First investment property

[Anonymous]

What’s the best way to start out buying my first rental property? I’ve read online about buying and renting out SFH and duplex etc but don’t understand how to effectively evaluate properties when they come on the market that offer a better opportunity for return long term than investing in the stock market. Ideally, it would be in nova.

[Anonymous]

Watch youtube vids - lots of content on this. Nova is very tough to make this work. You're basically betting on real estate appreciation because it'll be very hard to cash flow in today's price/rate environment. It's also worth mentioning - being a landlord is not passive. Value your time accordingly.

[Anonymous]

The best way to evaluate is can I rent the property out and get income that will cover mortgage payments, property insurance, maintenance, vacancy and taxes.
House appreciation is bonus points.

[Anonymous]

Anonymous wrote:The best way to evaluate is can I rent the property out and get income that will cover mortgage payments, property insurance, maintenance, vacancy and taxes.
House appreciation is bonus points.

Op - this is my point. At what pricepoint will it be worth the hassle to do this analysis, get the property, rent it out, and deal with maintenance, compared to just sticking the money in the market and not having to do any work? Is there a big ROI?

[Anonymous]

This is not the time or place to start buying rentals, and don't do it if you need a mortgage.

[Anonymous]

Anonymous wrote:This is not the time or place to start buying rentals, and don't do it if you need a mortgage.

+1

In the DC area I wouldn't do it even if I could pay cash. Prices are so high that it's hard to imagine a scenario that you would break even. I bought an investment property 20 yrs ago and maybe net $300/month. That's 20 yrs of being a landlord. I don't have a property manager and do all of the repairs and renovations myself. Real estate is a long game, so you need to be honest with yourself about how committed you are.

[Anonymous]

Anonymous wrote:

Anonymous wrote:The best way to evaluate is can I rent the property out and get income that will cover mortgage payments, property insurance, maintenance, vacancy and taxes.
House appreciation is bonus points.

Op - this is my point. At what pricepoint will it be worth the hassle to do this analysis, get the property, rent it out, and deal with maintenance, compared to just sticking the money in the market and not having to do any work? Is there a big ROI?

It's not the dividends (income) but the price of the real estate increasing, as long as taxes don't eat you up.

[Anonymous]

The rule of thumb is if you can rent it for 1% of the purchase price, it's a good deal. I haven't found anything on the market that meets that requirement. I bought a place a few years ago that breaks even (a little better some years, a little worse when something major breaks) and would have done better in the stock market...and that was with a much lower interest rate than you'll get today. It did ok financially when I had a tenant with a section 8 voucher in there, but the stress of this particular tenant was such that I was glad when they moved, even though the market had softened after that and the next people paid less rent.

Also, are you prepared to do your own maintenance or have you built 8% for property management into your model? Do you understand landlord-tenant law enough to know when you need to hire a lawyer (hint: you almost always should hire a lawyer--I have represented people in landlord-tenant court and I still hired a lawyer for some things)? Are you prepared to evict people when needed?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The best way to evaluate is can I rent the property out and get income that will cover mortgage payments, property insurance, maintenance, vacancy and taxes.
House appreciation is bonus points.

Op - this is my point. At what pricepoint will it be worth the hassle to do this analysis, get the property, rent it out, and deal with maintenance, compared to just sticking the money in the market and not having to do any work? Is there a big ROI?

It's not the dividends (income) but the price of the real estate increasing, as long as taxes don't eat you up.

Most real estate investors look closely at cash flow from rental income as fundamentals.
Appreciation is bonus point.

[Anonymous]

Anonymous wrote:The rule of thumb is if you can rent it for 1% of the purchase price, it's a good deal. I haven't found anything on the market that meets that requirement. I bought a place a few years ago that breaks even (a little better some years, a little worse when something major breaks) and would have done better in the stock market...and that was with a much lower interest rate than you'll get today. It did ok financially when I had a tenant with a section 8 voucher in there, but the stress of this particular tenant was such that I was glad when they moved, even though the market had softened after that and the next people paid less rent.

Also, are you prepared to do your own maintenance or have you built 8% for property management into your model? Do you understand landlord-tenant law enough to know when you need to hire a lawyer (hint: you almost always should hire a lawyer--I have represented people in landlord-tenant court and I still hired a lawyer for some things)? Are you prepared to evict people when needed?

So a million dollar house should rent out at 10k a month? Doesn’t seem realistic.

[Anonymous]

Anonymous wrote:

Anonymous wrote:The best way to evaluate is can I rent the property out and get income that will cover mortgage payments, property insurance, maintenance, vacancy and taxes.
House appreciation is bonus points.

Op - this is my point. At what pricepoint will it be worth the hassle to do this analysis, get the property, rent it out, and deal with maintenance, compared to just sticking the money in the market and not having to do any work? Is there a big ROI?

Yea, you need to do some homework. Look at comps, tax rates (Ffx Co, for example , is super high), get familiar/how much it costs for XYZ (appliances, cosmetic work, lawn care, HOA fees, etc), ...if you have to ask and you cant figure it out then this might not be for you.

[Anonymous]

What is your return in stock market? We bought 3 properties and the money would have done better in the stock market. We didn't learn much about real estate, but did learn a lot about the markets and investing.
Lots of investments are inside Roth, so taxes are really not a problem.
Even your own home is often a headache. The rental is twice the headache.

[Anonymous]

If you're insistent on investing in real estate, and I don't know why you find that an appealing idea, consider REITs instead of individual properties. Individual properties are very risky; there is no diversification with respect to location, dwelling type, tax issues, etc., and they are illiquid. None of those are attractive investment characteristics. And, youu're buying a business you have to dedicate time and effort to.

Unless you have reasonable grounds for envisioning a really compelling ROI, look elsewhere if you want to make money with less risk, less effort, and more liquidity.

[Anonymous]

OP - the whole premise of the question seems largely missed by most of the answers. Where’s the ROI from investing in real estate? I’m not insistent on buying a rental but clearly many do including several in my own neighborhood in ffx county. Based on the answers that doesn’t make sense to do.

[Anonymous]

Anonymous wrote:OP - the whole premise of the question seems largely missed by most of the answers. Where’s the ROI from investing in real estate? I’m not insistent on buying a rental but clearly many do including several in my own neighborhood in ffx county. Based on the answers that doesn’t make sense to do.

It could make sense if you can rent your property out for more than your carrying cost. Most mom and pop landlord's are renting out a home they used to live in (like, their one bedroom condo or smaller starter home). Investors who don't plan on living in the property want a profit ASAP. The thing is, even for the mom & pop landlord, it really depends on what their cash flow is on the property. I would bet in most cases, they would have been better off selling and putting money in the market.