Theory of investing in rental properties? - Posted by Cindy

Posted by mk on October 02, 2002 at 11:13:17:

But I was wondering…

1)Do you put any cash down at all…when u bought the duplex? or Strictly NOthing out of pocket… Ideally how much would be a good idea?

2)I agree 100$ is not enough reward. In case of a duplex and its maintenance-How much would make it rewarding…$300…or?

Happy Investing

Theory of investing in rental properties? - Posted by Cindy

Posted by Cindy on May 30, 2002 at 21:50:17:

Can anyone give me the big picture in investing in rental properties, single family homes/two or more unit buildings. Should I be looking at making money by having someone pay down my mortgage so I can sell for a profit or should I be just looking for a lower mortgage, make maybe $100 per month clear off the rent and buy a lot of these. Where is my retirement coming from in 10 years or so? I have 2 single family properties and a 2 unit and I am planning on buying more but, I think I am losing my perspective.

Theory of investing in rental properties? - Posted by David Krulac

Posted by David Krulac on May 31, 2002 at 15:38:02:

i’ve written before about rentals.

  1. SFH are easier to rent and easier to sell, and easier to manage and have less expenses.

  2. Multi units generate more income

  3. Only buy positive cash flow, figure on little or no appreciation, then be pleasantly surprised.

  4. hold, let the tennats pay off the mortgage.

  5. raise rents as appropriate and your positive cash flow should increase as the years roll along.

  6. don’t necessarily limit yourself to just one strategy. that’s like carrying a bow and only having one arrow in your quiver.

David Krulac
Central Pennsylvania

Do not buy rental properties - Posted by Bud Branstetter

Posted by Bud Branstetter on May 31, 2002 at 13:09:57:

If you are losing your perspective you don’t want to be buying rentals. Buying a rental becomes a fixed return on your investment. Unless you know what you are doing you can make a better return buying under market and reselling. When you have the cash that you don’t know what to do with you can consider doing rentals or carrying notes.

Re: Theory of investing in rental properties? - Posted by Mark (SDCA)

Posted by Mark (SDCA) on May 31, 2002 at 12:07:51:

Ken in sc has some good points. And I will add my perspective. What are YOU looking for? Me… I am looking for hassle free cash flow. In that order.
True, apartment buildings do (should, may) throw off more cash flow. But look at the average turnover in apartments. WAY more than in single families. Also, the average length of vacancy is longer.
Joe is right… paying down the mortgage is a long slow process. But even in the early stages of a mortgage you are probably paying down 50-100 a month (depending on the size of the mortgage and the term). Not a ton. But its still 600-1200 a year. And it gets larger every single month.
There is nothing wrong with having your tenants pay down the mortgage every month, especially if you can offset the REI “loss” (due to depreciation if nothing else) against W-2 wages.


investing in rental properties - Posted by ken in sc

Posted by ken in sc on May 31, 2002 at 07:36:06:

It seems to me like it is a sliding scale. The more units, the more cash flow (but more work). For example: a $100,000 house may rent for $1000/mo. but has only one tenant to manage. A $100,000 duplex may rent for $600/unit per month which is more cash flow but more tenants - this continues on up into apartments which have great cash flow but need an on-site manager.

Appreciation is a local thing and noone here can tell you what you will get. Even your local “experts” could be wrong on that.

Now, as far as your particular investment strategy - you would have to provide more financial data for us to give any helpful advise. What are you trying to accomplish? How many years do you have to reach what goals? I know investors who make six figure income elsewhere and want passive investments with good long run potential and good tax wriote-offs. I know investors who buy strictly for cash flow today who buy low income - high cash flow - section 8 type property that will probably not appreciate but pays the bills today. So you need to decide what you want your RE investments to do for you, and then ask questions as to how to design a portfolio to accomplish those particular goals.


Re: Theory of investing in rental properties? - Posted by Shawn Dostie

Posted by Shawn Dostie on May 31, 2002 at 06:33:47:

I first thought that I would invest in single families because I assumed they were easier to rent or resell(they are). I was approached by a couple who sold me a duplex and a triplex. The per unit cost was much lower than a single. Therefore the cashflow is better. What I look for is a property that allows positive cashflow with no cash out of pocket, which makes the yield infinite. That doesn’t mean that I don’t put any cash down, I just buy with the thought that the property must support itself. (I have enough children). By cashflow, I don’t mean $100.00 per month. In my opinion that is not enough reward to offset the risk of all the things that go wrong from time to time. How much to look for? Depends on you and your needs. I also buy on a maximum 20 year mortgage. I get a lot of flak from this forum on that, but when I am 55 I want everything paid for. That’s MY 401k. If it will pay me while paying for itself in 20 years or less, I think that’s a pretty fair deal.

Good luck,

Re: Theory of investing in rental properties? - Posted by JoeKaiser

Posted by JoeKaiser on May 30, 2002 at 22:07:24:

The theory being more along the lines of profitting long term from the property’s appreciation. Paying down the mortgage is a long slow process.

I think if you can set it up so it’s relatively painless, then it’s worth doing. Without the proper framework in place, though, it’s best avoided.