old to 33 years old.
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YouBet
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9:29a, 2/24/13
AG
As someone who grew up with rental property (parents own 3 duplex units), I would highly encourage a mgmt company to reduce your hassle factor and personal stress.

They are a great source of income now for my parents in retirement because they are paid off but the entirety of my childhood through my college years resulted in hundreds of man hours for me personally repainting and cleaning up after the latest tenant moved out in the middle of the night owing 1-2 months rent.

Many move outs consisted of roach bombing the entire unit before you could even attempt to clean up. We personally dealt with everything from tenant firing his 357 through the kitchen sink, to domestic abuse situations, to tenants writing profanity across all of the walls using mustard, tenants trying to steal drapes as they moved out leading to almost physical confrontations...

I personally mowed the lawns of all units almost every wkd for about 6 years.

Bottom line: its an ass load of work and hassle if you don't have the right tenants and/or decide to manage it yourself. Upon inheritance, my brother and I have already made the pact that we are either selling them or completely offloading mgmt to someone else even if it drastically reduces the income stream just so we don't have to deal with it.
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Mateo84
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10:25a, 2/24/13
AG
Just as an aside for all the Mint lovers out there ... I use Personal Capital and love it.

Very similar overall from what I hear (never used Mint). It does a good job of keeping up with investment accounts, and has cool features like analyzing your 401k fees, etc. Also has personal financial advisor features if you net investment assets are more than 100k
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hopeandrealchange
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7:43p, 2/24/13
#1 is to find a good girl and STAY MARRIED.
#2 Head down and elbows up. (work and commute both ways in the dark.)
#3 read the Richest man in Babylon.
#4 1 million is not that much in today's economy. set your sights higher.
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Guitarsoup
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7:47p, 2/24/13
AG
#5 Be a DINK
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Ray Guy
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7:59p, 2/24/13
AG
Lovin the DINK life
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OilAg01
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8:14p, 2/24/13
AG
Couple of comments on rental property.

1. 7% of gross income is about standard in CS. Plus 1/2 months rent for placing a tenant.

2. Rental property management isn't terrible but there is a little work in it. Get a good list of AC guys, plumbers, handy men, electricians, appliance guys etc. and call them when you have to. I've gotten the call on vacation for my Houston properties...no big deal. It's really about minimizing your responsibilities, screening your tenants and evicting terrible tenants. For example, don't put Fridges, washers, dryers, etc. in rent home. Have the tenant be responsible for the lawn. Don't put up with late rent.

Yes, it's work...but it's a nice little pay check everything month.

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strbrst777
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12:15p, 2/25/13
It's not complicated. As a poster said, max the 401k or equivalent (do not leave a company match on the table), go Roth, and invest systematically and wisely along the way. It may and probably will take a long, long time. I know a guy who invested $30/month (99 cents a day) in company stock for 25 years. Dividends were reinvested. The result is a asset of $250,000. And, BTW, that company was not and is not a high flier as was Berkshire Hathaway, Micrsoft or Wal-Mart. If you have a good job, it's simple and just a matter of time. Just do it!
And, oh, by the way, think before spending
$3.50 on a cup of coffee. That could turn out to be a $25 or $50 cup of coffee.
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Mateo84
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9:14p, 3/14/13
AG
Thought I would bump the thread with this:

http://finance.yahoo.com/news/booming-market-adds-300-000-150608288.html;_ylt=AsekMGNV1EprBiH990CXmaKiuYdG;_ylu=X3oDMTQ4MnN0MW9wBG1pdANDTkJDIFRvcCBTdG9yaWVzBHBrZwM1ZTA5NDVkYS0wMjlhLTM4NDctYTg5Yy1iM2RlYzIzNDU2Y2MEcG9zAzMEc2VjA01lZGlhQkxpc3RNaXhlZExQQ0FUZW1wBHZlcgM4M2RiNmU4MC04Y2M4LTExZTItYjVkZi1iMzI2OGVhZDExNmM-;_ylg=X3oDMTFpNzk0NjhtBGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDBHBzdGNhdANob21lBHB0A3NlY3Rpb25z;_ylv=3



[This message has been edited by Mateo84 (edited 3/14/2013 8:15p).]
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treetop flyer
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10:25p, 3/14/13
you can't take any of it with you. I measure success in being comfortable with considerable backstop and contingencies, doing what I want to do everyday, and giving my kids and grandkids a head start. That said, I'm trying to buy 1 or 2 rentals a year. so far so good, but it's a full part time job.
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SWCBonfire
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8:22a, 3/15/13
AG
quote:
#1 is to find a good girl and STAY MARRIED.
#2 Head down and elbows up. (work and commute both ways in the dark.)
#3 read the Richest man in Babylon.
#4 1 million is not that much in today's economy. set your sights higher.


#1 and #4 are true facts. You don't need a good, like-minded woman to become a millionaire, but you do if you want to stay one after you're married. And a million dollars isn't exactly a lot of money these days, at least as far as net worth is concerned. Just about anyone who is in agriculture and owns some land is a millionaire, yet struggles with liquidity and cash flow. I certainly am one, and I don't even make enough to ranch full-time. Now if your goal is a million in liquid assets, that's something totally different.

Most high net worth individuals I know attained a majority of their wealth via their own businesses and/or real estate. The appreciation gained by real estate is almost unparalleled by any other investment ... I know an oil man who's made more on real estate than oil. One enabled the other, but something to think about. Securities are something you invest in once you have money to secure... I think you're better served finding other avenues to create wealth rather than sustain it.
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pmoney10
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8:22a, 3/15/13
AG
quote:
Thought I would bump the thread with this:

http://finance.yahoo.com/news/booming-market-adds-300-000-150608288.html;_ylt=AsekMGNV1EprBiH990CXmaKiuYdG;_ylu=X3oDMTQ4MnN0MW9wBG1pdANDTkJDIFRvcCBTdG9yaWVzBHBrZwM1ZTA5NDVkYS0wMjlhLTM4NDctYTg5Yy1iM2RlYzIzNDU2Y2MEcG9zAzMEc2VjA01lZGlhQkxpc3RNaXhlZExQQ0FUZW1wBHZlcgM4M2RiNmU4MC04Y2M4LTExZTItYjVkZi1iMzI2OGVhZDExNmM-;_ylg=X3oDMTFpNzk0NjhtBGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDBHBzdGNhdANob21lBHB0A3NlY3Rpb25z;_ylv=3

Interesting article. Thanks for sharing! I can't believe the top 10% own 80% of all stocks!


[This message has been edited by Mateo84 (edited 3/14/2013 8:15p).]
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b_rummy
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1:04a, 3/16/13
AG
Very good thread, I literally just read through the whole thing!
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BBYD09
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3:14a, 6/2/13
AG
Bumping this thread for being awesome...
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Sir Psycho
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5:26p, 6/2/13
Wanna become a millionaire? Don't get married.
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Sir Psycho
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5:30p, 6/2/13
And I'm always skeptical of the people who spend 30-40 years living frugally, driving old cars, etc. so they can have a million or two at retirement. Then what? Go on a huge spending spree? At that point you're used to a lifestyle of depravation, so you end up retired and still living frugally and still driving the 10-year-old vehicle because you'd probably feel too guilty to ever go and splurge. So was all the penny-pinching worth it to retire five years sooner?
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Clavell
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7:13p, 6/2/13
AG
My wife and I live the life we want. We just have always maxed out our pretax 401Ks. Don't see it then don't miss it. When stock market crashed we rode it down and then back up. Save automatically and don't think about it.

[This message has been edited by Clavell (edited 6/2/2013 6:16p).]
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OilAg01
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8:31p, 6/2/13
AG
Sir P-

Actually, it's not getting married that kills wealth...it's marrying someone who does not have the same financial values that kills you. That and a wife that doesn't work and likes to spend money.
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gigemhilo
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10:59p, 6/2/13
AG
Marry the right person and it won't be an issue. I mean, seriously, "don't get married" is about the most ignorant advice there is. You forgo a life of happiness with someone you love just because you feel like that is a waste of money.

You can be unhappy. I love my life with my wife and we have no financial worries because we do it together. Choose well and it's not a problem.
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JohnClark
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9:28a, 6/3/13
I became one at 39:
1) Pay yourself first (put 15% gross into investments)
2) Asset allocate the investments (don't try to time the market)
3) Payoff the house in 15 years
4) Have no other debt. (if you want a new car, save up for it and pay cash)
5) MOST IMPORTANT: Enjoy the fruits of your labor (once you satisfy items 1-4, then spend and have fun; don't become obsessed with frugality)
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BTHOB
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10:24a, 6/3/13
AG
quote:
And I'm always skeptical of the people who spend 30-40 years living frugally, driving old cars, etc. so they can have a million or two at retirement. Then what? Go on a huge spending spree? At that point you're used to a lifestyle of depravation, so you end up retired and still living frugally and still driving the 10-year-old vehicle because you'd probably feel too guilty to ever go and splurge.


For some, being a millionaire and retiring is not about finally being able to "go on a huge spending spree," but rather to enjoy a sense of financial security. Some people enjoy their money by spending it... others enjoy their money by living a lifestyle of their choosing (frugal or not) with the security of a few extra banks in the bank "just in case."
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sparkplug
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3:15p, 6/3/13
Thank you ags for sharing.

Also max roth401k because tax today will likely be less than tomorrow I guess?

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JDCAG (NOT Colin)
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3:24p, 6/3/13
AG
quote:
Thank you ags for sharing.

Also max roth401k because tax today will likely be less than tomorrow I guess?



And the fact that on a 401K, you're paying taxes on everything you take out (contributions & earnings), which with a Roth, you're only paying taxes on the initial investment when it goes in - nothing is taxed on the way out. I guess the counter to that would be that what you would have paid in taxes on the initial deposit in a Roth can grow in a 401K to account for the taxes you'll have to pay on the earnings, but it seems like the Roth will come out better in the long run.

I'm very new to all of this so somebody can correct me if I'm wrong on that.
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Sir Psycho
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3:41p, 6/3/13
My "don't get married" comment was tongue-in-cheek. It's when you get married to a spouse who doesn't produce income and who doesn't have fiscal discipline is when you run into problems.
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ORAggieFan
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4:38p, 6/3/13
quote:
Also max roth401k because tax today will likely be less than tomorrow I guess?
All depends. I'm of the belief that my current tax bracket makes a Roth not the way to go and recently changed away from it. With a house paid off and tiered rates I'd rather manipulate the income than pay a high rate now.
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