I've only been buying and renting SFRs for just under 2 years, but so far the experience has been pretty good. I've been able to acquire several properties with an average unlevered yield of 8%. That's based on the 50% rule and corroborated by my estimate of expenses.
I have to wonder, though, if I'm missing something. The math would say that if I want 120,000 of rental income, I just have to scale what I've done to 1.5mm worth of properties.
1. Is it really that straightforward (not going to say easy, but straightforward)?
2. What happens in 10, 20 or 30+ years? Do they really just keep pumping out stable cash flows that grow with inflation or do you end up with a bunch of decrepit houses that no one wants to rent?
3. What are the long-term risks I may not be thinking about? e.g. a Detroit type scenario?
4. If you've been doing this for 10+ years and have grown your portfolio of properties to 10 or more, did everything pretty much gone as expected from a big picture point of view? What were the biggest surprises if any?
Thanks!
Every post is "right on". I am a retired landlord. My husband and I did own properties in Detroit for 30 years and the outlining areas. We owned 40 properties and it was EXCITING. It was a CHALLENGE. But you know what? We were so busy and happy doing what we were doing that we didn't anticipate growing older, therefore the best advice I can give you is to make sure you have an EXIT PLAN! Especially for the day that YOU cannot physically do all the work yourself. Even though we had various handymen to help us with the work, we still did the physical labor ourselves for awhile, until the old bones were causing us to eat Tylenol like candy, then we turned over most of the labor and repairs to our handymen, but the more dangerous Detroit became, the more our handymen stopped working for us, because their vans were stolen and their toles taken, and even one of our men, lost his life. And soon we found ourselves having no handyman want to come to Detroit and work with a ten foot pole and we were alone. Trying to take care of 40 rental units and everything else that is involved in being a landlord including handling my own court cases, was overwhelming, and in 2009 we finally sold our homes and took a great loss.
When I first began being a Landlord I didn't have a clue how to get tenants to pay their rent. I was frustrated every moment of the day, to the point that I wanted a Divorce! I wanted out! But my husband's favorite words to me were, "Yea, sure, just pick up your baseball glove and go home to mommie and daddy. You're not a loser! You don't quit! You're a winner! " And I knew he was right. I wasn't a quitter! Being a Landlord is and was and still is, to this day, what defines me and is who I am and always will be.
So...being a person who has always been a business woman from the day I was born, yep I was born with a pencil behind my ear, and a calculator in my hand, I decided that I had looked at this entire adventure completely wrong. Instead of looking at landlording as a business, I viewed it as just a person who bought houses and rented them out, just like every newbie feels when they first get into this business! And, that, my BP friends is where we go wrong!
That day, I developed a business plan and I put it into action. I no longer fought with tenants over rent verbally or ever, I never got frustrated because I let my Lease Agreement and the law work for me. And I had a plan. I had rules and regulations in the tenants lease agreement which is a legal document I studied the landlord/tenant laws and the City Ordinances of where my properties were located. And I began setting up my home office like it should have been setup, with the right equipment to help me be a winner.
Everything I did I put it in writing and I mean everything. Every conversation I had with a tenantand I followed up that conversation in writing and sent it to the tenants confirming our conversation of that day.
I purchased Vonage Phone and all voice message were recorded and a record stored to my online account. The day, the minute, the hour, how long the conversation went, etc. And it kept a record of my phone calls to them! Vonage became my very best friend along with Stamps.com. Stamps.com recorded every letter I sent, the date, the time, and how I sent it. Two very powerful tools that helped me from going to court over every little thing. It proved my cases in court and I never lost a case ever in my landlording career and I handled them all myself for 13 years.
Once I viewed landlording as a business, it began to run like a well oiled machine. My tenants were happy because they found stability with me, and my tenants stayed with us long term, some for 20 years.
Do I miss it, yea I do, but I'm still involved in other ways now.
I hope I have given you incentive to stay the course, just be careful where you invest. Develop a plan, and have an exit plan. Take care of your tenants. Make them happy, and you and your family will be happy.
Always make sure that you have profit of at least $100.00 per rental unit when all expenses are paid. Not every house will have repairs done to it every month so you will have big profits most of the time if you run this as business and do things right.
One other tip. Try to buy as many houses as you can and keep buying. Having one house or two or three won't cut it. You have tenants who won't pay their rent. You will have vacancies. You will have repairs that you didn't anticipate, like furnaces, new roofs, water heaters, things that go wrong. The more houses you own, the more those houses keep you running and going and able to pay those repairs without stress on you and that's what makes you happy. Having enough Equity in your investment, in your rental homes, helps maintain that investments and it just doesn't get any bettere than that!
Good luck to you
Nancy Neville
I personally think it gets simpler the more you have. It's harder having 1 or 2 properties and maintaining a full time job, with doing this part time. With the economies of scale, your 1.5mm worth of properties could be a 75 unit apartment property or 150 space mobile home park. It doesn't have to be 50 houses spread all over town. Both can be run by a manager other than yourself.
The idea is in 10-20 years having your properties free and clear of debt, with some appreciation and years of cash flow. Of course, you need to be maintaining your properties for that time period, so they don't end up decrepit and run down.
As far as the Detroit scenario goes, you can't fall asleep at the wheel. You need to be following what the local economy is doing and adjust as necessary.
Been at this close to 20 years now, my only regret is not having started 10 years earlier. Much success.
1. Landlording is the easiest business I've been involved in. There are speed bumps like nasty evictions, but it's just part of the job. If you don't get emotionally involved in the issue, it shouldn't bother you. All businesses have losses and landlording is no different.
2. They do keep pumping out cash... As long as you didn't buy rentals in... Detroit. And, you maintained the properties. If you take that slice of cash every month that you should be investing in maintenance and instead stuff it in the pocket and call it profit, then you certainly will end up with a pile of decrepit houses - and you'll earn the title 'slumlord.'
3. Depends on where you invest. Over a 20 year period neighborhoods could go from good to great, great to good, good to bad, bad too good. etc. If you buy in stabilized areas with good school districts, you should fare well.
4. Well, I've been doing this for 10+ years, but just slightly on the plus side and we've seen catastrophic economic decline right smack in the middle of that term so, no, it didn't go as I planned, but if you buy the houses right, shore them up with good financing, then dig your fingernails in and hold on, you should do pretty well.
1. Is it really that straightforward (not going to say easy, but straightforward)?
2. What happens in 10, 20 or 30+ years? Do they really just keep pumping out stable cash flows that grow with inflation or do you end up with a bunch of decrepit houses that no one wants to rent?
3. What are the long-term risks I may not be thinking about? e.g. a Detroit type scenario?
4. If you've been doing this for 10+ years and have grown your portfolio of properties to 10 or more, did everything pretty much gone as expected from a big picture point of view? What were the biggest surprises if any?
Thanks!
1) I don't think many things in life end up being straightforward- We lay plans, but the reality is usually a twisty, winding path. But I also think real estate is actually pretty easy if you don't get over-extended.
2) Take care of the property and you'll be fine. Or sell them before they get decrepit!
3) Keep an eye on the big picture so you can adjust your plan as you go. I was super fortunate to buy in Denver neighborhoods that gentrified very fast. I had one place that was, frankly, pretty decrepit. I bought it before I knew what I was doing, and almost ended up seriously over-extended (ahem... see #1). BUT the appreciation in the area allowed me to sell (to a rehabber) at a good profit and do an exchange into a much larger (and way more profitable) property in Ohio.
4) I started 12 years ago- don't know if that qualifies as longterm? But no, it certainly has not gone as I expected. It's gone much, much better than I expected. Some of this was luck (OK, lots of it) but part of it was due to keeping my eyes open and my plan flexible. The biggest surprise? How fast things can change once they start changing.
Long term landlords are likely happy. The ones you want to ask are the not-new-any-more landlords. <g>
Yes to all of the above... It's not exactly easy but it's not that hard. You have to re-invest in the properties even if it's a little painful. If it's a lot painful, you bought wrong.
1. Is it really that straightforward (not going to say easy, but straightforward)?
2. What happens in 10, 20 or 30+ years? Do they really just keep pumping out stable cash flows that grow with inflation or do you end up with a bunch of decrepit houses that no one wants to rent?
3. What are the long-term risks I may not be thinking about? e.g. a Detroit type scenario?
4. If you've been doing this for 10+ years and have grown your portfolio of properties to 10 or more, did everything pretty much gone as expected from a big picture point of view? What were the biggest surprises if any?
Thanks!
1. Numbers don't lie. But don't expect success to be a straight line. There will various curves, hills, and turns. Just know your numbers and don't deviate form them.
2. It's been 7 years and now 21 rentals and they seem to keep pumping so long as you take care of your properties - you must keep up on the maintenance and keep good tenants. Screen your prospective tenants well!
3. All business has risk. Try to eliminate your risk through education. And not Guru type education- real education from real landlords. There are some really good books and education out there by real landlords. No one has a crystal ball and if there was no risk everyone would do it.
4. Only been doing it part time for 7 years and has grown to 21 properties. Don't sell yourself short. I don't think anything goes as first expected because you learn as you go and can't be afraid to make mistakes along the way. Learn to try to always turn a negative into a positive whenever possible. Always sure for solutions and don't dwell on the problems that will arise. Also, don't try to over annalize it or it will create paralysis and you will lose opportunities. Biggest surprise was when a tenant called a week after moving into a new property we had just acquired to report she had no water and upon inspection, the well had collapsed on the property. Yes, some unexpected problems will occur.
If you simply duplicate a winning formula, it will lead you to much success!
Paul C.- Best of luck on your endeavor!
Every post is "right on". I am a retired landlord. My husband and I did own properties in Detroit for 30 years and the outlining areas. We owned 40 properties and it was EXCITING. It was a CHALLENGE. But you know what? We were so busy and happy doing what we were doing that we didn't anticipate growing older, therefore the best advice I can give you is to make sure you have an EXIT PLAN! Especially for the day that YOU cannot physically do all the work yourself. Even though we had various handymen to help us with the work, we still did the physical labor ourselves for awhile, until the old bones were causing us to eat Tylenol like candy, then we turned over most of the labor and repairs to our handymen, but the more dangerous Detroit became, the more our handymen stopped working for us, because their vans were stolen and their toles taken, and even one of our men, lost his life. And soon we found ourselves having no handyman want to come to Detroit and work with a ten foot pole and we were alone. Trying to take care of 40 rental units and everything else that is involved in being a landlord including handling my own court cases, was overwhelming, and in 2009 we finally sold our homes and took a great loss.
When I first began being a Landlord I didn't have a clue how to get tenants to pay their rent. I was frustrated every moment of the day, to the point that I wanted a Divorce! I wanted out! But my husband's favorite words to me were, "Yea, sure, just pick up your baseball glove and go home to mommie and daddy. You're not a loser! You don't quit! You're a winner! " And I knew he was right. I wasn't a quitter! Being a Landlord is and was and still is, to this day, what defines me and is who I am and always will be.
So...being a person who has always been a business woman from the day I was born, yep I was born with a pencil behind my ear, and a calculator in my hand, I decided that I had looked at this entire adventure completely wrong. Instead of looking at landlording as a business, I viewed it as just a person who bought houses and rented them out, just like every newbie feels when they first get into this business! And, that, my BP friends is where we go wrong!
That day, I developed a business plan and I put it into action. I no longer fought with tenants over rent verbally or ever, I never got frustrated because I let my Lease Agreement and the law work for me. And I had a plan. I had rules and regulations in the tenants lease agreement which is a legal document I studied the landlord/tenant laws and the City Ordinances of where my properties were located. And I began setting up my home office like it should have been setup, with the right equipment to help me be a winner.
Everything I did I put it in writing and I mean everything. Every conversation I had with a tenantand I followed up that conversation in writing and sent it to the tenants confirming our conversation of that day.
I purchased Vonage Phone and all voice message were recorded and a record stored to my online account. The day, the minute, the hour, how long the conversation went, etc. And it kept a record of my phone calls to them! Vonage became my very best friend along with Stamps.com. Stamps.com recorded every letter I sent, the date, the time, and how I sent it. Two very powerful tools that helped me from going to court over every little thing. It proved my cases in court and I never lost a case ever in my landlording career and I handled them all myself for 13 years.
Once I viewed landlording as a business, it began to run like a well oiled machine. My tenants were happy because they found stability with me, and my tenants stayed with us long term, some for 20 years.
Do I miss it, yea I do, but I'm still involved in other ways now.
I hope I have given you incentive to stay the course, just be careful where you invest. Develop a plan, and have an exit plan. Take care of your tenants. Make them happy, and you and your family will be happy.
Always make sure that you have profit of at least $100.00 per rental unit when all expenses are paid. Not every house will have repairs done to it every month so you will have big profits most of the time if you run this as business and do things right.
One other tip. Try to buy as many houses as you can and keep buying. Having one house or two or three won't cut it. You have tenants who won't pay their rent. You will have vacancies. You will have repairs that you didn't anticipate, like furnaces, new roofs, water heaters, things that go wrong. The more houses you own, the more those houses keep you running and going and able to pay those repairs without stress on you and that's what makes you happy. Having enough Equity in your investment, in your rental homes, helps maintain that investments and it just doesn't get any bettere than that!
Good luck to you
Nancy Neville
Entertainment, sales, and superhero, but that last one didn't go so well. (You actually have to HAVE special powers...)
Oh my, very good tips, but as to recording phone calls and taking them to court, better check applicable laws as to notice of recordings, unless you have 3 or more on a conversation, privacy is assumed.
I've used recordings and gave notice that is not so obvious but meets the legal requirement, by saying such things as;
"You know George, I'm not discussing this issue with you privately at this time"....
Or "You know that under the circumstances anything you tell me is public knowledge as I may have to repeat any part of this"
I doubt a landlord can justify saying it's recorded for training purposes LOL.
Otherwise, not only will your recording be tossed out, you may get nailed for wiretapping!
As to the questions, you got some great replies. Can't stress the importance of location and the market. I've never purchased a property thinking I'd own it 30 years later. But if that's your intention look to the future. Every market is different but you can usually look back and see mature neighborhoods and study the growth of your market. Historic growth trends will show you the direction of growth and changes that neighborhoods go through. Selecting a so-so 120K rancher in a rather mature area could suffer due to external factors. Appreciation is usually had in 7 to 10 years at an average rate but thereafter it may slow and at 15 to 20 years may become flat or negative, it's certainly not guaranteed anywhere. So, watch for external obsolescence in an area, good locations near major shopping areas, good schools or near hospitals are usually a plus that will endure with time. :)
Entertainment, sales, and superhero, but that last one didn't go so well. (You actually have to HAVE special powers...)
LOL, now I understand you much better Aaron, not everyone has special powers, it's RE Man, the residential red capped crusader revitalizing residential roosts ready to rent! :)
Every state has different laws on this. In Michigan, it's legal to record any conversation as long as at least one party knows it's being recorded. You could record any conversation you have with anyone. If I record your conversation without either party's knowledge, that's a crime.
Thanks @Account Closed ! You have given me incentive to keep going, but your response has also been very sobering (which I was looking for and appreciate).
I particularly liked this advice of yours, " We were so busy and happy doing what we were doing that we didn't anticipate growing older, therefore the best advice I can give you is to make sure you have anEXIT PLAN! Especially for the day thatYOU cannot physically do all the work yourself."
What are some example of exit plans? The main appeal of rental homes to me is the steady stream of income they can provide to live off of. But if one were to sell them when they can no longer physically handle the work, what would they live off of then? That would be precisely the time when I would most want that rental income.
Do you feel investing in Detroit was still profitable for you overall? I know you enjoyed it, but as an investment, would you do it again? Detroit seems like a worst case scenario so if that can work out, it makes me feel that any market can work out. In retrospect, what are the warning signs you would look for to let you know it's time to exit a market before it's too late?
Thanks for sharing your experience!
Hi Paul:
First of all I have to clear up my remark regarding Vonage Phone. Vonage Phone acts as an answering machine. I always let my phone calls go to the answering machine (Vonage Phone) first and then I call the caller back. Therefore, when anyone leaves a message on the answering machine (Vonage Phone via the Computer) it is legal! (Besides I'm the type of person that I need time to think about their message before responding. If it's a bad message, I need time to deal with it calmly and professionally and not fly off the handle because it's something I didn't want to hear)
When I call them back, our conversation is not recorded, just the time I called, who I called, how long the call lasted, etc. It proves to the court that I indeed called the person back if and when a tenant states that I never did.
Then I follow up my conversation with the tenant or customer with a letter, confirming our conversation. So, once again, when people leave a message on your cell phone, home phone, they know their message is being recorded and therefore is completely legal.
Now, off to your question Paul. Would I re-invest in Detroit? Not as a residential investor. And I wouldn't invest in Commercial Property there either, UNLESS it was on the Water Front, but you better have the funds to invest there.
Right now is not the time to invest in "falling" cities, even though the Realtors (I am one, but won't resort to that) will try to entice you. Or because the media needs YOU to invest in the city in order to bring it back.
In order to bring back Detroit, the crime needs to get fixed. There is a shooting every day, break in's etc. Just listen to the news! Invest your money close to you, in a decent neighborhood. It doesn't have to be a grand neighborhood, but a safe neighborhood. Do some research. Sit in some court hearings and see how many landlord/tenant cases they do every day. This tells you alot!
See if the neighbors take care of their lawns, are the lawns well groomed. People can be poor, but poor people like clean! And they love spending their times on flowers, and working outside.
Your Exit Plan should begin even when young, just like we should plan for our burial when we are young, or insurance for us and our family. That's the time to invest in our "Senior Years. Get the expense over with while we are young.
Plan for an Exit plan in case you become disable. What would you do if you fell off a roof fixing it and became disabled? Could you afford to hire Independent Contractors or Property Managers to take care of things for you. Trust them? (And please be careful of Property Managers, many of them have never been a landlord and don't have a clue how to take care of you. Their lease agreements stink and they have the tenants best interest at heart and not YOURs. Whereas, a Property Manager should have everyone's best interest at heart.
Once you retire from the business, whether you are young or old, (and many landlords stay in this business until they "croak", so when to retire is up to you), you can do other things. Like getting into selling Real Estate. Being an Investors contact person,( which I am) Writing Books - Self Publish. (which I do) Mentoring. Consulting. Supervising (Which I do). Invest in Commercial Real Estate. Plan for all this. Save your money for all this.
But one thing for sure, study the market. Take Continuing Education Courses in Real Estate (I do all the time. I am a professional student) and get involved in every aspect of the Industry you want to be a part of.
You've got to have the "Love" of the job. I'm 66 years old. Do I sound like a woman who would be happy sitting around an old folks home playing Bingo? Do I write, talk, think like an "Old Woman", that people like to sterotype when they see someone with wrinkles! :)
Age is only a number. And if old people can be elected to the White House and still be there until they croak, (well I guess comparing people to the White House may not be a good thing) then I think you and I can do it too, and do it quite nicely as long as we have the intelligence, the physical ability and the "love" for it!
I hope you can tell that I have the Love for it. That I enjoy teaching others and helping others. That it comes through with what I write and what I say. My mission is to answer those questions truthfully, even though it may be something people don't want to hear.
Take care Paul
Nancy Neville
1. Is it really that straightforward (not going to say easy, but straightforward)?
2. What happens in 10, 20 or 30+ years? Do they really just keep pumping out stable cash flows that grow with inflation or do you end up with a bunch of decrepit houses that no one wants to rent?
3. What are the long-term risks I may not be thinking about? e.g. a Detroit type scenario?
4. If you've been doing this for 10+ years and have grown your portfolio of properties to 10 or more, did everything pretty much gone as expected from a big picture point of view? What were the biggest surprises if any?
Thanks!
1. It is straightforward, things don't always turn out as expected. Maybe the returns are not what you thought. But you can achieve your goal of $120,000 rental income, for sure.
2. I've passed all those year benchmarks. The cash flow expands exponentially when the mortgages are paid off. You need to keep up with maintenance, updates and improvements. I'm currently redoing an apartment that I've owned for a long time, the last tenant was there for 21 years, with new granite countertop, new kitchen cabinets, all new flooring, new ceilings, and a new deck. It will be better than ever and will rent for more and be more attractive.
3. Neighborhoods do change, particularly when you're in for the long haul. But by diversification of areas, and by thinning the herd, you can have properties in different areas, different towns and you can jettison under performing properties along the way.
4. There are always surprises, some good some bad. The longevity of tenants was one surprise. One tenant moved in in 1984, still there. And I've had lots of other long term tenants. Vacancy is a big costs that most newbies overlook or minimize.
Good thread. I have had many exit strategies, but often the continual cash flow is too good to pass up..and you can always sell the houses down the road.
Watch for neighborhood changes. Be attuned to them and sell those before they get harder to sell. Only by driving by and seeing changes objectively can you make the call to unload particular properties.
Another point is not to have too many SFR on the same street, as you end up competing against yourself if more than one becomes vacant at one time. Also, if a neighborhood changes for the worse, having too many properties in that area does more harm than good. I like to spread my houses in a city over several miles to reduce that risk.
Nothing goes straight up, but it is hard to beat continual rental income.
I grew up in the Landlording business with my parents owning many MFH. I enjoyed it so much that I bought myself MFH and continue to look for properties that make sense.
The biggest fault I saw in my parents running their MFH was that they didn't treat it as a business. They were both self employed running their own businesses and treated RE as a investment but not a business. I took over operations 3 yrs ago and wished I took over 10yrs before that. Many of the properties suffered from absentee landlord and maintenance. I have been spending a lot of time and money getting the properties updated and rented with very little reserves.
As many others expressed in this thread. Running your properties like a business and having an Exit strategy for various scenarios are key. We would all like to retire in our golden years and just collect a check. Unfortunately as expressed above its not that easy. Know when to get out $$$.
I have a slightly different viewpoint that may add to the discussion. We bought rental property back in the 90's, then sold all but one in early 2000's because my husband thought there were easier ways to make money. He didn't like dealing with tenants or emergency repairs, but then got upset when I paid a repairman for something as he can fix almost anything. The one we kept had a long-term tenant, so I convinced him to keep it. Over the years we watched as rentals increased in value and rents (that we missed out on for the ones we sold), and even when the stock market crashed, our one rental kept paying each month. We started investing again in 2008, and he doesn't get upset anymore as we do the rehab (part he likes) but then pay repairman and property managers for day-to-day issues. So being able to follow the ones we sold back then, we've learned long-term is definitely worth it, but you need to be able to make it through the frustrating parts, like the new gas furnace right before Christmas and a tenant moving out Dec 31...ugh. Back then, issues like that made him want to sell them all. Now, he sees it as just a cost of doing business.
I've used recordings and gave notice that is not so obvious but meets the legal requirement, by saying such things as;
"You know George, I'm not discussing this issue with you privately at this time"....
Or "You know that under the circumstances anything you tell me is public knowledge as I may have to repeat any part of this"
I doubt a landlord can justify saying it's recorded for training purposes LOL.
Otherwise, not only will your recording be tossed out, you may get nailed for wiretapping!
As to the questions, you got some great replies. Can't stress the importance of location and the market. I've never purchased a property thinking I'd own it 30 years later. But if that's your intention look to the future. Every market is different but you can usually look back and see mature neighborhoods and study the growth of your market. Historic growth trends will show you the direction of growth and changes that neighborhoods go through. Selecting a so-so 120K rancher in a rather mature area could suffer due to external factors. Appreciation is usually had in 7 to 10 years at an average rate but thereafter it may slow and at 15 to 20 years may become flat or negative, it's certainly not guaranteed anywhere. So, watch for external obsolescence in an area, good locations near major shopping areas, good schools or near hospitals are usually a plus that will endure with time. :)
Actually my husband and I did buy many properties on one street. It was intentional so that we had somewhat of a control over the neighborhood. When we did our open house and had another vacancy across the street coming up or available, we'd show everyone that home as well and tell them that whomever got this house first (going by the criteria qualification process and who qualified first) they would, if they qualified, be able to get the house across the street.
Nancy Neville
I started owning rental properties 18 years ago when I married my husband and my father-in-law said "Welcome to the family business!". His exit plan was to sell his properties on contract. He sold one of them to us and that was our start. It's a win-win. He still has stable income coming in and no longer manages properties. Grandpa is in his late 80's now and likes to plant flowers and vegetables for our tenants... the personal touch.
Owning and managing residential property takes a certain type of personality and commitment. It's not for everyone. We enjoy providing a service that meets the housing needs of others and that makes all the difference.
My husband and I work full time in our professions and run our rental property business on the side. As such, we hire out most of the maintenance work, but continue to manage the properties ourselves. We buy and hold and took the slow approach to building our portfolio, with the intention of generating cash flow to supplement our retirement plan.
I see the greatest risk being that of liability. In this litigious society you can never be too careful. Substantial protection can be obtained with a good fire policy and good umbrella policy. Keeping properties well maintained, following the law, and being proactive by mitigating risk is most important. A comprehensive rental agreement can serve you well. We also partner with local law enforcement to keep our properties and communities safer. More than once a police officer has thanked me for being attentive and involved in what happens around our property.
Our biggest surprise was the sudden death of my brother-in-law who was one of our partners. We didn't have an LLC at the time and weren't prepared. The property had to go through probate... a costly and cumbersome process. We now have two LLCs that define how we run our business and what will happen in the case of the death or incapacitation of one of the owners.
My husband and I have 3 units in an LLC partnership with family members and 12 units in an LLC of our own. We have some properties paid off and are enjoying the positive cash flow. At this point we are reinvesting the profit back into the business.
We only buy properties (houses and plexes) in stable neighborhoods close to our home, so it is unlikely we would be caught off guard by changes in the area. At some point we will sell off our properties and will most likely realize a profit, but for now we are benefitting tax wise and they are our golden goose... still laying the golden eggs.
@Account Closed I want to thank you for your thoughtful responses.
Some very good advice here. I would like to echo that it gets easier with more properties assuming you run everything like a business. Having an issue that costs 1-2 years cashflow when you only have one unit can be a difficult pill to swallow. Multiple property income helps offset those bumps. After many properties, the roller coaster of monthly income tends to flatten out. We found the more properties we own, the more we are forced to streamline operations and run things professionally.
The only item I would like to add is take everything in stride. This business can make you eat a bottle of tums in a hurry if you let it get to you. When you get the call that the electrical system shorted out all the appliances in the house, stressing out is the worst thing you can do. You'll make irrational and emotional decisions rather then executing your plan. Having reserves greatly reduces that stress.
Thanks @Jason Miller . I think I'll start a different thread about this at some point, but what are some of the ways you've been able to streamline operations?
We're closing on our 8th property tomorrow and we're always looking for ways to do things better, easier or cheaper.
Some of the things we've done are:
1. Have one company service all HVACs twice a year.
2. Use Quicken for our bookkeeping so we can run a variety of reports and make tax filing easier. We also scan all relevant paperwork and link it to the transaction for easy retrieval and to cut down on paper that needs to be retained.
3. Got a commercial insurance policy -- reduced our insurance costs by over 2,000 a year for the same protection.
Just a thought to consider. Those that burn out and auger in don't post on bigger pockets. People that don't learn don't post on bigger pockets. People that don't adapt don't post on bigger pockets. I have purchased from those people. For the most part. I would say even those folks made money in RE if they were able to hang around for the 10+ years.
Regarding #1 - with good education it's very straight forward. Without education not so much.
#2 - this can go either way. picking the right areas and proper maintenance and upkeep tend to protect your investment. With a few exceptions even decrepit old houses are worth more now than they were 30 years ago. So maybe you didn't pick the best or manage very well but with RE it is very forgiving. It's just not what it could have been if the tide hadn't turned or the management been better.
#3 - You've thought of Detroit so that's not one of those. Only one other person mentioned liability. That is probably something you don't think about too much. Doesn't get a lot of discussion but is a growing trend.
#4 - Biggest surprise - It has gone way better than I ever imagined. Should have had more lofty goals and learned more at the beginning. With the right goals from the start I could have quit my job by now. I've hit what I was shooting at but my target was too low.