I'd love the advice of these savvy real estate investors. We purchased two condos in Hawaii as investments about 6-7 years ago. Condo A was a foreclosure and purchased for $155K with 20% down. It needed about $16K of work. Last year, profit was $2,500. Current value is $270k. Condo B was purchased for $265K with 30% down. Last year, profit was $2,200 and current value is $320k. We currently live in Washington State with no state income tax. However, the legislature might pass a capital gains tax this month. Should we sell both, just one, or continue owning both? We have a great property manager who handles everything like a pro.

Anonymous wrote:This isn't perfect - but it's a quick overview of the sort of analysis you should apply to real estate investments:

http://www.biggerpockets.com/renewsblog/2010/06/30/introduction-to-real-estate-analysis-investing/

If you get a negative number... or even one that's lower than the stock market returns, cut your losses and get out.

Assuming you can actually get out, I'm barely above water, in order to sell I have to bring some money to the table.
I'd rather have $100 negative cash flow for now, and sell later when tenants pay some of the mortgage down.

PS I don't consider it an investment, and will sell as soon as I can.

This isn't perfect - but it's a quick overview of the sort of analysis you should apply to real estate investments:

http://www.biggerpockets.com/renewsblog/2010/06/30/introduction-to-real-estate-analysis-investing/

If you get a negative number... or even one that's lower than the stock market returns, cut your losses and get out.

Anonymous wrote:

Anonymous wrote:Asking "how much do you make a month" is sort of the wrong question. The real question to ask would be "what is your return on investment / capital".

For example the previous poster says that they are making $1050/month in a townhouse while another poster is making $300 a month.

That is great, but how much equity do they each have tied up in their townhouses, that is the real question. If the $1050 a month poster owns a $300K townhouse with no mortgage, then they are basically investing $300K a year to make $12,600 a year. The return on investment would be 4.2% That is pretty good.

The $300 a month poster might have a $250K mortgage on a $300K townhouse, so $50K in equity. That is a return of 7.2% on their investment. Which is much better, even though they are making less money each month.

+1000

I am a real estate investor. I love real estate and always get excited when I click on these threads, but they are inevitably stupid and useless because people write a post consisting of one number, like "$2600", like that's supposed to be informative in any way. So basically people are treating it like the "what is your net worth / how big is your engagement ring" threads, which I generally don't click on.

I wish the DCUM real estate and finance fora had a culture of more earnest and detailed posts by investors, but it seems not destined to be. So I end up spending more time on bigger pockets and seeking alpha instead.

Also an investor and I couldn't agree more. It worries me that most folks on this board seem to consider a negative cash flow property "an investment", but that's my bias as a landlord. I'm sure most people here are trying to do the right thing by their rental properties but I'm concerned they don't have the right tools to evaluate whether they're making a smart financial decision. At the end of the day, it's clear that most DCUM readers are just not real estate investors, which is fine, if disappointing for those of us who like to swap ideas.

Lose $25 a month, which is negligible but still not a profit. Model tenants though, have reimbursed them just for the costs of parts as they've made repairs around the property (the man is very handy). Hope to increase the rent by $150-$200 for the next tenant.

Anonymous wrote:

Anonymous wrote:Asking "how much do you make a month" is sort of the wrong question. The real question to ask would be "what is your return on investment / capital".

For example the previous poster says that they are making $1050/month in a townhouse while another poster is making $300 a month.

That is great, but how much equity do they each have tied up in their townhouses, that is the real question. If the $1050 a month poster owns a $300K townhouse with no mortgage, then they are basically investing $300K a year to make $12,600 a year. The return on investment would be 4.2% That is pretty good.

The $300 a month poster might have a $250K mortgage on a $300K townhouse, so $50K in equity. That is a return of 7.2% on their investment. Which is much better, even though they are making less money each month.

+1000

I am a real estate investor. I love real estate and always get excited when I click on these threads, but they are inevitably stupid and useless because people write a post consisting of one number, like "$2600", like that's supposed to be informative in any way. So basically people are treating it like the "what is your net worth / how big is your engagement ring" threads, which I generally don't click on.

I wish the DCUM real estate and finance fora had a culture of more earnest and detailed posts by investors, but it seems not destined to be. So I end up spending more time on bigger pockets and seeking alpha instead.

You think a real estate investor who is successful is going to share details about strategy and profits in the same market he operate in?

We lose $300/mo on a condo in Arlington. We have about $50k in equity in it. Waiting a few more years to sell it. It's appreciating annually faster than our loss, plus the tenant is paying down the mortgage. Being a landlord is a huge pain though.

Anonymous wrote:Asking "how much do you make a month" is sort of the wrong question. The real question to ask would be "what is your return on investment / capital".

For example the previous poster says that they are making $1050/month in a townhouse while another poster is making $300 a month.

That is great, but how much equity do they each have tied up in their townhouses, that is the real question. If the $1050 a month poster owns a $300K townhouse with no mortgage, then they are basically investing $300K a year to make $12,600 a year. The return on investment would be 4.2% That is pretty good.

The $300 a month poster might have a $250K mortgage on a $300K townhouse, so $50K in equity. That is a return of 7.2% on their investment. Which is much better, even though they are making less money each month.

+1000

I am a real estate investor. I love real estate and always get excited when I click on these threads, but they are inevitably stupid and useless because people write a post consisting of one number, like "$2600", like that's supposed to be informative in any way. So basically people are treating it like the "what is your net worth / how big is your engagement ring" threads, which I generally don't click on.

I wish the DCUM real estate and finance fora had a culture of more earnest and detailed posts by investors, but it seems not destined to be. So I end up spending more time on bigger pockets and seeking alpha instead.

Anonymous wrote:We made about 100K last year - and paid taxes on about $500 of it. Even after years of owning rental property, the tax breaks still surprise me.

Okay, if you "made" $100k that implies profit. Tell me how you managed to get $95,500 in profit past the IRS without paying any tax on it? You must be using some "tax breaks" that don't apply to the rest of us.

We made about 100K last year - and paid taxes on about $500 of it. Even after years of owning rental property, the tax breaks still surprise me.

Anonymous wrote:-250 when the tenant pays her rent, but she also seems to think that's negotiable so some months -1050. It's my husbands old house he had before his divorce and it's small and in an economically depressed area of this south. I wish the tenant would do us all a favor and burn it down.

Haha I feel the same way. We have a house in Midwest, very small but in a good area. Losing around $200 each month, but then I think ok in 20 years it will be paid off. Plus tax return is better.

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Anonymous wrote:We are in he negative every month wrt mortgage and fees. However we make up for it at tax time

How? How can you write off the loss of you aren't in the real estate business and make more than $110,000 a year?

I would assume s/he is depreciating the property.

But even if you depreciate, you can't offset anything but rental income right? I don't own any rental property, but it doesn't seem worth the effort of dealing with tenants if you don't make any money.

I don't own rental property but I would think the main draw is the tenant paying the mortgage and building up your equity for you.

I disagree. There is an opportunity cost to tying up a down payment. If you have $150K you can put it in the market and make an average annual return of 7%. IMO rental property should return more than that to be worth the investment - not to mention the time and trouble.

We bought the property at times when you could do 0 downpayment.

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Anonymous wrote:We are in he negative every month wrt mortgage and fees. However we make up for it at tax time

How? How can you write off the loss of you aren't in the real estate business and make more than $110,000 a year?

I would assume s/he is depreciating the property.

But even if you depreciate, you can't offset anything but rental income right? I don't own any rental property, but it doesn't seem worth the effort of dealing with tenants if you don't make any money.

I don't own rental property but I would think the main draw is the tenant paying the mortgage and building up your equity for you.

I disagree. There is an opportunity cost to tying up a down payment. If you have $150K you can put it in the market and make an average annual return of 7%. IMO rental property should return more than that to be worth the investment - not to mention the time and trouble.

+1. I'd love to understand the economics of the PP with 24 units in Chicago.

We are considering selling. The units are older now and no longer in a super desirable area, but do well because of college students and a steady stream. The property itself is worth several million, but probably less than you think (you'll find 10 and 12 bedrooms in Chicago for under $3M.... It's not DC). Everything pivots on what you think the rate of return we can achieve is - realistically we'd need to net at least $6M+ to have a comparable income stream. That's probably in the ballpark for our property (I should have typed 24 bedrooms, technically not 24 units).

The other consideration is that when the economy weakens we tend to do better with rentals, somewhat paradoxically perhaps because our location isn't great so we tend to see people who are cost conscious over most other things. So we've struggled with the decision to keep or not because the investment is basically a hedge at the moment, and of course it's very hard to time an exit from the market. And then purely emotionally, this property has been in the family a long time, selling it feels a bit like selling what could be a generational income stream (at least until the property gets so old it needs to be torn down, but that's a long ways away)

Anonymous wrote:

Anonymous wrote:Around $50k true net a year after all expenses and management fees and I have none of my own cash in them at this point.

15 rental properties and about $3.25M in equity.

You only have $50k return on $3.25 million? Surely that money would be better invested in the stock market.

I am the $3.25M poster. $50k is cash on cash return. Prinicipal pay down is about another $65k per year. So overall return is around 4%, plus any appreciation (which is leveraged approximately 2 to 1). In other words if property averages a 2% return I actually yield 8% on my portfolio. Besides, and this is very complicated, I use some of the equity as collateral for an unrelated business that generates returns in the 30%+ range.