I’m newbie here I’m not sure whether I should jump into RE business, especially renting.
Here are a few fact about me
I’m 28 year-old, single, and not a virgin
Have about $300k in cash, no debt (except for car and school loan)
Make $80k / year, and earn extra $120 k from my side business. I dont know how long my side biz will last, and whether I will lose my job tomorrow.
I know nothing about RE, housing stuff/fix/maintain and crap like that.
I hate travel
My english is very bad.
I’m very busy with my side biz already, so research/time/commitment to something else may be hard (of course I always want to learn to know everything)
My bro, and what he heard from others are buy property then rent it out, make alot of money.
Basically, something along the line like
Buy a property in Las Vegas, cost $180k, down $10k, and mortgage the rest.
Try to rent it out for like $1000ish a month, and break even
After 20, 30 years etc… you own the house. Basically renters are paying for your mortgage.
So if you repeat the plan, expending the number of houses you have, then probably when you are old, you would have like a bunch of houses, and be super rich.
I know a lot of people got rich thru RE, but what is the percentage of success. You always hear ppl yelling and screaming when they make $$$, but not when they lose $$$. A few ppl mention about get property at $50k / $70k, $10k etc…, and they are super-rich. But for normal/average/newbie like it, it may take 5, 10, 20, 30 years to even reach that stage. So it’s more like time/commitment/luck/intelligent/make the right decision.
Is it really even worth it at all?
Would I be better off just invest in stock market, dollar-average into the index market for the rest of my life, no need to worry about all of this?
Right now, I work a few hours everyday for my side biz (beside my full time job), and be able to earn more than $10k / month extra income.
Is it even a smart decision to not fully dedicate to something that giving that kind of $$$ return doing what I am doing right now, and jump into RE business?
If you were me, what would you do?
Btw, would the Las Vegas renting example above a good business decision at all?
I like the delema your in, the ultimate paradox! What, where and why to invest in one avenue of investment over another.
The stock market and dollar averaging the index market do not afford you the tax write-offs real estate can offer you!
In your position I think I would make it real simple and pay all cash for 3, 4 or 5 properties in a growth area. I invest in Arizona which is expected to continue to grow in the long run, properties which are relatively new can be bought for less than the cost to build new and the rental market has not completely collapsed.
You can buy all cash, rent for good returns, compile all rents back into a future investment account and when the market recovers over the next 5 to 10 years see an appreciation gain effectively trippling or quaddrupalling the property value.
I would reccomend buying all cash because right now as investor loans are hard to get, you require big reserves for each property, huge down payments and only get about a 75% return observed on new loans from rental income, and you end up paying a lender interest which can be part of your returns.
So if you bought a home for example built 1998, 1199 sq.ft., 3/2 with 2 car garage and 6100 sq.ft. lot for $61,800 and rented it for $1000 dollars you would make a roughly 15% return on your cash after cost’s with a upside potential of trippling your property value over 10 years.
I think if I am correct the yield would be almost 31% per year for a 10 year investment with all real estate write off’s except interest deductions.
The house I refered to above is actually for sale, if you want to talk further send me a PM with your contact information and I will give you a call.
I am not as optimistic as GoldRiver about the future rate of real estate appreciation. I assume he is only referring to his expectations for his local market and not to the national average.
I fully expect the housing market to show some growth and appreciation over the next ten years, but I don’t expect a double or triple, but rather a slower and more modest rate of appreciation – more on the order of 2.5% average increase over the next ten years.
High unemployment rates will still plague us for the next year or so, and the credit markets will make home mortgage borrowing difficult at best for the homeowner and nearly impossible for the investor. Higher savings rates and high unemployment are both drags on an economic recovery.
When you consider that the only way to get our exorbitant budget deficit over the next ten years under control is to raise taxes and reduce spending – both of which have to be done to have any positive effect – the American consumer will be reluctant to take on any more debt or to even spend his descretionary income for the next several years.
As I see it, the real estate markets do not hold the promise of rapid appreciation that we expericnced between 2001 and 2005. Instead, the averge national appreciation rate willl most likely be about half the historic average.
Rental property can still be a profitable investment for the long term, but if you are hoping to double the value of your investment in ten years, you will probably do better in the stock market.
Today’s rental property investor is investing for the cash flow the property generates and the tax benefits derived from investment property ownership. Appreciation in this market is not certain and should not be a factor in choosing real estate as an investment vehicle.
I’m not sure whether I should jump into RE business, especially renting.