Obviously, it depends on the size of the house, but I’ve heard that you only make about $500/month per house.
That doesn’t even sound worth it to me when you can make much more rehabbing or wholesaling without the hassle of being a landlord.
If you’re able to make $500/month positive cashflow per house then buy all the houses you can. This is far beyond what most landlords make per property. The norm is $100-200/month per door.
This strategy is just that, a strategy that can fit certain peoples investment strategy. If you’re immediate goal is cash then this won’t work. However if you’re goal is long term passive wealth creation with certain tax benefits, this is one option. Personally my strategy is buy sub2 and sell with owner finance. Much more secure position without the headaches of being a landlord.
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In a sub2 deal, does the deed change hands? If you default on the mortgage payment, does the judgement go against you?
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When you sell owner financing, who pays taxes and insurance?
There are several answers to these two questions, PM me and I’ll explain best I can.
Redstar, the law of deeds says “The deed MUST BE delivered during the life of the grantor” If you get a deed sub2 whether or not you record it you are the owner of the property.
Is this $100-$200/month per house figure assuming a mortgage payment?
A person could make $8,000/month wholesaling two houses per month, even after marketing costs. This means that even if you made $300/month per house, you would need 27 houses to match this figure.
I think that only a fool would buy a house in cash because that money would more wisely be used (if one were to stick with real estate) in rehabbing, home building, etc. Therefore, I see no point in single family rentals.
Apartment complexes and hotels may be another story, but I have never actually ran any numbers. One time I went to the owners of a local hotel and pretended I worked for a real estate investment firm that was interested in buying their hotel. They told me it had a revenue of $57,000 per year. Even if it only cost $3,000,000, it would take 52 years to see that back. I’m not sure there is a point in buying ANY real estate in all cash.
To me, the only advantage of investing in real estate over the stock market is the ability to take out long-term loans to do so. (Aside from the fact that it’s just “cool” to own an apartment complex or hotel). Seeing as I’ve profited $0 in my many years of experience, I would consider myself an expert.
Rehabbing and home building is not “real estate investing” to me, it’s more like starting a business. And wholesaling is just creating money from nothing.
Without starting a new thread…
When renting a single family house…
Who pays for garbage, recycling, and sewer?
Usually the renter pays the utilities on a rental house, including water/sewer/trash.
So then the math on a house would look something like…
INCOME = rent, minus sales tax and income tax(es)
EXPENSES = property tax, property insurance, maintenance, legal costs, management costs
debt service (if applicable), mortgage insurance (if applicable)
REVENUE = income - expenses
On an apartment complex, you would add garbage, sewer, recycling, storm water… (some apartment complexes might include water, Internet, cable)
On a hotel/motel, add water, electricity, and probably Internet and cable…
You’ve already been offered this feedback numerous times, and what you’ve posted is not accurate. Go through my posts to find the right answers. It’s too much to repeat/justify.
Meantime, assume expenses will be 50% of your market rent on a given property. Expenses are not considered the same as debt service, and debt service is not included in the expense column.
All parts of investing should be ran like a business. Those who do run it like a business are the most successful. In terms of renting properties, it depends on your strategy. Yes it takes a ton of houses to equal what a good wholesaler can make in a month, but if done right it can be more passive of an income. There was a guy on here years ago (propertymanager) that offered tons of advice on landlording/rentals.
You suffer from indecisiveness. Please find one aspect of real estate that appeals to you and learn all there is to know about that one aspect. If you don’t have a clear idea of your exit strategy, it will be impossible to solve your sellers problems because you yourself won’t know what to do.
Exit strategy for what?
The seller. What a wholesaler will pay is different than a landlord might pay, which is different than what a person who buys Sub2 and sells on l/o might pay. It’s tough to provide a solution if you have too many ideas floating around your head. It is for me anyway.
My method is Sub2, I sprinkle in some wholesale deals here and there.
:beer :beer :beer
I think if I had the money, I would just rehab houses.
On an unrelated note, do your tenants in your apartment complexes know you by first and last name? Do they just write a check to the DBA name of the complex and deal with management?
Ideally? No, you don’t want to become familiar with your tenants, as the owner. You have managers to insulate you from that. However, this doesn’t occur on smaller projects, and onesy-twosy rental houses, from my experience. This is more the case on 30 units (to pick a size), or bigger, when you can afford full time management.
At the same time, I was taught to represent myself as the property manager, not the owner, and have my tenants make the rent payable to the management company.
That has served me well over the years, especially at the beginning.
After all, I was the property manager, and I had a management company (even with less than a half-dozen houses at first). Who needed to know I also owned the property?
This can be done from the beginning, and should be. You don’t want renters associating their rent payments with you personally.
I’m not sure there’s anything more amateurish, and begging for hiccups and avoidable trauma and drama, then getting on first-name basis with your tenants, and then accepting rents made payable to you. You know, why not just collect rents in your Corvette?
Speaking of doing that, before I knew better (and started using my head), I used to collect rents in my shiny, black Corvette Stingray. Worse, I parked in the tenant’s driveway. You know there’s collecting rent, and there’s rubbing the tenant’s nose in it.
Later, when I had to, I wisely drove the beater truck to pick up rents, and somehow the tenant’s were more ‘neutral’ toward me. I probably looked like I needed the money.
Bottom line: Hide behind your management company; represent yourself as the manager; and accept rents made to your management company.
P.S. It’s very hard for some newbies investors to separate their identities from their rentals. These landlords are often scarcity-minded, often working on a thin margin of error. Consequently, they resent tenants who don’t fulfill their fantasies that their houses will be treated like they own them. As a result, they are generally unrealistic, stupid retards (my clinical diagnosis), that want to “lord” over their renters; cultivate and initiate power struggles; and escalate situations, because they can, if not carry on like gross amateurs will.
If I were to rent a house again, I would NOT rent directly from an owner/operator. They are not sophisticated enough to understand the importance of placing a manager between themselves and their tenant, and/or they cannot actually afford to do that, and as a result, remain way too unpredictable, often litigious, and otherwise pains in the neck. No thanks. FWIW
One thing I forget to mention. If you’re gonna represent yourself as a manager, then play the part consistently.
Ask, “What do managers act and look like? Do they show a house in shorts, t-shirt, and smell like a freshly plunged toilet, and/or have a paint brush hanging out of their pocket?”
No. Managers don’t handle paint brushes or toilet plungers personally. They ‘have people’ who do that.
So, if you’re gonna play the part of a manager, act like a successful one. One that delegates grunt work, and shows up looking like a professional manager. I know it’s MUCH harder to pull that off, when you’re the only one you can afford, to unclog the tenant’s toilet clog at 7:30 at night. But do the best you can to leave the impression that you’re just the owner’s lackey, and not the actual owner, who’s his own lackey.
Just a word for beginners and small operators wanting to avoid becoming too familiar with your tenants.
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And you buy these complexes by sending mass mailers to complex owners?
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They all turn a profit despite having to pay debt service on 100% owner financing?
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Am I correct in assuming that you never use realtors or purchase any publicly listed properties?
So I shouldn’t collect rent in my $20,000 replica of a $459,000 Lamborghini?