Income property - any good resources for start ups?

[ColdAccord]

Have you had a home inspection done? If there are any issues, you may be able to have the seller take care of them and roll cost into the mortgage. Or perhaps the situation qualifies for a 203k where you can get your repair costs rolled into the mortgage. It's always best to borrow high and roll everything into a small monthly payment than pay thousands out of pocket for repairs. Even if you have a huge cash reserve that money could go towards other projects instead.

Commercial is more difficult to find tenants for than residential. The less expensive the property, the more at risk you are for bad tenants.

An LLC is a good idea, to cover your ass. My buddy was getting his roof done, one of the workers fell and broke his legs. Roofing Co. had an insurance lapse, so guy sued my buddy and settled for some big bucks from him. Good insurance saved his ass.

If it's in a rough neighborhood talk to your councilmember and see if there are any grant programs available.

I'm renovating a 7 untit 16,000 sq ft building right now. It's a huge headache. But it should pay off well in the end.

[tim88325is]

Depends on the investor too.

If you are inclined towards banking and checking the stock market, maybe a low fee index fund is better. If you know how to paint, do plumbing, electrical, etc. and have the flexibility to cater to issues, no reason why an investment property wouldn't work out if purchased correctly.

Central PA is world away from the greater NYC metro area. Who cares what the mortgage interest is, it is never going to get better than now anyway and what are the options if one is not already independently financed? The renters will pay it, you are leveraging their income to build assets for you.

http://www.realtor.com/realestateandhomes-search/Williamsport_PA/type-multi-family-home

According to Census.gov, the median home price went from $67K in 1981 to $240K in 2011 or 358%, the S&P 500 yielded a 287% return, if all dividends are reinvested this bumps up to 777%.

[Hansel]

According to Census.gov, the median home price went from $67K in 1981 to $240K in 2011 or 358%, the S&P 500 yielded a 287% return, if all dividends are reinvested this bumps up to 777%.

Keep in mind 67k in 1981 dollars is 170k in 2011 dollars before you're cashing in that "300%" return...

[tim88325is]

That is true, I did use the adjusted numbers for the S&P though.

I am really not trying to argue either way but am in the same boat as the original poster, considering a rental property versus other options. I can do the maintenance but not entirely sure I want the hassle.

My family has done well with shorter-term rental properties in the past, sometimes even doubling their money in less than 5-6 years, all pre-housing bubble.

What would be a comfortable cushion for a rental property? 20% per month after fixed costs?

Two units rented at $600 each with a $1000 mortgage taxes included = $200 a month to save for future expenditures? That could get sucked up very quickly if the property is deteriorating.

Thanks for all the ideas.

[george graves]

Just an FYI, those TV shows of people flipping houses, they often fake the numbers. They won't clear $30k on a flip as they say. It might be much less - and sometimes in the red. So why do they agree to do it? Cause the production company is giving them 50k for just shooting the show over 3-4 weeks, and sometimes fronting the money.

[tim88325is]

Oh yeah, I tell people that Ancient Aliens or Finding Bigfoot is way more realistic and plausible than gut renovating a kitchen in 3 days or whatever....

[mjimport]

As "jross" recommended in page 1 here, biggerpockets.com has great info on how to determine viability. Cash on cash ratio is one, from what I'm told, 15% cash vs investment is a good number, but less than 5% is no go. Also I've been told that landlord should use the "50% rule" which says your expenses usually average out to 50% of rent revenue.
But if this is true I'm not sure how anyone makes money, unless it's a straight flip investment.
I was looking at a house that would have made zero profit if using 50% rule, but showed great cash flow sing the COC ratio (20% +). So basically there is no equation that will tell whether to pull the trigger or not, some of it always comes down to your gut.

[mbonder]

Keep in mind 67k in 1981 dollars is 170k in 2011 dollars before you're cashing in that "300%" return...

That's exactly what I was talking about earlier. Is it worth 30 years worth of repairs and hassle from renters for a mere $70k? I think I'd rather just put my money in the market and get the same return with none of the hassle.

Now if I knew I'd be making exponentially more than that, maybe 3x or 5x that $70k it becomes a much more intriguing thought...