Should I get in....

Question

I'm 45 and have owned my own business for about 15 year. My current business is kind of on autopilot and I'm bored with it.

I have been kicking around the idea of investing in rental real estate for years but have never made the plunge.

My question is Should I do it?

I have seen friends try it and fail while others have done well.

I'm sure that like any business hard work and experience make the difference. I can do the hard work. You guys have the experience.

My goal is to net around 5K per month. What kind of effort will that take?

There are 3 major colleges near my so I'm thinking about going after one of these markets? Any advice on College rentals vs families?

I have the cash to buy a few properties now. I see all kinds of stuff going to auction. Any thoughts on buying at Auction?

Is the any recommended reading?

How much time do you currently spend on your businesses? What are the major pitfalls and problems.

Thanks for your help in advance. I know you are all very busy.

I look forward to your reply.

John Evan Miller · Answer

Buying at a foreclosure auction can yield great results for buyers who want to get a good deal on a property. These repo auctions are extremely popular across the country, especially for those investors who know how to work the system and get the best price. Many buyers don't realize that there are different ways to buy foreclosed homes depending upon how they were financed in the first place. Some of these homes are REO properties, which stands for real estate owned. In most cases, the bank will require a substantial deposit or even the full amount of the property at the time of winning the bid on the courthouse steps. Other properties for auction may be HUD homes for sale. In most states, there is a certified HUD listing broker who will list the properties for sale. Then, HUD will have a specific starting bid. Instead of bidding on these properties in person, there is an online process where an agent will walk the buyer through the special HUD contract. Typically, the bidding is open for certain period of time, and sometimes it is only open to certain groups such as owner occupants or investors. In many states, the entire price of the home must be paid within 24 hours of winning the bid on the courthouse steps. Check with your state to find out what the rules are regarding payment. For regular auctions done by a third party, many buyers are able to go ahead and get a traditional loan. The same can be said for HUD homes, which go through the normal process of closing just like any other type of home.

Scott W. · Answer

i would get mortgages & not pay all cash, if you can. the more leverage, the better IMO. Plus, you'll most likely need to fund 100% of the rehab (not a lot of rehab loans out there but there are some). And - most importantly - ya gotta have those reserves for when Murphy's Law kicks in. There is a ton to learn before jumping in. My advise is to learn as much as possible before starting.

Dale Osborn · Answer

Sounds like you are looking for a challenge as your business is getting boring. Real estate investing will definitely give you what you are looking for. We started out with SFRs then moved into apartments and became full time investors since then in July 1994 we bought a 27-unit apartment. It paid all the bills and gave us something to do. It is a great feeling to be the Boss and decide whether you wanted to go to work or not. Also if you wanted to work 10 hours a day - it was your choice as you are working for yourself. Eventually we got burnt out on people not taking care of the apartments and moved on to mobile home parks. If they tear up the home or plug the toilet - don't call me - it is their home & I am just renting the dirt it sits on.

Tom S. · Answer

Welcome! My first investment property was a college rental and I still have some college rentals to this day. Some tips I can offer from my experience: - Lease by the house not by the room. That way you're not tracking down individual renters all the time. Many college people moving off campus occurs around the junior year, so they know friends at that point who all want to get a place together. Also if one person is late, I just notify everyone they may evicted and peer pressure tends to get the remaining rent in. - Some people I know require parents to co-sign. I simply run credit and let them know I'll report it if they default. Most college kids are concerned about their credit. - You definitely get better rents, but higher turnover and damage versus some families. Get a higher security deposit (1.5 times rent for me). - There's generally more zoning and code enforcement for the safety of the students. Be aware of the regulations in your town. Hope that helps, - Tom

William Donaldson · Answer

Welcome to BP! You should certainly get into real estate investing if you are wanting to have more control over your financial future! Netting 5k per month will probably take awhile to get to - investors on here seem to go for CAP rates of 8-20%+. Obviously the higher the CAP rate the harder it probably was to find the deal, but you'll get there. I am also located in a town with three colleges nearby (Clemson, SC). Rents near campus are much higher than 10-15 miles down the road. It's very common to rent/lease per person (bedroom). More management-intensive, but it can lead to greater returns if done right. If you have any specific questions, it's easy to use the search feature on this forum. You'll most likely find multiple articles on the subject with helpful information and different perspectives. I'll go ahead and beat the next person to the punch and recommend joining a local REIA. Good luck!