Real estate

>>1569338
It's low risk.

>>1569345
If I put all the expenses in that I've passed over, and put some money away to account for repairs, vacancies, and deadbeat tenants, my guess would be that the return is effectively 0%. I don't know where you get "low risk" from. I don't invest in perfect scenarios.

>>1569350
Might even be negative return if I really put the work into the spreadsheet.

Right now stocks and real estate is so over valued that nothing looks like a good investment.

This stuff changes every few years. Real estate is very local and the opportunities are there for the bright.

>>1569353
Thanks for the response.

So basically you're telling me that it's regional(which I knew) and that the only way it would work out is if I found a REALLY good deal on a buy?

I just hear so many people pump up real estate, and I can't even make it work on the back of a napkin if I fudged it. Is it just echoes of the early 2000s?

>>1569358
>if I found a REALLY good deal on a bu
Yep, the market is inflated so deals are really hard to come by. Can someone make money now? Yes, they can make a positive cash flow while the mortgage is being paid down. Will you? Doubtful because of the market.

Remember that the real estate crashes don't always correspond with stock market crashes.

>>1569364
I have money to spend, and 4% over 5 years doesn't excite me. I projected out further and it only went up to 5% after 10 years. I just wanted to confirm that I wasn't missing out on some stupid factor. Sounds like real estate is shit. Thanks.

Think you're missing the main point. The main point of what you're talking about is to pay off the house as quickly as possible and then be able to pocket the rent monthly. Do this across multiple properties and you have a lot of passive income. It really doesn't pay off in the short term, but it will in the long term.

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>>1569371
I was trying to find an old book of mine, but this excerpt from it is funny! We have like everything going on they mention. Don't invest in real estate now.

>The Unofficial Guide to Real Estate Investing…by Spencer Strauss,

>>1569385
I think you're missing the point, actually, likely due to lack of risks. 4% on a "perfect situation" is still a shit return, regardless of all the things that can cost money(like I mentioned, vacancies, past due rent, repairs/maintenance). These things are inevitable. My calculations worked on a perfect world and the returns compared to other investments are still shit. I'd rather risk that money on something stupid like LendingClub at that point.

The whole point of me using percentages means that multiplication of properties doesn't matter, it just makes it worse. I can allocate my capital better than a 4% "low risk".

I was hoping to see someone in here who is doing it today and can explain factors that I haven't considered. Running the "best case" numbers I did, a single property would give me far less income in 10 years than I make in a year. Hardly worth the trouble. I don't think I'm missing anything, I even dropped theoretical buy price by half and it still came out to 8% over 10 years. Stupid. Why would anyone do this?

>>1569396
That is funny. Believe me, I'm not going to invest. First part of planning is to see if it can even work on paper. All I can see is that it's a great time to be a renter! (although I own my house) Probably has always been that way. I can say the biggest expense on my sheet is property tax, by far.

Thank you for sharing that.

>>1569399
This looks like Robert Kiyosaki propaganda haha

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>>1569401
Welcome. Shame I can't find a digital copy. Book is loaded with nice tidbits.

What about mobile homes? Land can be bought for cheap(regionally) and mobile homes are always on the market for pretty cheap 10k~ on avg here for livable ones. I know there won't be a resale value, but I am not looking to flip properties, just buy them and rent em out. I know repairs are usually cheap on mobile homes as well due to their modular nature.

Getting a 5k MBHome, renting it for 500-700 range, I would see a 100% return within one year with 100% occupancy.
Even with a 10k home, a little under 2 years would start to profit.

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This other book basically says a normal fully owned apartment building yields around 6 to 12%. Disregarding any leverage.

>investing in real estate 5th edition (part of the biz depository I think).

>>1569408
These are great hypothetical situations, and they sound like great stories to help someone understand basic finance. If real estate ever has a place as a great investment, I don't think Connecticut is one. It's even scarier to me to buy a place that I can't easily check out once in a while(out of state).

>>1569412
Like half of renters rent single family homes. Remember that!

>>1569412
Again, think this is regional. CT is a small state, very blue, much taxes. Even for a condo the taxes accounted for(gross) 40% of the expenses. I've modeled out single family homes too and the returns do come back *slightly* better than renting a condo, but still extremely small. I should move to another state. Again, the whole point of the thread was for me to learn if I'm missing something. So far my suspicions have been confirmed, and I'm more than okay with that.

Thanks again for the help.

>>1569338
I'm going to do you all a favor and suggest REITs.

You won't have to spend the time with property management and can still diversify away from the stock market. If you're more hands on, I'd consider what the single home is renting for in your area vs traditional rental properties and try running projections on potential properties that way.

>>1569464
Yeah, it may be a way to break away from my regional disadvantages. Like I posted most recently, even a single home doesn't give great margins. I hear so much about being a "landlord" is so great, but my best case numbers are extremely unattractive. I just wanted to make sure I wasn't missing a crucial gap in my understanding. I guess not. Thank you for the suggestion.

>>1569464
REIT's don't offer you the same tax benefits that actually investing in real-real estate does.

>>1569497
*or the control. If you're an average person, sure they are fine. But most landlords are complete fucking idiots. Easy to outsmart the market for higher returns.

(Better advertising, better managing, better upkeep of property, etc.)

Hard to beat the market in stocks, very easy to do in residential real estate, imo.

>>1569497
>>1569499
True, but they can offer a decent hedge for areas that offer crappy returns for real estate.

Real estate is heavily dependent on the local market, so buying physical properties could be a goldmine or a curse depending on where you have reasonable access to manage your properties-if you want to take the hands on approach.

The tax benefits are huge in real estate. One could make a killing in some areas-especially if they lived there themselves.

>>1569499
Yeah this post doesn't help.. at all.. I considered perfect conditions. No management, no upkeep, perfect tenants... even considering the ideal situation the returns are total shit. Where do you live btw? This must be a regional thing.

>>1569399
>>1569404
>>1569408
These are golden, keep going

>>1569524
Hah, good shit, right? It's been a couple hours, think that train left the station.

>>1569338
>Why would anyone do this?
Because you forgot to take into account that property value increases over time.

I bought a small 2 bed 1 bath for 40k,
rented it and made roughly 8k a year net,
Then sold it 6 years later for 70k.

If I just kept the money in the bank, I would still only have 40k.

>>1569541
My projections showed a meager return in spite of ignored risks. No capital growth these days would even cover it if I did a full-on projection.

You got lucky. Congratulations(that's not sarcasm either).

>>1569546
Whats the square footage of what you are looking at, how much are you charging per month, and how valuable is the location?

I bought the house with cash in a town over from a major city that I (along with everyone else) knew would grow, as it did and home prices went up, so did prices in neighboring towns.

I rarely had any trouble with collecting rent, or damages to the property because I screened renters heavily.
I went 4 months with it vacant once, but it payed off in the long run because that tenant stayed for 4 years, and hardly damaged the place.
I was also only renting to one family, not trying to rent an entire complex.
So I could have that luxury of being picky.

>>1569552
Let's put it this way. In the area I'm in, I could buy a single family for around $129k(that's CHEAP for around here), at around 1100 sq ft, taxes $4k, and an acceptable rent around here is $1/sqft. This is in an area where I wouldn't lend a bicycle to. What do your numbers look like? I'm just convinced that CT sucks.

>>1569569
>I could buy a single family for around $129k
Seems reasonable.
> an acceptable rent around here is $1/sqft
Something seems very wrong with this.

Rent for a 1 bed 1 bath no garage 600 sq ft apartment starts at $1,100 a month.

Maybe you're just looking at a bad area.(In terms of growth not crime)

I have no idea what to tell you, other then you're right if that is the situation where you are.

>>1569587
Yep I figured something was off about the numbers. No way would I be able to get $1100 for a 600 around here. Just don't think it's in the cards for the "area" where I live.

The place I actually live in is a little more suburban than where I'm looking to invest, but it all seems to scale the same. You mention crime but I ran my numbers on a perfect situation and it was still shit. I guess it's proof that our state our going down the crapper ;)

Thank you for your input, I knew something was wrong.

It's a good day to be a renter

what are reits

>>1569338
Yup, this is how it works. I own rental properties. With real estate you're in it for the long haul.

Commerical properties have higher risks and returns, but residential properties rarely amortize quickly. 15 years is pretty amazing in an established region (big city) and that equals out to about 6% APR. You're usually looking more at 3-4% APR. Given the over-heated real estate market many high-class rental properties are now yielding closer to 1%.

Having said that, here are some mitigating factors:
It's incredibly safe. You're basically inflation proof. Unless something catastrophic happens in the neighborhood inflation is usually the floor for property appreciation. And your rent is contractually bound to the consumer price index. So you have stable real gains, not just nominal gains like with any other form of investment. Nobody's saying you should go 100% into real estate, but every portfolio should have it as a stable base.
You calculate the returns on rent only - meanwhile your property appreciates in value, meaning real estate is ideal to create net worth. Since you don't want to sell in the rentals you're usually old property as collateral to buy more, leading to exponential growth.
20% down payment is utter shit for your first property. Interest is going to tank your profits and cash flow. The flip side is, you're getting 80% of the worth "for free" because the property pays itself off.
If you buy turnkey properties you're a chump. Buy a run-down moldy house, fix it up with your crew and enjoy massive profits.
Good properties have low profit margins. Bad neighborhoods have much higher margins but you'll have to deal with shithead tenants. Safety costs you.

Run some actual numbers. Interest payments, taxes, vacancies, etc. If a classy property amortizes in under 30 years it's a pretty good deal for the current market.
You'll build net worth and enjoy safe and stable cashflow. The *real* profits in real estate are for the next generation though.

>>1569338
I don't work much in CT, but I've posted in RE threads in the past and am in New England.

Sounds like you are looking at market rates for buying properties. Don't do that. Buy shit at foreclosures, FSBO, and wholesales. Get a network of contractors. Take run down and damaged properties, and get them into working order, either to flip, or rent. Buying at market rates is saturated. You're competing with homebuyers, and people doing armchair investment through zillow, sometimes with bots.

If you want the good deals, you can't skip legwork.

I'll go through the rest of this thread and answer some stuff tomorrow. If you have targeted questions I can try to answer, but as I said, I'm not supremely active in CT.

>>1569637
>You calculate the returns on rent only - meanwhile your property appreciates in value.

Also bit of this. It's not just appreciation. Some costs are static, which offsets this further.

Rent, and the property value will appreciate over the long term, keeping pace with inflation in general. Maybe a bit past inflation in areas that are growing moderately well. Taxes will go up with appreciation, and maintenance costs will go up with inflation to an extent. However your mortgage doesn't go up. It's static. You might cash flow for 100 dollars a month on a small property now, but in 10 years, that cash flow could easily be growing at a rate that exceeds inflation, while generating equity from paying down the mortgage, and with appreciation on top of both of those.

.01% of value per month.

10 years to recover value of the property if prices remain stagnant,but you always have a tenant. Minus shit like repairs

>>1569338
CT fag here. To make higher returns you buy a cheaper property and rent to shitheads. You can make double the return.

Also remember your 4% is likely cash flow. You're building equity in the meantime too. I've looked at houses in Florida to rent and they have razor thing 3-4% margins, but that's after a maintenance company and a small amount for repairs set aside.

How long of a mortgage are you considering? 30 years cash flows sooner despite overall lower returns.

>>1569396
The article doesn't assume opportunity costs, is biased towards real estate, and states properties are positive over the past 50 years. I'm not willing to wait potentially 35-40 for my investment to start paying off. There's no point. I understand what the article is trying to say, but it's too much of an oversimplification.

>>1569338
Well, real estate isn't generally a big earner. If you plan to buy and you've got the cash wait until interest rates go up. (it's inevitable at this point) when they do you're going to see housing markets break a bit.

>>1569397
I responded before to you too. Despite equity as well, you can buy some dividend paying stocks for 3-4% return, be taxed less and have much less of a headache. Real estate, especially in the tax hell hole that is CT can go down just as easily as stocks.

Most people who praise realestate and make it seem so easy are full of shit, leave out details, actually get burned, or take the risk of lead paint, asbestos, or fudge about repairs and missed rent. It's definitely greater in the regard of leveraging your money, but I tried recently and the market sucks. It's overpriced for the risk/return. I have stellar credit and money - banks still want 20% down and give you no money for improvements. A turnkey house requires a much higher investment as well. It's shit right now. Other markets may be good, but for CT, stay away unless you get a deal.

>>1569406
There's no new zoning for trailer parks in the US I heard. If there is, there's very little.

>>1569514
Its worth it just for the tax savings if you're making good money anyway.

>>1569713
>too much of an oversimplification.
Well it is one page of a 500 page book.

>>1569338
capital gains

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>>1570337
Another page from another book on too much leverage for fake percentage gains!

>>1570347
That's less to do with over-leverage, and more to do with trying to redefine cash flow using bullshit metrics. If a building actually truly cash flows, it will continue to cash flow as long as it appreciates just under the rate of inflation.

Anyone looking for consistent 10-20% a year appreciation should invest in meme stocks and buttcoins. Then drink themselves to death when it blows up in their face because they're fucking stupid. All you are doing when you do something like that idiot is increasing the supply of cheap properties for people with some degree of basic rationality.