200k, can it generate 20k yearly ?

Jon Holdman

Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes

11y

$20K annually from $200K invested is a 10% return. That should be achievable in a variety of ways. One of the easiest would be to hook up with rehabbers and become a lender. That's also achievable with rentals in some areas.

2 Reply

Colin G Murphy

Investor · Tampa, FL · Member since 2010 · 263 posts · 159 votes

11y

Hi @Mario V.

I´m based in Madrid Spain (since 2005) and it is very difficult to get high yields on residential properties here, especially on coastal properties depending on variable tourist income. This is not a 10% yield market at all. There are a lot of agents promising unrealistic returns.

Mario V.

OP

London, Ontario · Member since 2014 · 5 posts · 3 votes

11y

@Joel Owens I like to think I'm good at reading up and doing research once I'm pointed in a direction, so if you have any specific keywords and suggestions you think I should look into, I'd be thankful. I have no difficulty reading up articles and cross referencing articles and options online to debunk hyperbole, but as a right side brain user I tend to lack an idea of what direction to start looking into in these matters.

@Jon Holdman Thanks for the tip, I've been reading into lenders and rehabbers now. My worry (from what I'm reading so far) with that would be trying to make regular decisions while sitting far away in Spain, but I'd trust my friend to do that for me here in Canada if I went that route.

Incidentally... what is an actual average return rate with rents ? 6%, 8%... less ?

@Colin Murphy Yeah, after doing some reading on Real Estate in Spain (and some horror stories) and given Spain's current Economy issues, I do feel more comfortable leaving my money in Canada so far.
Thanks for the advice, and if you're in Madrid (not Florida?) I hope you're enjoying life there!.

While reading up tonight I came across REITs which at first glance sound like a great alternative for someone inexperienced like me, looking for a simple cash flow, but things that sound great tend to make me wonder why not everybody is talking about them (or maybe they are and they just don't come up in artsy conversations).

Would a mixture of REITs be a good idea for my needs or is there a devil somewhere, aside from the obvious things I'm reading about, like being susceptible to the moods of the market ?

Mario V.

OP

London, Ontario · Member since 2014 · 5 posts · 3 votes

11y

Hmmm I think I'm starting to see the issue with the yield rates and share prices with REITS...

Jon Holdman

Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes

11y

Rentals are much more hands on that making loans, though making direct loans are not hands-off, either.

There is no such thing as an average return on rentals. It can be quite high in some areas, perhaps 20% or more. Especially if you are hands on. It can be badly negative in MOST areas.

Personally I think investing in US real estate from overseas really sets you up to be fleeced by bad operators. But then I'm uncomfortable even investing as close as Kansas City, which is a quick flight from Denver.

Gordon CuffePro Member

Investor · Roseville, CA · Member since 2009 · 1k+ posts · 583 votes

11y

You can earn 10% annually by becoming the private lender. You can find a broker who will have a judiciary obligation to find the borrower with the means to pay back the loans. You would always want to use a title company to transfer funds so that the paperwork is correct. You can also buy properties towards the middle of the U.S. to earn higher returns but you need good property management. You cant get good returns in CA or other coastal states as investors make money on appreciation. If someone says send me the money and I will take care of it, then run away from them.

Dustin Rose

Investor · El Dorado Hills, CA · Member since 2014 · 447 posts · 62 votes

11y

My suggestion would be to buy your own assets and earn 20k annually. A private lender should earn more than 10% per year if they're charging points and the going interest rates for hard money is 11-12% per year where i'm at.

You can buy 8-10 of single family homes or duplexes in a variety of areas like Indiana, Ohio and Michigan that are priced at 60k in decent areas. After paying your expenses and mortgage you should be able to net 3-4k per house annually. The advantage is that you're also paying off 8-10 of your own assets and in 10-15 years you can literally own a few of them out right. This of course all depends on buying the right properties in the right areas- so you will need to team up with someone who is trust worthy and can help you execute this strategy.

Same thing with lending your money privately. Team up with someone experienced and trustworthy if that's the way you decide to go- always remember that real estate investing is either Gambling or Investing. Every deal has the option to be either. New investors lose their money when they don't seek the advice of an experienced successful investor. Use other peoples learning curves to lower your risk.

Mike D'ArrigoPro Member

Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes

11y

I agree with @Jon Holdman that investing in U.S. properties from overseas can set you up to be fleeced by bad operators. There are a lot of bad ones but there are also some very good ones, some of which can be found right here on BP. It all comes down to knowing who you are working with and doing your duel diligence on them but that's true of any investment.

Podcast Guest on Show #47

Joel OwensBusiness Member

Moderator

Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes

11y

There are various factors at play.

There is the timing of your currency conversion. Some of my foreign investors the exchange rate is peaking for the countries value to the U.S. dollar and they want to take advantage. There are also issues with international tax treaty laws and entity creation and structure set up over here.

Another hurdle is some commercial sellers are apprehensive going under agreement with a foreign buyer who hasn't visited the area and property yet. They can read all of these great demographics and info about the area but it is coming here that solidifies the deal.

There is a lot of money and I mean a lot of money flowing here. I am getting approached by private investors that have tens of millions to hundreds of millions to invest.

While they love their countries the taxes over there tend to be more than the U.S and the other factors are that the countries are very unstable. So holding long term money there where the buyers feel the government may collapse or be put into a tailspin with the economy they do not want to hold their money there.

I personally think 2015 will be a record year for buying in the U.S. Some countries the investors pay 10 to 12% interest to have loans there and they are amazed the interest rates and pricing they can get here on commercial assets.

I would say buying houses over here can be a challenge because yes you can spread assets out but that can be a bad thing as well.

10 sets of roofs, a/c's, different vintage build of houses, varying PM companies to control as they likely to do not manage different areas etc. It can quickly turn into a nightmare for an out of state investor much less out of the country.

With commercial assets you run less into unprofessional PM's etc. but the barrier to entry is much higher.

The key is to connect with someone who isn't a scammer and will tell you what you need to do to buy here and what it will take.

For example in commercial if for every dollar in your country is worth 2 U.S. dollars plus you have low debt fixed in the 4's and cap rates in the 8's you do not stand to gain by waiting.

If your currency devalues and interest rates rise here and cap rates compress you could lose 100 basis points of return by waiting.

NNN Invest53 Reviews

Shawn Holsapple

Residential Real Estate Broker · Indianapolis, IN · Member since 2010 · 1k+ posts · 557 votes

11y

@Mario V. welcome to BP!

Like mentioned above and specifically by @Jon Holdman there are lots of ways to loose your foreign funds in the US.

Unfortunately, I see this on a somewhat regular basis. Investors work with a company or individual without doing much [if any] due diligence and end up getting fleeced or worse.

I spent 5 years recently in Calgary, AB and know that one will be hard pressed to find anything to buy/rent for $200k. That would just be the down payment needed for a home that won't cash flow.

I work with several local, out of State & Foreign Nationals that lend. That seems to work very well for them.

Your 10% goal should be easily obtained by partnering up with investors.

Most of the lenders that I use see a 20%+ annual return - all secured by solid real estate investments and [of course] the proper documentation and insurance.

Podcast Guest on Show #89

Engelo RumoraBusiness Member

Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes

11y

Originally posted by @Mario V.:

Hi everybody.

For the last few weeks I have been trying to read up as much as possible on what I want to do, and the most encouraging and interesting google results are always from this forum.

My dilemma comes from some money coming to me within the next few months. Work sometimes pays off in interesting ways.

So until recently I never had a reason to think outside my usual comfortable box and common retirement plans.

I've spent some time reading up here but as someone who has a different lifestyle from the incredibly knowledgeable people in this forum, I never looked in this direction of life and things still don't feel very clear to me and was hoping for some insight, confirmations, reassurances, tips, warnings... anything that makes potentially throwing large (for me) amounts of money at something feel less terrible.

Here's my situation:

-I'm in Ontario and while most of what I read here seems to be US related, I imagine general wisdom will be just as useful either way.

-I'm turning 40 next month! (not sure why I would put an exclamation mark on that).

-I'll have something over 200k (CAD) sometime within the next 1-3 months.

-Bought a small house here last year, paying mortgage.

-I do always keep enough cash around to survive for up to 6 months without changing my lifestyle, so whatever my needs are I should be fine for a while, plus I have other small investments and such that I'd rather not touch.

-I'm Spanish, been working here as an artist for a studio for years and considering going back home soon, either permanently or for a few years or splitting time between Canada and Spain, from where I could still work from home for the same Studio here.

My initial plan was to use the 200k to buy a property in Spain that I could use when I'm there, and use a Property management company to rent it out to tourists (which seems pretty popular these days) when I'm here.

I haven't completely axed that idea but the more I read on the topic, coupled with the CAD to EUR rates and the fact that if I decide to stay in Spain for a longer period of time there would be 0 cash flow, the more it sounds like a rather bad investment, for what I want anyway.

So plan B, which is currently plan A, would be to buy some property here in Canada that I just rent out, regardless of where I am and either have my savvy best friend look over it/them (hope she won't read this before I ask her if it comes to it) or have a property management company do it.

In a perfect world I would use the 200k to generate around 20k each year, which is all I would need to live comfortably in Spain if I wasn't able to work at all... which is the very worst case scenario I like to plan for. While I'm not a fan of it, there's always contract work for me I can do from home if things should ever get tight (and I'd rather not move again to yet another country to be on site) so I should be fine either way.

My concern is that I don't know at all if 20k net is realistic, until now I never thought much about passive cash flow at all. I've found a lot of very helpful reading material here but simple numbers that make sense for a layman in this area seem hard to come by.

I'd be interested in knowing if it's a realistic goal, or what it would take to get there, having some 200k as a starting point.

I realize that the type, quality and location of properties play a role, and that issues in any property would always add extra costs... and I imagine that some issues can be rather expensive, too... for which I would use an existing pool of around 30-80k that is separate from the 200k.
As long as I do some work I don't see a problem with always having the ability to maintain or even expand that emergency pool, if it seemed necessary.

I think that's all, any advice would be welcome

Thanks.

Hi Mario,

Please don't think I am trying to be a smart a.. with my comment but I wouldn't get out of bed for anything less than 20% net income.

Ohio has some great opportunities especially if you don't buy turnkey and do the work yourself.

It takes time to set up the right structure but it definitely can be done.

I can list many deals over the last 8 months in solid B class areas that we bought with those high net figures.

Check out the Midwest.

Thanks and have a great day.

Oz Realty4.5367 Reviews

Account Closed

Professional · Noblesville, IN · Member since 2014 · 222 posts · 66 votes

11y

Welcome to the BP community! I'm a recent member myself and firmly believe you will find some great people and advise. I've been in the business for years and found this to be a fantastic source of information as well as contacts to assist me in my daily activitiy. I've met some great people active on BP both local and out of state here. As @Shawn Holsapple indicated, your targets are attainable. Make sure you are dealing with reputable sellers and don't underestimate the selection of your PM as that is critical. In the midwest you will find good houses with good tenants that would allow you to buy at least three properties with rents in the 7-900/month range. I'm biased of course to Indianapolis, but would recommend doing your homework upfront select a stable market with an established PM to service your activity.

Chad U.

Investor · Boca Raton, FL · Member since 2012 · 1k+ posts · 1k+ votes

11y

Hi @Mario V. , welcome to BP. What a small world, I'm originally from London, Ontario. All above suggestions above are great advice, best bet is to focus on the mid-west, but you must do your due diligence!

Mario V.

OP

London, Ontario · Member since 2014 · 5 posts · 3 votes

11y

Thanks everybody again for all the great advice,

@Shawn Holsapple The lending with proper paperwork and insurance is starting to sound very interesting... daunting too with my lack of know how, but one thing at a time I guess.

If I wanted to try lending out, or at least do some of that among other things, how much would it make sense to go with ? investing 200k into 1 spot would be to scary and risky and doing 20k might be not enough for investors to bother with ?

I'd be thankful for any contacts and tips.

I think if I was to go with buying and renting my own properties I'd probably want to buy them out outright, rather than using 200k as down payment for an army of properties.
While I imagine it would be the smarter way of using the money, as someone who never had a cent of debt in his life until I bought a house last year, the thought of owing money doesn't agree very well with me.

The local areas in which I'd think of buying properties around here (if I went with that option) are both university towns and I know I could get 2-3 condos with 200k, leaving anything above the 200k for emergencies, renovations etc if needed.

@Engelo Rumora ... I completely understand, no worries. Within my field of expertise I turn down lucrative contract work often enough when it doesn't agree with me on some level, but being completely out of my element in this arena, small steps and average goals seem wiser right now.

Podcast Guest on Show #89

Engelo RumoraBusiness Member

Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes

11y

Originally posted by @Mario V.:

Thanks everybody again for all the great advice,

@Shawn Holsapple The lending with proper paperwork and insurance is starting to sound very interesting... daunting too with my lack of know how, but one thing at a time I guess.

If I wanted to try lending out, or at least do some of that among other things, how much would it make sense to go with ? investing 200k into 1 spot would be to scary and risky and doing 20k might be not enough for investors to bother with ?

I'd be thankful for any contacts and tips.

I think if I was to go with buying and renting my own properties I'd probably want to buy them out outright, rather than using 200k as down payment for an army of properties.
While I imagine it would be the smarter way of using the money, as someone who never had a cent of debt in his life until I bought a house last year, the thought of owing money doesn't agree very well with me.

The local areas in which I'd think of buying properties around here (if I went with that option) are both university towns and I know I could get 2-3 condos with 200k, leaving anything above the 200k for emergencies, renovations etc if needed.

@Engelo Rumora ... I completely understand, no worries. Within my field of expertise I turn down lucrative contract work often enough when it doesn't agree with me on some level, but being completely out of my element in this arena, small steps and average goals seem wiser right now.

Thanks Mario :)

Oz Realty4.5367 Reviews

Account Closed

Unemployed · Dumfries and Galloway · Member since 2013 · 51 posts · 3 votes

11y

@Mario V. . Hi and welcome to BP!

I just wanted to chime in on leveraging money and using mortgages. I read an interesting example the other day and thought you might be interested.

Assume you can buy one property cash with this 200k. Suppose prices go up after a few years and the property doubles in value. Now you have 400k.

But what if, instead of buying one property with cash, you buy four properties, by using 50k as a down payment on each property and obtain mortgages from the bank for the remainder. Each property is worth 200k.

Now if real estate values double again you have gained 200k of equity per property. You've only used 50k of your own money per property. By using leverage you have quadrupled your equity increase.

In the first example you invested 200k and made 200k profit. In the second example you also invested 200k but made a profit of 600k. Which would you rather have?

You could also consider not using the whole amount right away. Try one property using leverage and see how it feels to have "good debt." You could always pay it off

Shawn Holsapple

Residential Real Estate Broker · Indianapolis, IN · Member since 2010 · 1k+ posts · 557 votes

11y

Originally posted by @Engelo Rumora:

Originally posted by @Mario V.:

Thanks everybody again for all the great advice,

@Shawn Holsapple The lending with proper paperwork and insurance is starting to sound very interesting... daunting too with my lack of know how, but one thing at a time I guess.

If I wanted to try lending out, or at least do some of that among other things, how much would it make sense to go with ? investing 200k into 1 spot would be to scary and risky and doing 20k might be not enough for investors to bother with ?

I'd be thankful for any contacts and tips.

I think if I was to go with buying and renting my own properties I'd probably want to buy them out outright, rather than using 200k as down payment for an army of properties.
While I imagine it would be the smarter way of using the money, as someone who never had a cent of debt in his life until I bought a house last year, the thought of owing money doesn't agree very well with me.

The local areas in which I'd think of buying properties around here (if I went with that option) are both university towns and I know I could get 2-3 condos with 200k, leaving anything above the 200k for emergencies, renovations etc if needed.

@Engelo Rumora ... I completely understand, no worries. Within my field of expertise I turn down lucrative contract work often enough when it doesn't agree with me on some level, but being completely out of my element in this arena, small steps and average goals seem wiser right now.

Thanks Mario :)

Yes, throwing all of it at one lending deal would be risky.

IMHO - I would start off with funding a small wholesale deal with someone that has a good track record. In my market, $40k-$50k is a good average deal. I would suggest you at least get 15% of the net profits on the back end [$4k proft will net you $600]. I know that doesn't sound like much but this is usually for less than 30 days of use on your money. That's over 14% APR on $50k if you did that once a month for a year. Not bad.

As mentioned above, good debt can be vary lucrative. I'm a firm believer of this method of building wealth - especially now with prices so low. I am going after all the good debt I can find [within reason of course] right now to acquire cash flowing assets.

I hope that helps!

Hales Corners, WI · Member since 2013 · 229 posts · 80 votes

11y

Mario, congrats on your new money.

I am not a real estate investor yet, but I wanted to share some simple thoughts.

1. How is real estate doing in Spain! Spain is wonderful, btw. Learn your own markets and see if that seems like a fit. If your prices are going low, or super-low and you have an opportunity to get beach property, well… keep an eye on your market!!!

2. I would suggest you talk more with Engelo, just because he started from Australia and then moved to the US to start his company. I have not worked with his company but his stories are interesting as to how he got started. He is on one of the BP podcasts. Try to meet some of the other international investors here and see if they like who they are working with and see if you can't get started working with some of them.

3. If you are interested in the stock market, I would suggest Motley Fool Options / Motley Fool Pro services. (They have a whole bunch of services but I stick to the more conservative ones) I have been with them for one year and it's fantastic. Great community, very solid advisors. I am just a customer there, no salesperson, no nothing. But its another path you can check into if you like. They should have a money-back trial period if you want to check them out and see if it feels like something that fits your style and goals.

BE CAREFUL NO MATTER WHAT YOU DO!

That's all I got. All the best to you!!!! Let us know if you figure out something great, I want to learn too. :)

Hales Corners, WI · Member since 2013 · 229 posts · 80 votes

11y

Here's a question -- if you are going back and forth to Spain, would it makes sense for you to simply rent your residence when you are there, rather than own 2 properties in 2 countries? Think about what is efficient for your life, and look at all the costs. :) Can you (is it economically sensible to) rent out your current Canadian home when you go to Spain, or are you going to sell it?

I think that first, you should pick your country to live in, and then progress from there. Have fun with it!

Jassem A.

Investor · PA · Member since 2013 · 1k+ posts · 602 votes

11y

I was told by a neighbor the other day that he makes 50k/year selling put-options but requires 250k of capital

Hales Corners, WI · Member since 2013 · 229 posts · 80 votes

11y

Here's a question -- if you are going back and forth to Spain, would it makes sense for you to simply rent your residence when you are there, rather than own 2 properties in 2 countries? Think about what is efficient for your life, and look at all the costs. :) Can you (is it economically sensible to) rent out your current Canadian home when you go to Spain, or are you going to sell it? Maybe rent in Spain until you decide for sure if you are staying in Spain or returning to Canada.

I think that first, you should pick your country to live in, and then progress from there. Have fun with it!

Hales Corners, WI · Member since 2013 · 229 posts · 80 votes

11y

Jasseem, I have been working with options for a little while now, and I make $500 - $1000 a month selling put options on about $20k - $50k of capital / buying power. But…. it is not steady like a rental would be. I only sell puts when there is something that I want to be involved with, and I don't sell puts for expirations every month. I am still getting the hang of it, really, and I pay for advice to help me learn and be (a little bit) responsible with it! But the bit notes are that it is not steady for me (at least so far) and it is also not something I would do in all market conditions. Sometimes they go wrong, and sometimes the market is not right for that strategy. (But there are other strategies for other market conditions.) I'm having a great time learning and exploring and playing with it in smallish dollar amounts.

David Hood

Houston, TX · Member since 2014 · 29 posts · 7 votes

11y

Anyone can sell puts in a bull market and make money. But, since markets don't go up forever, it's only a matter of time before you get eaten by a bear. Options are legalized gambling. If it was safe and easy, everyone would do it.

Back to the original topic.

I'm sure there are folks on this board that would be interested in helping place your money into some deals.