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8,725 Views | 47 Replies | Last: 5 yr ago by wilhunting
Tex_Ag_2017
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AG
I have been really interested in the idea of passive income from properties and generally speaking, from research, it seems that real estate is usually a safe investment in the long run. I contribute to my companies 401k and I do the maximum to my roth ira. It would be nice to diversify some and get some rental properties. I have seen some articles that show how over time, you can basically get your properties to run themselves. For example, the rent covers the mortgage and then some to help with repairs, then you build up enough wealth from it and buy another property and so on. My wife and I could save up enough in a year or so to be able to put a down payment on a 150k house. It just seems a little scary to invest 25k all at once and you may get a bad renter or the property not be able to sustain itself. Can anyone give me some of their tips and experience with this? Some questions I have are mainly dealing with investing in the same town? Is it good to do this so you can be hands on or is it fine to live in a different town and have a property manager? Also, does anyone have experience with a company like RoofStock who has these auctions to be able to buy already up and running rental properties in cities across America?
Thanks in advance for any help.
TX AG 88
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Good luck to you. It's good that you're thinking this way now. It will definitely pay off in the long run.

Your questions are very, very basic. I'm sure you'll get a lot of helpful advice and anecdotes here, but there are tons of resources out there that you can access. Books, YouTube videos, websites dedicated completely to real estate investing (most selling something, but not all, or at least just ad supported, etc.)

There are "investment ecosystems" out there that some have had success with (e.g. Lifestyles Unlimited) but everything comes at a cost. Read and learn. Finding a trustworty mentor would be eye-opening.
CS78
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Tex_Ag_2017 said:

Some questions I have are mainly dealing with investing in the same town? Is it good to do this so you can be hands on or is it fine to live in a different town and have a property manager?
For a first time investor wanting to watch their investment closely, I say stay in your own town. You're going to learn more and have much better control and a sense of control over your investment. Most of the people I see investing in other towns are either- A. well experienced investors that have experience dealing with property managers, contractors, researching markets, etc. or B. high income investors that don't seem to watch their money as closely. If their property doesn't run as efficient as it should no big deal to them. Many are just looking for a place to park cash and a small five figure loss due to a bad decision isn't going to hurt them much. To me, one of the main benefits of rentals is personal control. You can increase your chances of success by putting personal effort in to it. If I were after a truly passive investment it would be stocks, not a rent house out of town at the mercy of some agent that I don't know.
Tex_Ag_2017
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AG
The only thing that I don't like about passive income from stocks are how much money you have to put into a stock to get anything out. It seems that if I put in $500 to a defend dividend etf or similar fund, I may get $5 a year back. The rent and rate at which property values grow seem to me to be higher than stocks but maybe they have a greater risk than your average etf or high dividend fund.
evestor1
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Quote:

For a first time investor wanting to watch their investment closely, I say stay in your own town.

More true words have never been spoken.


----------------------------------------------------------------

I stand corrected, truer words have been spoken!

Quote:

If I were after a truly passive investment it would be stocks, not a rent house out of town at the mercy of some agent that I don't know.
HalifaxAg
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AG
I am in the exact same boat as you are. I'm about to make my first purchase and it is scary, no doubt. I can recommend a few books that I have read and they are quick short reads.


https://www.amazon.com/gp/product/1419537253/ref=oh_aui_detailpage_o08_s00?ie=UTF8&psc=1

https://www.amazon.com/gp/product/1413323278/ref=oh_aui_detailpage_o08_s01?ie=UTF8&psc=1

https://www.amazon.com/gp/product/1413324444/ref=oh_aui_detailpage_o08_s01?ie=UTF8&psc=1



Great info in those, answered a lot of my basic questions.


The trouble I'm having right now is just selecting the right property to pursue. I have 3-4 options that I've viewed in person and it's just nerve-wracking deciding which one to go after. I end up in analysis-paralysis most times and I think I'm going to go with the one that has the best cash-flow at this point.
schwack schwack
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AG
We started in 2015 and now have several properties. We only buy in our town (not even out in the county), do most of the reno work & all of the dealing with tenants ourselves. We actually have stayed fairly concentrated in one neighborhood and drive by each property regularly. This is a great strategy until a tornado takes out the whole hood....but we do a a few across town so we've got that going for us.

Nothing about our venture is passive - we are super hands on & that's the only way we can see to make money.

I think the biggest problem you'll have is finding properties that are priced low enough for you to make a good profit once you pay your mortgage, taxes, insurance, maintenance.

Good luck! We have been very happy with our decision to do this and are looking to retire within the next year or two to focus on this full time. By that time we figure to be done with buying & renovating so it should be a lot easier to manage.

mwp02ag
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AG
Howdy! You're right where I was about 4 years ago. Start with your education, you don't even know what you don't know at this point. That is OK, we all started in the same place, seeking a better way to secure our families future. IMO this is the most critical it's ever been and we have golden opportunity over the next 10-20 years to build generational wealth so that you can then help others.

Couple of quick lessons I have learned over the last couple of years:

1. Read the books, every successful investor is constantly working harder on themselves than they do their jobs.

2. It's a mindset game, you MUST keep going. In order to be successful, you must get comfortable being uncomfortable and that is where most people stop. The first sign of adversity and they crumble. Guess what, that is you getting better. We've been educated to abhor mistakes all our lives, now you must learn to love and learn from them.

3. Its a long process, that starts very slowly then all the sudden momentum begins to take hold and dramatic changes and rewards begin to show up. I'm early in this stage in my investing, I can actually feel momentum building behind me.

4. In order to become wealthy, you must be willing to make other people wealthy. You'll be returned the favor many times over so never begrudge what it cost to gain education, a mentor or a program that will help you succeed.

5. You can not be successful alone, real estate is a networking game. Build a team of people around you that are able to do what you can't, not what you can, and learn from them. Tell everyone you meet what you are trying to do, you never know who might be able to help.

If you are at all like me when I started most of this may seem like common sense, but I promise you the more you study, the more sense it will begin to make. One day you'll look back and realize that you really don't even know the right questions to ask right now, but at least your asking questions.
Tex_Ag_2017
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AG
Thanks for the advice from everyone. Another thing that I have been thinking about is the difference in weekend rentals vs. 12 month contracts. Does anyone know if there is any money to be made renting out a house on VRBO or AirBnB? Or does it put a lot of wear and tear so that it isn't worth? I know that the house would need to be in a good spot like college station to be able to rent out for big bucks on game day weekends, etc. or a lake house on a popular lake near marble falls.
schwack schwack
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AG
I've been wondering the same thing. We just bought a small lake house on a private lake to reno and we were thinking about furnishing it & going with short term rentals instead of long lease. Part of the reason is that we'd like to block some time for our own guests & maybe us occasionally. One of the tricky things with ours is that the "guests" would not have lake privileges - they can't boat or fish. That might hurt us on the VRBO or AirBnB sites. Our guests would have to be content with a fantastic house & a terrific view. It might be perfect though for traveling nurses or people working in town that just want a relaxing place semi-long term.

I hope to see some people weigh in on this & if it's worth it or not to consider.

mwp02ag
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AG
Lots if money to be made in AirBNB in the right market. It's more labor intensive and different municipalities have differing rules so always check with that. It's also more capital intensive upfront as you need to furnish and appoint them well.

As far as wear and tear many experienced BNB guys will tell you it's LESS than with a long term renter. No pictures to hang, not typically using the appliances as hard, generally more respectful of the home and most importantly you have it cleaned almost daily in addition to always knowing immediately if there are problems.

www.airdna.com (I think) is a good website to find rates and occupancy in a given area.
mwp02ag
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AG
Oh and if you really want to think about it consider finding someone who is willing to let you sublet their home as an AirBNB. I've listened to some podcasts of guys who are doing just that. If I remember right one dude was netting $100k/ month and didn't own a single property. He focused on high equity sellers who didn't need cash for something and were able to use the cash flow he was able to provide by leasing the homes from them to be BNB.

OR if you REALLY want to know an interesting asset class look into Residential Care Homes. This is what I am working to set up next. I have an opportunity to get into a perfect SFR that we will be able to put 8 beds at $3000/month in. Its a highly regulated industry, rightly so, but it's going to explode with all the baby boomers aging. There are some really creative ways to get into these deals too. Of course my wife and the wife of the partners on this deal are both RN's so it's going to be an easy for them to help manage this.
JP76
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mwp02ag said:

Oh and if you really want to think about it consider finding someone who is willing to let you sublet their home as an AirBNB. I've listened to some podcasts of guys who are doing just that. If I remember right one dude was netting $100k/ month and didn't own a single property. He focused on high equity sellers who didn't need cash for something and were able to use the cash flow he was able to provide by leasing the homes from them to be BNB.

OR if you REALLY want to know an interesting asset class look into Residential Care Homes. This is what I am working to set up next. I have an opportunity to get into a perfect SFR that we will be able to put 8 beds at $3000/month in. Its a highly regulated industry, rightly so, but it's going to explode with all the baby boomers aging. There are some really creative ways to get into these deals too. Of course my wife and the wife of the partners on this deal are both RN's so it's going to be an easy for them to help manage this.


How do the numbers work on this ?

That comes out to around $32 an hour gross before paying workers, insurance and all other overhead. Or am I missing something ?



mwp02ag
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AG
We are just getting started on the business plan but from other investors active in this class we are told to expect around $5k/ cash flow once at capacity and to rarely have open beds. You do NOT staff with LVN's or RNs, but you do need staff on hand at all times. Over night staff is lighter obviously, then were planning 1 staff for every 3-4 residents plus a cook. All meals and necessities are included, except for meds although we will have someone with the ability to dispense them.

We are focusing on residents who are still mobile and with full/ near full cognition, you can earn more per bed for higher needs such as memory care. There are placement agents who will bring us residents once we're up and running.

It's funny, I picked this idea up at my very first ever real estate seminar and I've been toying with it ever since. That was the Rich Dad 3 day event about 4 years ago and the presenter was doing it in Fla. I love the idea of helping these people stay out of large facilities and with a RN as a wife it always seemed like a natural fit.

It wasn't until this owner carry deal popped up recently that it dawned on me that I needed to bring this about. Seller is asking $300k for the home. We are negotiating for a small down payment and 30 amortization at typical bank rates. Seller is retiring soon and just needs her new mortgage covered for now. We will refinance the loan after seasoning the business a bit.
schwack schwack
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AG
Quote:

Residential Care Homes

Interesting & with your wife in the "business" I think you're going to do great.
Medaggie
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We have rentals and I have a property manager so I spend almost no time with the properties. 8% is well worth it for me. I will tell you that it took me about 2 yrs to cashflow and we put all of the profit back to upgrade the homes plus some.

If you are going to do rentals, be aware that you may have to put money in as things always break down. A new roof will take 1-2 yrs of profit.

But now that my properties are cash flowing, it is a great investment. Once we pay off the mortgages hopefully in 5 yrs, we can buy another property a year just on the profit.

We also have a Homeaway home on Lake LBJ - 1st yr. I will say that this is a fantastic rental market.

We will be hitting over 100 dys rented this year and almost completely rented from June through Aug already. We will make alittle profit and we get to spend 30 dys on the lake every year which would cost me about 15K to rent. We have a property manager and thus spend almost no time running the property. Plus having a property manager gives me a peace of mind that someone is checking on my property every week and trouble shooting any issues.
Diggity
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Quote:

Oh and if you really want to think about it consider finding someone who is willing to let you sublet their home as an AirBNB. I've listened to some podcasts of guys who are doing just that. If I remember right one dude was netting $100k/ month and didn't own a single property. He focused on high equity sellers who didn't need cash for something and were able to use the cash flow he was able to provide by leasing the homes from them to be BNB.
I cannot, for the life of me, imagine an owner who is dumb enough to do this.
jonj101
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Which area are you in?

My wife owns a senior care agency and she has partnered with various facilities to provide workers as well as mutual referrals.

We are in the greater Houston area.
mwp02ag
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Dude is finding people to do it. I had several guys want to rent my triplex at asking to do just that too...I declined.
mwp02ag
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San Antonio but shoot me an email, always good to connect. figtreehomessa@gmail.com
Tex_Ag_2017
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We were looking into trying to get something on Lake LBJ. In maybe 1-2 years we could probably have enough money to put 20% down on a 300k house. MedAggie, would you be willing to email me at centxlawnservices@gmail.com and talk to me about advice you have or if you have any connections in the realty business. I have heard that it is good to have connections and I just don't know where to start.
Diggity
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I'm curious how many of these owners know that he is subletting them. I would imagine a much lower percentage realize he's doing the same thing with dozens of properties and could in no way way his rents if the market fell apart.

Medaggie
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With all things being equal, why would anyone let someone sublet unless they are paying a super high premium.

I would let someone sublet if they are responsible for all damages, and pay me 2X market rate.
mwp02ag
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AG
He tells them exactly what he is doing up front. I'll see if I can't find that particular podcast but it's been at least a year and I'm not even sure which one it was. I think it was Joe Fairless...he has "the longest running daily show"
Diggity
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It could be true but I take all those stories with a grain of salt.

Investors, like fishermen, tend to grossly exaggerate their conquests.
BMach
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Bigger pockets podcast. Wealth of info.
jt2hunt
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Find more cash flow in your properties, they should cash flow once rehab is done.
itsyourboypookie
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We've got 26 doors south of San Antonio under contract. About to look at another 58 doors.

Gross rents will be about 55k a month.

Looking for 3.5 million to purchase both.

Corey @ roughneck2realestate . Com for more info.
SwissAgg
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This may be my personal opinion, but get a property on the higher end of

the rental spectrum. You will have a lot fewer headaches in the long run

by dealing with people that earn a bit more money.
jt2hunt
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AG
I realize you are saying this is your opinion but do you have any experience managing properties that tell you this is accurate?
itsyourboypookie
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jt2hunt said:

I realize you are saying this is your opinion but do you have any experience managing properties that tell you this is accurate?


We currently own and self manage 157 units from Canyon Tx, to Pecos TX, Willis TX, and now McAllen TX

No income is passive. Our units rent from $600- $1200.

We collect about $400 in late fees a month.

We use a program called appfolio to manage all the properties. It keeps our books, and makes renting vacant units a breeze.

Contrary to popular belief, your biggest expense is vacancies. Appfolio keeps these to a minimum. When a unit goes vacant, it's automatically put on 95 websites. Including zumper, which puts it into fb marketplace. 90% of our tenants come from fb.

Since we've incorporated appfolio, we don't really have to chase rents.
SwissAgg
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AG
jt2hunt said:

I realize you are saying this is your opinion but do you have any experience managing properties that tell you this is accurate?
Yes. I own three rental houses and have had others over the past 18 years.
Diggity
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You'll typically have a lot of fewer potential renters at the "high end" of the market.

It could potentially be a good strategy if you find the area is undeserved but I just don't see many higher end properties cash flowing.
SwissAgg
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AG
Diggity said:

You'll typically have a lot of fewer potential renters at the "high end" of the market.

It could potentially be a good strategy if you find the area is undeserved but I just don't see many higher end properties cash flowing.
Mine are cash flowing very well. I have only had one month in 8 years that one of my houses

was vacant. Each rental market is a bit different.
one MEEN Ag
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Tex_Ag_2017 said:

The only thing that I don't like about passive income from stocks are how much money you have to put into a stock to get anything out. It seems that if I put in $500 to a defend dividend etf or similar fund, I may get $5 a year back. The rent and rate at which property values grow seem to me to be higher than stocks but maybe they have a greater risk than your average etf or high dividend fund.
Your high dividend ETF is 1%? Just the S&P500 overall is like 2%. I think you're judging stocks to harshly and real estate too lightly. The barriers to get anything out of stocks are extremely low. One single stock + $4.95 per trade. Minimum investment in a rental property? 20-25% down payment + closing costs + repairs + first months rent to a management company. You're staring down potentially 45k and paying 5% interest on your loan in the meantime.

45k in a high dividend yielding stocks will do 4.5%. No fuss. No closing costs. If your trying to diversify your portfolio into a different asset that is one thing. If you're just trying to get better returns and are okay with higher risk look at REITs or investing in FAANG.
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