Why are people so obsessed with rental properties yielding positive cash flow?

[Anonymous]

Anonymous wrote:So we purchased several townhouses after the housing crash for around $250-300k, putting down about $60k on each house for 15 years mortgages. We sped up by prepaying the last few years and have paid them off. Those houses are zestimated around $450-480k now and we just increased our rent this year by around 10%, though still several hundreds below market. Meanwhile, my portion of retirement portfolio just went down about 15%. I'm not saying real estate should be a huge portion of your retirement, but it's good to diversify. Our paid off rentals net us about $95k per year and more than enough to cover our basic retirement expenses without having to touch our 401k/iras, especially during market down turn.

The loss of value in your retirement portfolio is irrelevant unless you are retired and getting ready to take money out it.

[Anonymous]

Anonymous wrote:

Anonymous wrote:So we purchased several townhouses after the housing crash for around $250-300k, putting down about $60k on each house for 15 years mortgages. We sped up by prepaying the last few years and have paid them off. Those houses are zestimated around $450-480k now and we just increased our rent this year by around 10%, though still several hundreds below market. Meanwhile, my portion of retirement portfolio just went down about 15%. I'm not saying real estate should be a huge portion of your retirement, but it's good to diversify. Our paid off rentals net us about $95k per year and more than enough to cover our basic retirement expenses without having to touch our 401k/iras, especially during market down turn.

The loss of value in your retirement portfolio is irrelevant unless you are retired and getting ready to take money out it.

It’s relevant to compare how much equity he has now in townhouses vs stocks growth , and how much “dividend” his RE brings vs stocks and bonds

Did you try to compare, PP?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:So we purchased several townhouses after the housing crash for around $250-300k, putting down about $60k on each house for 15 years mortgages. We sped up by prepaying the last few years and have paid them off. Those houses are zestimated around $450-480k now and we just increased our rent this year by around 10%, though still several hundreds below market. Meanwhile, my portion of retirement portfolio just went down about 15%. I'm not saying real estate should be a huge portion of your retirement, but it's good to diversify. Our paid off rentals net us about $95k per year and more than enough to cover our basic retirement expenses without having to touch our 401k/iras, especially during market down turn.

The loss of value in your retirement portfolio is irrelevant unless you are retired and getting ready to take money out it.

It’s relevant to compare how much equity he has now in townhouses vs stocks growth , and how much “dividend” his RE brings vs stocks and bonds

Did you try to compare, PP?

DP. Not saying pp has a bad investment. It meets my rule that real estate is worthwhile if you are using leverage, the rental income covers expenses AND you're buying in an appreciating market. However, it's a good example of why it's hard to compete with the stock market. I don't know how much OP paid in terms of interest and expenses over the years (i.e., the costs and benefits of leverage & costs of maintenance, taxes, etc), but $300,000 invested in 2008 at the DJIA would be worth $1.24 million in 2021 (even if you assume the last year was a wash, which it hasn't been in my case -- still up yoy). Just to do very simple math, that's a difference of $760,000 in equity, and even if you assume the stock market never grows over 4% over time again (@$50,000 a year), you'd need to clear $95,000 (+$45,000) a year for 17 years to break even. And, in the meantime, you've had to hassle with renters and home repairs, etc., and you're very exposed to the vagaries of one regional housing market. Personally, if I'd want to be diversified into real estate, I'd rather buy a REIT that holds a diverse portfolio and where I don't have to deal with tenants not paying their bills and maintenance. Not to mention that there were lots of sad stories out there during covid about small landlords who lost their property because the government told their tenants they didn't have to pay their rent. You are at the mercy of one bad tenant that you can't evict, so it's not a risk-free investment.

I inherited several rental properties that were fully paid for. They were excellent investments for the original owner, because they bought in a booming real estate market, but between taxes, insurance and maintenance, the math just didn't pencil out on my end. The $$ is invested in a mix of stocks, REITS and venture capital firms, and I'm not sorry, even after the latest moves in the market.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:So we purchased several townhouses after the housing crash for around $250-300k, putting down about $60k on each house for 15 years mortgages. We sped up by prepaying the last few years and have paid them off. Those houses are zestimated around $450-480k now and we just increased our rent this year by around 10%, though still several hundreds below market. Meanwhile, my portion of retirement portfolio just went down about 15%. I'm not saying real estate should be a huge portion of your retirement, but it's good to diversify. Our paid off rentals net us about $95k per year and more than enough to cover our basic retirement expenses without having to touch our 401k/iras, especially during market down turn.

The loss of value in your retirement portfolio is irrelevant unless you are retired and getting ready to take money out it.

It’s relevant to compare how much equity he has now in townhouses vs stocks growth , and how much “dividend” his RE brings vs stocks and bonds

Did you try to compare, PP?

DP. Not saying pp has a bad investment. It meets my rule that real estate is worthwhile if you are using leverage, the rental income covers expenses AND you're buying in an appreciating market. However, it's a good example of why it's hard to compete with the stock market. I don't know how much OP paid in terms of interest and expenses over the years (i.e., the costs and benefits of leverage & costs of maintenance, taxes, etc), but $300,000 invested in 2008 at the DJIA would be worth $1.24 million in 2021 (even if you assume the last year was a wash, which it hasn't been in my case -- still up yoy). Just to do very simple math, that's a difference of $760,000 in equity, and even if you assume the stock market never grows over 4% over time again (@$50,000 a year), you'd need to clear $95,000 (+$45,000) a year for 17 years to break even. And, in the meantime, you've had to hassle with renters and home repairs, etc., and you're very exposed to the vagaries of one regional housing market. Personally, if I'd want to be diversified into real estate, I'd rather buy a REIT that holds a diverse portfolio and where I don't have to deal with tenants not paying their bills and maintenance. Not to mention that there were lots of sad stories out there during covid about small landlords who lost their property because the government told their tenants they didn't have to pay their rent. You are at the mercy of one bad tenant that you can't evict, so it's not a risk-free investment.

I inherited several rental properties that were fully paid for. They were excellent investments for the original owner, because they bought in a booming real estate market, but between taxes, insurance and maintenance, the math just didn't pencil out on my end. The $$ is invested in a mix of stocks, REITS and venture capital firms, and I'm not sorry, even after the latest moves in the market.

Did you count for depreciation write offs? I purchased a rental property in 2009 with 150K equity for 800K. It was making around 70K/year, invested another 150K into improvements in 2015 and it started making 85k/year. It was fully paid off in 15 years and now is worth $1.6mm. I was writing off depreciation and all expenses and paid minimal taxes for many years.
So it's like a pre-tax 401k but you get benefits/cash right away.

800k equity from depreciation
about 100K saved in taxes if not more
round 30K net income after mortgage servicing net each year and now around 70K net after it's paid off.

If you add up all above, I made more money vs your stocks relative my initial investment

[Anonymous]

I can only tell you what I do and say it works for me

I have 4 properties I manage myself. I’m a SAHM so this is my “job”. My annual PITI for all homes is $33,000 and my gross rental income is $123,900. I used to set aside 12k/yr for repairs, but stopped doing that because I haven’t had much and have 40k sitting for that.

Until recently I used to invest the profits in index funds. I’ve since pulled that and have it sitting in cash looking to pick up a 5th property when the bubble bursts. I have enough for a cash buy. The real estate income invested monthly for the last 10 years has created incredible opportunity.

My goal is to get this 5th property and hopefully be bringing in a gross of 160k/yr and at that point my DH will retire from his w2 job. The rental income will be a nice supplement to his 401k.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:So we purchased several townhouses after the housing crash for around $250-300k, putting down about $60k on each house for 15 years mortgages. We sped up by prepaying the last few years and have paid them off. Those houses are zestimated around $450-480k now and we just increased our rent this year by around 10%, though still several hundreds below market. Meanwhile, my portion of retirement portfolio just went down about 15%. I'm not saying real estate should be a huge portion of your retirement, but it's good to diversify. Our paid off rentals net us about $95k per year and more than enough to cover our basic retirement expenses without having to touch our 401k/iras, especially during market down turn.

The loss of value in your retirement portfolio is irrelevant unless you are retired and getting ready to take money out it.

It’s relevant to compare how much equity he has now in townhouses vs stocks growth , and how much “dividend” his RE brings vs stocks and bonds

Did you try to compare, PP?

DP. Not saying pp has a bad investment. It meets my rule that real estate is worthwhile if you are using leverage, the rental income covers expenses AND you're buying in an appreciating market. However, it's a good example of why it's hard to compete with the stock market. I don't know how much OP paid in terms of interest and expenses over the years (i.e., the costs and benefits of leverage & costs of maintenance, taxes, etc), but $300,000 invested in 2008 at the DJIA would be worth $1.24 million in 2021 (even if you assume the last year was a wash, which it hasn't been in my case -- still up yoy). Just to do very simple math, that's a difference of $760,000 in equity, and even if you assume the stock market never grows over 4% over time again (@$50,000 a year), you'd need to clear $95,000 (+$45,000) a year for 17 years to break even. And, in the meantime, you've had to hassle with renters and home repairs, etc., and you're very exposed to the vagaries of one regional housing market. Personally, if I'd want to be diversified into real estate, I'd rather buy a REIT that holds a diverse portfolio and where I don't have to deal with tenants not paying their bills and maintenance. Not to mention that there were lots of sad stories out there during covid about small landlords who lost their property because the government told their tenants they didn't have to pay their rent. You are at the mercy of one bad tenant that you can't evict, so it's not a risk-free investment.

I inherited several rental properties that were fully paid for. They were excellent investments for the original owner, because they bought in a booming real estate market, but between taxes, insurance and maintenance, the math just didn't pencil out on my end. The $$ is invested in a mix of stocks, REITS and venture capital firms, and I'm not sorry, even after the latest moves in the market.

Did you count for depreciation write offs? I purchased a rental property in 2009 with 150K equity for 800K. It was making around 70K/year, invested another 150K into improvements in 2015 and it started making 85k/year. It was fully paid off in 15 years and now is worth $1.6mm. I was writing off depreciation and all expenses and paid minimal taxes for many years.
So it's like a pre-tax 401k but you get benefits/cash right away.

800k equity from depreciation
about 100K saved in taxes if not more
round 30K net income after mortgage servicing net each year and now around 70K net after it's paid off.

If you add up all above, I made more money vs your stocks relative my initial investment

Depreciation isn't pure profit -- it lowers your basis, & you'd have to calculate whether the time value of the $$ you get from the depreciation deduction is higher than the capital gains tax you'll pay when you sell. Which is another reason the rent needs to cover expenses, including depreciation. If you're not a real estate professional, you can't deduct the depreciation against ordinary income. I'm also not sure where you're getting the $100k "saved" in taxes?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:So we purchased several townhouses after the housing crash for around $250-300k, putting down about $60k on each house for 15 years mortgages. We sped up by prepaying the last few years and have paid them off. Those houses are zestimated around $450-480k now and we just increased our rent this year by around 10%, though still several hundreds below market. Meanwhile, my portion of retirement portfolio just went down about 15%. I'm not saying real estate should be a huge portion of your retirement, but it's good to diversify. Our paid off rentals net us about $95k per year and more than enough to cover our basic retirement expenses without having to touch our 401k/iras, especially during market down turn.

The loss of value in your retirement portfolio is irrelevant unless you are retired and getting ready to take money out it.

It’s relevant to compare how much equity he has now in townhouses vs stocks growth , and how much “dividend” his RE brings vs stocks and bonds

Did you try to compare, PP?

DP. Not saying pp has a bad investment. It meets my rule that real estate is worthwhile if you are using leverage, the rental income covers expenses AND you're buying in an appreciating market. However, it's a good example of why it's hard to compete with the stock market. I don't know how much OP paid in terms of interest and expenses over the years (i.e., the costs and benefits of leverage & costs of maintenance, taxes, etc), but $300,000 invested in 2008 at the DJIA would be worth $1.24 million in 2021 (even if you assume the last year was a wash, which it hasn't been in my case -- still up yoy). Just to do very simple math, that's a difference of $760,000 in equity, and even if you assume the stock market never grows over 4% over time again (@$50,000 a year), you'd need to clear $95,000 (+$45,000) a year for 17 years to break even. And, in the meantime, you've had to hassle with renters and home repairs, etc., and you're very exposed to the vagaries of one regional housing market. Personally, if I'd want to be diversified into real estate, I'd rather buy a REIT that holds a diverse portfolio and where I don't have to deal with tenants not paying their bills and maintenance. Not to mention that there were lots of sad stories out there during covid about small landlords who lost their property because the government told their tenants they didn't have to pay their rent. You are at the mercy of one bad tenant that you can't evict, so it's not a risk-free investment.

I inherited several rental properties that were fully paid for. They were excellent investments for the original owner, because they bought in a booming real estate market, but between taxes, insurance and maintenance, the math just didn't pencil out on my end. The $$ is invested in a mix of stocks, REITS and venture capital firms, and I'm not sorry, even after the latest moves in the market.

Did you count for depreciation write offs? I purchased a rental property in 2009 with 150K equity for 800K. It was making around 70K/year, invested another 150K into improvements in 2015 and it started making 85k/year. It was fully paid off in 15 years and now is worth $1.6mm. I was writing off depreciation and all expenses and paid minimal taxes for many years.
So it's like a pre-tax 401k but you get benefits/cash right away.

800k equity from depreciation
about 100K saved in taxes if not more
round 30K net income after mortgage servicing net each year and now around 70K net after it's paid off.

If you add up all above, I made more money vs your stocks relative my initial investment

Depreciation isn't pure profit -- it lowers your basis, & you'd have to calculate whether the time value of the $$ you get from the depreciation deduction is higher than the capital gains tax you'll pay when you sell. Which is another reason the rent needs to cover expenses, including depreciation. If you're not a real estate professional, you can't deduct the depreciation against ordinary income. I'm also not sure where you're getting the $100k "saved" in taxes?

I am a real estate professional (licensed in my state), thus about 100K saved in federal income tax alone over several years. And I don't plan to sell and pay capital gain tax, even if I do sell. There are ways of immediate write offs same year, or 1031 exchanges. I am just expanding business for income generation and holding it like most people hold 401K. The only property I might sell is purchased from IRA so there won't be capital gain tax when I do sell it.

People pay capital gain on stocks as well.

[Anonymous]

Anonymous wrote:I can only tell you what I do and say it works for me

I have 4 properties I manage myself. I’m a SAHM so this is my “job”. My annual PITI for all homes is $33,000 and my gross rental income is $123,900. I used to set aside 12k/yr for repairs, but stopped doing that because I haven’t had much and have 40k sitting for that.

Until recently I used to invest the profits in index funds. I’ve since pulled that and have it sitting in cash looking to pick up a 5th property when the bubble bursts. I have enough for a cash buy. The real estate income invested monthly for the last 10 years has created incredible opportunity.

My goal is to get this 5th property and hopefully be bringing in a gross of 160k/yr and at that point my DH will retire from his w2 job. The rental income will be a nice supplement to his 401k.

And you would be a fool to do so. It significantly lowers your leverage. Better to spread it around as down payments on multiple properties. If you pay cash for an income property you will likely do worse than a total stock market investment. The reason real estate can sometimes have better returns in only because of leverage.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:So we purchased several townhouses after the housing crash for around $250-300k, putting down about $60k on each house for 15 years mortgages. We sped up by prepaying the last few years and have paid them off. Those houses are zestimated around $450-480k now and we just increased our rent this year by around 10%, though still several hundreds below market. Meanwhile, my portion of retirement portfolio just went down about 15%. I'm not saying real estate should be a huge portion of your retirement, but it's good to diversify. Our paid off rentals net us about $95k per year and more than enough to cover our basic retirement expenses without having to touch our 401k/iras, especially during market down turn.

The loss of value in your retirement portfolio is irrelevant unless you are retired and getting ready to take money out it.

It’s relevant to compare how much equity he has now in townhouses vs stocks growth , and how much “dividend” his RE brings vs stocks and bonds

Did you try to compare, PP?

DP. Not saying pp has a bad investment. It meets my rule that real estate is worthwhile if you are using leverage, the rental income covers expenses AND you're buying in an appreciating market. However, it's a good example of why it's hard to compete with the stock market. I don't know how much OP paid in terms of interest and expenses over the years (i.e., the costs and benefits of leverage & costs of maintenance, taxes, etc), but $300,000 invested in 2008 at the DJIA would be worth $1.24 million in 2021 (even if you assume the last year was a wash, which it hasn't been in my case -- still up yoy). Just to do very simple math, that's a difference of $760,000 in equity, and even if you assume the stock market never grows over 4% over time again (@$50,000 a year), you'd need to clear $95,000 (+$45,000) a year for 17 years to break even. And, in the meantime, you've had to hassle with renters and home repairs, etc., and you're very exposed to the vagaries of one regional housing market. Personally, if I'd want to be diversified into real estate, I'd rather buy a REIT that holds a diverse portfolio and where I don't have to deal with tenants not paying their bills and maintenance. Not to mention that there were lots of sad stories out there during covid about small landlords who lost their property because the government told their tenants they didn't have to pay their rent. You are at the mercy of one bad tenant that you can't evict, so it's not a risk-free investment.

I inherited several rental properties that were fully paid for. They were excellent investments for the original owner, because they bought in a booming real estate market, but between taxes, insurance and maintenance, the math just didn't pencil out on my end. The $$ is invested in a mix of stocks, REITS and venture capital firms, and I'm not sorry, even after the latest moves in the market.

Did you count for depreciation write offs? I purchased a rental property in 2009 with 150K equity for 800K. It was making around 70K/year, invested another 150K into improvements in 2015 and it started making 85k/year. It was fully paid off in 15 years and now is worth $1.6mm. I was writing off depreciation and all expenses and paid minimal taxes for many years.
So it's like a pre-tax 401k but you get benefits/cash right away.

800k equity from depreciation
about 100K saved in taxes if not more
round 30K net income after mortgage servicing net each year and now around 70K net after it's paid off.

If you add up all above, I made more money vs your stocks relative my initial investment

Depreciation isn't pure profit -- it lowers your basis, & you'd have to calculate whether the time value of the $$ you get from the depreciation deduction is higher than the capital gains tax you'll pay when you sell. Which is another reason the rent needs to cover expenses, including depreciation. If you're not a real estate professional, you can't deduct the depreciation against ordinary income. I'm also not sure where you're getting the $100k "saved" in taxes?

I am a real estate professional (licensed in my state), thus about 100K saved in federal income tax alone over several years. And I don't plan to sell and pay capital gain tax, even if I do sell. There are ways of immediate write offs same year, or 1031 exchanges. I am just expanding business for income generation and holding it like most people hold 401K. The only property I might sell is purchased from IRA so there won't be capital gain tax when I do sell it.

People pay capital gain on stocks as well.

Well, yes. On their profit over their original basis, not the depreciated basis. You’re still counting depreciation twice. The $800k depreciation isn’t “equity.” A depreciation deduction is of value to the extent it resulted in a tax deduction (so basically the value is what you would have paid in terms of marginal rate), but it’s a negative when you go to sell. If you do a 1031 exchange, you don’t increase your basis, you just move it to a new property. If your goal is to keep the property until you die and allow your heirs to inherit it with a stepped up basis, that can work, but most people don’t want to lock themselves into that.

The real estate owned by an IRA doesn’t get depreciation deductions, and usually must purchase in cash (no leverage) so that’s a different calculation.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:So we purchased several townhouses after the housing crash for around $250-300k, putting down about $60k on each house for 15 years mortgages. We sped up by prepaying the last few years and have paid them off. Those houses are zestimated around $450-480k now and we just increased our rent this year by around 10%, though still several hundreds below market. Meanwhile, my portion of retirement portfolio just went down about 15%. I'm not saying real estate should be a huge portion of your retirement, but it's good to diversify. Our paid off rentals net us about $95k per year and more than enough to cover our basic retirement expenses without having to touch our 401k/iras, especially during market down turn.

The loss of value in your retirement portfolio is irrelevant unless you are retired and getting ready to take money out it.

It’s relevant to compare how much equity he has now in townhouses vs stocks growth , and how much “dividend” his RE brings vs stocks and bonds

Did you try to compare, PP?

DP. Not saying pp has a bad investment. It meets my rule that real estate is worthwhile if you are using leverage, the rental income covers expenses AND you're buying in an appreciating market. However, it's a good example of why it's hard to compete with the stock market. I don't know how much OP paid in terms of interest and expenses over the years (i.e., the costs and benefits of leverage & costs of maintenance, taxes, etc), but $300,000 invested in 2008 at the DJIA would be worth $1.24 million in 2021 (even if you assume the last year was a wash, which it hasn't been in my case -- still up yoy). Just to do very simple math, that's a difference of $760,000 in equity, and even if you assume the stock market never grows over 4% over time again (@$50,000 a year), you'd need to clear $95,000 (+$45,000) a year for 17 years to break even. And, in the meantime, you've had to hassle with renters and home repairs, etc., and you're very exposed to the vagaries of one regional housing market. Personally, if I'd want to be diversified into real estate, I'd rather buy a REIT that holds a diverse portfolio and where I don't have to deal with tenants not paying their bills and maintenance. Not to mention that there were lots of sad stories out there during covid about small landlords who lost their property because the government told their tenants they didn't have to pay their rent. You are at the mercy of one bad tenant that you can't evict, so it's not a risk-free investment.

I inherited several rental properties that were fully paid for. They were excellent investments for the original owner, because they bought in a booming real estate market, but between taxes, insurance and maintenance, the math just didn't pencil out on my end. The $$ is invested in a mix of stocks, REITS and venture capital firms, and I'm not sorry, even after the latest moves in the market.

Did you count for depreciation write offs? I purchased a rental property in 2009 with 150K equity for 800K. It was making around 70K/year, invested another 150K into improvements in 2015 and it started making 85k/year. It was fully paid off in 15 years and now is worth $1.6mm. I was writing off depreciation and all expenses and paid minimal taxes for many years.
So it's like a pre-tax 401k but you get benefits/cash right away.

800k equity from depreciation
about 100K saved in taxes if not more
round 30K net income after mortgage servicing net each year and now around 70K net after it's paid off.

If you add up all above, I made more money vs your stocks relative my initial investment

Depreciation isn't pure profit -- it lowers your basis, & you'd have to calculate whether the time value of the $$ you get from the depreciation deduction is higher than the capital gains tax you'll pay when you sell. Which is another reason the rent needs to cover expenses, including depreciation. If you're not a real estate professional, you can't deduct the depreciation against ordinary income. I'm also not sure where you're getting the $100k "saved" in taxes?

I am a real estate professional (licensed in my state), thus about 100K saved in federal income tax alone over several years. And I don't plan to sell and pay capital gain tax, even if I do sell. There are ways of immediate write offs same year, or 1031 exchanges. I am just expanding business for income generation and holding it like most people hold 401K. The only property I might sell is purchased from IRA so there won't be capital gain tax when I do sell it.

People pay capital gain on stocks as well.

Well, yes. On their profit over their original basis, not the depreciated basis. You’re still counting depreciation twice. The $800k depreciation isn’t “equity.” A depreciation deduction is of value to the extent it resulted in a tax deduction (so basically the value is what you would have paid in terms of marginal rate), but it’s a negative when you go to sell. If you do a 1031 exchange, you don’t increase your basis, you just move it to a new property. If your goal is to keep the property until you die and allow your heirs to inherit it with a stepped up basis, that can work, but most people don’t want to lock themselves into that.

The real estate owned by an IRA doesn’t get depreciation deductions, and usually must purchase in cash (no leverage) so that’s a different calculation.

I am not counting depreciation as equity. What I am saying the whole asset generates "dividends" on the total asset value, not just on my initial investment of $150k. If I invested $150K in stocks I would have had today $510K in value in stocks. No dividend income. Would I be able to buy an asset generating me 70K annual income today for $510K? Absolutely not. So the purchasing power of my stock portfolio and its' income generating power would be much lower than my $1.6mm townhouse which has very low basis, as you noted. Plus, you really need to time the stock market to enter it at right time, while with rentals I pick them based on my projected return, knowing local rents, demand etc. Price is a mute point for me for a rental: its a combination of interest rate, price and rents which matters. Should be no less than 5% cap rate for me to consider buying it.

There is absolutely no point for me to sell my real estate, even if the housing crashes because it still will generate rental income of about 5% minimum/year. My CAP rate from rentals (I manage some as furnished business accommodations with higher yields) is 10%, and it stayed at 10% even during covid pandemic. I don't care about tax basis as I frankly won't ever sell such profitable and reliable asset.

You can move stock portfolio into cash, but there will be also capital gain tax, and few people would spend $1.6 portfolio right away. They would sit on cash spending it annually in increments. It's a financial equivalent of spending my rental income, but cash dissipates whereby my townhouse stays and will go to my son.

[Anonymous]

When you have an expected 4k expense you will find out it is a good idea.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I can only tell you what I do and say it works for me

I have 4 properties I manage myself. I’m a SAHM so this is my “job”. My annual PITI for all homes is $33,000 and my gross rental income is $123,900. I used to set aside 12k/yr for repairs, but stopped doing that because I haven’t had much and have 40k sitting for that.

Until recently I used to invest the profits in index funds. I’ve since pulled that and have it sitting in cash looking to pick up a 5th property when the bubble bursts. I have enough for a cash buy. The real estate income invested monthly for the last 10 years has created incredible opportunity.

My goal is to get this 5th property and hopefully be bringing in a gross of 160k/yr and at that point my DH will retire from his w2 job. The rental income will be a nice supplement to his 401k.

And you would be a fool to do so. It significantly lowers your leverage. Better to spread it around as down payments on multiple properties. If you pay cash for an income property you will likely do worse than a total stock market investment. The reason real estate can sometimes have better returns in only because of leverage.

Not that poster, but I’m a realtor and I have about a dozen investor clients. Quite a free of them are cash buyers. Especially now. I’ve had calls from alll of them waiting on opportunity now that rates have increased. I’d not say any of them are foolish, they are incredibly successful.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I can only tell you what I do and say it works for me

I have 4 properties I manage myself. I’m a SAHM so this is my “job”. My annual PITI for all homes is $33,000 and my gross rental income is $123,900. I used to set aside 12k/yr for repairs, but stopped doing that because I haven’t had much and have 40k sitting for that.

Until recently I used to invest the profits in index funds. I’ve since pulled that and have it sitting in cash looking to pick up a 5th property when the bubble bursts. I have enough for a cash buy. The real estate income invested monthly for the last 10 years has created incredible opportunity.

My goal is to get this 5th property and hopefully be bringing in a gross of 160k/yr and at that point my DH will retire from his w2 job. The rental income will be a nice supplement to his 401k.

And you would be a fool to do so. It significantly lowers your leverage. Better to spread it around as down payments on multiple properties. If you pay cash for an income property you will likely do worse than a total stock market investment. The reason real estate can sometimes have better returns in only because of leverage.

Not that poster, but I’m a realtor and I have about a dozen investor clients. Quite a free of them are cash buyers. Especially now. I’ve had calls from alll of them waiting on opportunity now that rates have increased. I’d not say any of them are foolish, they are incredibly successful.

For developers cash buy is usually an investment into a shell, a property for development. They buy it for $250K then take a loan of $800K and develop. So it's leverage again, just spent on their own renovations/business.

I haven't seen anyone successful buying condos for cash

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I can only tell you what I do and say it works for me

I have 4 properties I manage myself. I’m a SAHM so this is my “job”. My annual PITI for all homes is $33,000 and my gross rental income is $123,900. I used to set aside 12k/yr for repairs, but stopped doing that because I haven’t had much and have 40k sitting for that.

Until recently I used to invest the profits in index funds. I’ve since pulled that and have it sitting in cash looking to pick up a 5th property when the bubble bursts. I have enough for a cash buy. The real estate income invested monthly for the last 10 years has created incredible opportunity.

My goal is to get this 5th property and hopefully be bringing in a gross of 160k/yr and at that point my DH will retire from his w2 job. The rental income will be a nice supplement to his 401k.

And you would be a fool to do so. It significantly lowers your leverage. Better to spread it around as down payments on multiple properties. If you pay cash for an income property you will likely do worse than a total stock market investment. The reason real estate can sometimes have better returns in only because of leverage.

Not that poster, but I’m a realtor and I have about a dozen investor clients. Quite a free of them are cash buyers. Especially now. I’ve had calls from alll of them waiting on opportunity now that rates have increased. I’d not say any of them are foolish, they are incredibly successful.

For developers cash buy is usually an investment into a shell, a property for development. They buy it for $250K then take a loan of $800K and develop. So it's leverage again, just spent on their own renovations/business.

I haven't seen anyone successful buying condos for cash

This. Or it is a 1031 exchange and they need to deploy the cash to avoid paying taxes on it. I assume your "investor clients" aren't relying on you to provide financial advice.