6 answers
Dylan
Student
Walnut Creek, California
1
Question
Asked
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Can anyone give me and or guide me to advice on rental property real estate?
I am interested in learning about rental properties as a form of passive income. #rentalproperties #realestate #investing #passiveincome
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6 answers
Dan Engel
Sales & Business Development
6
Answers
San Juan Capistrano, California
Updated
Dan’s Answer
I can help you out with any questions related to rental real estate. I've owned several rentals in the past and have also read a ton of books on the subject.
Specifically, what would you like to know?
Specifically, what would you like to know?
I'd love to know more about investing with a limited budget, and fixer uppers strike me as most interesting (being a construction management major). So far listings in my area just dont fit the price to rent ratio so I've considered investing out of state, however at my age this does not seem too realistic .
Dylan
Ben Gof
Finance
29
Answers
Wayne, New Jersey
Updated
Ben’s Answer
Hello Dylan,
This is a great question and I could probably go on for pages, but I'll limit myself to a few paragraphs. I currently own 6 properties and have owned others that I have sold in the past. I started about 30 yrs ago, a year after I graduated college. The good news for you is that there is alot more resources available now than there was in 1992 when I bought my first property due to the Web. The Web makes it easier to find properties, use online mortgage calculators, find tenants and screen potential tenants.
The way I started was, I bought my first property and lived in it for 6 months, not really thinking about it as an investment. I then realized that I could rent it out and the amount would cover my entire monthly mortgage bill. So I found a good tenant and moved back in with family. That way I was able to save up a down payment faster for my second property and did the same thing again. From there it was rinse and repeat.
I would suggest starting with 1 property as your own personal home and live in it for a few months to a year so you can understand the types of things that come up with home ownership such as leaks under the sink, filling holes in walls with spackle, painting, fixing light switches etc... You can even start with a condo. You don't need to learn how to do those types of repairs on your own, but if you get into home ownership you should understand these things happen and tenants will call about them from time to time. You should also have some contacts for a local handyman who can do those things when the tenants call.
As was mentioned in another reply, look for properties in good neighborhoods , even if they need some work. Be careful of falling in the trap of buying nicely fixed up properties in troubled neighborhoods. There is a saying: "the 3 most important things in real estate is location, location, location." You'll pay more for properties in the nicer neighborhoods but you'll also get a more professional type tenant and command more rent so it evens out. Most of my properties where Condos or single family homes. I would get a professional tenant who would mail me a check or nowadays use Zelle and just send me the rent that way. I once had a 2 family house in a sketchy neighborhood and every month it was the same story where I had to chase down the tenants to get paid. They always was paid, but it would be on the 7th of the month or 10th of the month and after multiple calls and knocks on the door. It was very time consuming to say the least.
Now for the really great news. This is an excellent way for you to build wealth over time. Seven out of 10 millionaires in this country became millionaires from real estate. This happens 2 ways. First, as the tenant is paying rent, they are really paying down your mortgage, so your building equity there. Second, the value will appreciate over time and your equity will continue to increase. I purchased a condo in 1992 for $39K, that is now paid off, brings me $600 month net income and is worth $125K. You can do it young man!
This is a great question and I could probably go on for pages, but I'll limit myself to a few paragraphs. I currently own 6 properties and have owned others that I have sold in the past. I started about 30 yrs ago, a year after I graduated college. The good news for you is that there is alot more resources available now than there was in 1992 when I bought my first property due to the Web. The Web makes it easier to find properties, use online mortgage calculators, find tenants and screen potential tenants.
The way I started was, I bought my first property and lived in it for 6 months, not really thinking about it as an investment. I then realized that I could rent it out and the amount would cover my entire monthly mortgage bill. So I found a good tenant and moved back in with family. That way I was able to save up a down payment faster for my second property and did the same thing again. From there it was rinse and repeat.
I would suggest starting with 1 property as your own personal home and live in it for a few months to a year so you can understand the types of things that come up with home ownership such as leaks under the sink, filling holes in walls with spackle, painting, fixing light switches etc... You can even start with a condo. You don't need to learn how to do those types of repairs on your own, but if you get into home ownership you should understand these things happen and tenants will call about them from time to time. You should also have some contacts for a local handyman who can do those things when the tenants call.
As was mentioned in another reply, look for properties in good neighborhoods , even if they need some work. Be careful of falling in the trap of buying nicely fixed up properties in troubled neighborhoods. There is a saying: "the 3 most important things in real estate is location, location, location." You'll pay more for properties in the nicer neighborhoods but you'll also get a more professional type tenant and command more rent so it evens out. Most of my properties where Condos or single family homes. I would get a professional tenant who would mail me a check or nowadays use Zelle and just send me the rent that way. I once had a 2 family house in a sketchy neighborhood and every month it was the same story where I had to chase down the tenants to get paid. They always was paid, but it would be on the 7th of the month or 10th of the month and after multiple calls and knocks on the door. It was very time consuming to say the least.
Now for the really great news. This is an excellent way for you to build wealth over time. Seven out of 10 millionaires in this country became millionaires from real estate. This happens 2 ways. First, as the tenant is paying rent, they are really paying down your mortgage, so your building equity there. Second, the value will appreciate over time and your equity will continue to increase. I purchased a condo in 1992 for $39K, that is now paid off, brings me $600 month net income and is worth $125K. You can do it young man!
Jason Kuok
8
Answers
Macau
Updated
Jason’s Answer
Hi Dylan. I entered the rental property real estate market not too long ago about 4 years now. Of course I agree with Dan keeping your properties relatively close would be able to save your money on management fees however the price to rent ratio in California is ridiculous so my suggestion to you would be think outside the box.
You might have to do some research in the first hand to see where people are moving and are companies relocating their headquarter from one place to another. Is there a specific trend on this ex East to West/Central? There is a saying "Money is where the people are". I am sure you can find out a lot more about where to start by looking at the trend and statistic.
The costs of living where the companies are relocating to might be relatively lower and easier to start. Please please please take advantage of the record low interest rate and to leverage the situation at the moment now.
Real estate is a great industry to step your foot into and if you would like to know more why not try to become a real estate agent it only takes weeks to complete and once you are on the field more and more opportunities will open up for you. At the same time you can be managing your own properties and getting commission at the same time by doing what you like.
You might have to do some research in the first hand to see where people are moving and are companies relocating their headquarter from one place to another. Is there a specific trend on this ex East to West/Central? There is a saying "Money is where the people are". I am sure you can find out a lot more about where to start by looking at the trend and statistic.
The costs of living where the companies are relocating to might be relatively lower and easier to start. Please please please take advantage of the record low interest rate and to leverage the situation at the moment now.
Real estate is a great industry to step your foot into and if you would like to know more why not try to become a real estate agent it only takes weeks to complete and once you are on the field more and more opportunities will open up for you. At the same time you can be managing your own properties and getting commission at the same time by doing what you like.
Dan Engel
Sales & Business Development
6
Answers
San Juan Capistrano, California
Updated
Dan’s Answer
Hi again Dylan, you are right to believe that the price/rent ratio in California doesn't quite work out. It's been a problem in this state for quite some time.
One of the only ways to combat this would be to find a true bargain, usually a fixer, in a great neighborhood. But typically this still would only barely pay the mortgage, let alone the taxes and insurance and would therefor create a monthly loss. A lot of people will still do this sort of arrangement expecting the value of the house to rise ( which they have in the last 10 years) and then sell the rental for a profit.
If you could find this hidden gem, possibly the answer would be to live in the house yourself and rent the other rooms out, either long term or on Airbnb. You might still have a deficit, however if it's low enough, you could consider this your "rent" as you would need housing for yourself anyway.
Over time, rents will increase and one day in 5-10 years you'll be able to raise rents enough to actually make a monthly profit.
Out of state rentals could be another option, however I would caution that you would probably want a local property manager to keep an eye on things and that might take roughly 10% of the monthly rent to pay one. there are people that have done this successfully, however I like to keep rentals relatively local because I know the market and sometimes property managers don't do a good job.
I'd also read "Rich dad poor dad" as it gives a really good overview of investing in rentals and making money in general.
One of the only ways to combat this would be to find a true bargain, usually a fixer, in a great neighborhood. But typically this still would only barely pay the mortgage, let alone the taxes and insurance and would therefor create a monthly loss. A lot of people will still do this sort of arrangement expecting the value of the house to rise ( which they have in the last 10 years) and then sell the rental for a profit.
If you could find this hidden gem, possibly the answer would be to live in the house yourself and rent the other rooms out, either long term or on Airbnb. You might still have a deficit, however if it's low enough, you could consider this your "rent" as you would need housing for yourself anyway.
Over time, rents will increase and one day in 5-10 years you'll be able to raise rents enough to actually make a monthly profit.
Out of state rentals could be another option, however I would caution that you would probably want a local property manager to keep an eye on things and that might take roughly 10% of the monthly rent to pay one. there are people that have done this successfully, however I like to keep rentals relatively local because I know the market and sometimes property managers don't do a good job.
I'd also read "Rich dad poor dad" as it gives a really good overview of investing in rentals and making money in general.
Matthew Roque-Paskow
30
Answers
Fort Lauderdale, Florida
Updated
Matthew’s Answer
A great way to learn about Real Estate is listening to some podcasts on it. I recommend bigger pocket podcast. They will teach you about the BURR method, and more.
It is important to search comp around the area (what other people are paying in rent or what other people paid for their house) this helps you make an informed decision on if it is going to be a profitable deal!
It is important to search comp around the area (what other people are paying in rent or what other people paid for their house) this helps you make an informed decision on if it is going to be a profitable deal!
Patrick Nuciforo
1
Answer
Updated
Patrick’s Answer
Hello. I would recommend signing up for Biggerpockets.com. There you can browse their forums and look at what other people are asking. As mentioned in a previous comment their podcasts are awesome. I've owned and sold several rental properties and would not be living in my current house if it wasn't for those investments. Currently I own 2 investment properties and they continue to provide me with a great 2nd income stream. Good luck!