All Forum Posts by: Bao Nguyen

@Joe Villeneuve I'm going with low end properties because their ROI can be as high as 15-20%. The nicer homes - with less headaches - generate about 10-30% higher rents, but costs 100% to 200% more, lowering ROI to about -10% to 5% instead of the 15-20% on the low-end homes. Exactly the point made by @Dan Gheesling  . That's why I'm sticking to lower-end homes: higher rates of return, but more work. I'm speaking for the Lansing area.

You also mentioned I could be doing 30 non-low-end homes and profit about $200k/year. That puts cash flow at about $7k/year/home, or a net income of about $550/month/property. The only way to get that kind of monthly cash flow is to own the units out-right, which takes years (15-30yrs). 

So to make $200k/yr as you suggest, that's only possible after putting in 15yrs+ of work. I can't imagine someone making this kind of cash in 2-3 years starting out with no-money-down buying subject-tos.  Unless they are doing active real estate investment: flipping, wholesaling..etc.

@Paul Ewing I'm in almost the same boat as you, but with less properties.  The mortgage eats up a big chunk of the cash flow.  There is equity build-up from the mortgage payments, but the payments consists mostly of interest unless your mortgage is 10yrs+ old where the amortization starts to work in your favor and most of the payment is principle instead of interest.  Again, 10yrs+ for this to start to become in your favor.  Nothing points to 2-5yrs of work and $100k annual revenue as the guru programs seems to imply.

@Jay Hinrichs I know you have a lot of experience with owning a lot of low-end rental units.  I'd be very interested for your input on this.  And what kind of income range (under $100k, $100k-$400k, over $400k) can one expect from owning, saying 100+ low end rental units?

Like many other real estate investor, I seek to buy and hold real estate, and enjoy the cash flow and any possible appreciation.  

However, since my target properties are lower end properties that often requires rehab before I can attract the best tenants at full market rent, I find myself doing a lot of work. The work consists of not just hiring contractors to fix up the properties, but also of a property manager: marketing/vetting for great tenants, repairs, paperwork and tax preparation for my LLC (or researching if I should even use an LLC)..etc. It's a full-blown business - it's not passive income anymore in my opinion. It's work, and it's work on top of my already full-time job. I'm in awe that some own and manage 100+ units.

My question to all of you veterans in this business: what is your income range, and how many hours/week do you work for this income?  If you could start your response with the following 2 pieces of info, it would help me (and a lot of others who think real estate is easy BIG and FAST money after going through their guru-course) :

1) Annual revenue (pre-tax) of under $100k, $100k-$400k, over $400k

2) # of hours/week spent for this income

From my estimates, I would need to own 50+ single family homes, all paid for free and clear, and all rented before I can even start sipping anything on the beach and not worry about finding a full time job to support me in addition to rental income.  Although it's possible to own 50 units fairly fast, to own them out-right with no debt would take many many many years.  Or am I just a failed guru-course student?

...and the problem with taking many years to do this  - 10 to 30yrs in my calculation - is that many low-end properties are already 100+ years old.  How long can a home possibly last?  How much left is left on these homes, where I can pass them onto my kids as an "asset" instead of a crumbling pile of 2x4s?

@David Krulac Amazing David.  I guess I'm just an ignorant guru-course student.  Thanks for sharing.  

@Jay Hinrichs You're absolutely right about owning low end properties and have capital ready at all times for expenses: HVAC goes dead, vandalism, plumbing emergencies..etc. I don't get how all these guru programs are teaching no-money-down-leverage-as-much-as-you-can-and-you-can-start-without-a-dime-in-your-pocket. That strategy might work with a house that's only 5-10yrs old, but I can't imagine a seller with a new house in a good neighborhood is willing to selling under these terms when they can put on the MLS and get full cash price. Am I missing something here or am I just a dumb guru-course student that never got it?

 Wow.  That's unbelievable.  The insurance companies probably has all this printed out inside some thick booklet using insurance lingo that the layman has no clue about.  Technically these insurance companies are usually always right.  But not ethical and not playing fair in my opinion.  

@Account Closed how many units do you own?  Sounds like a good idea if you have a lot of units, but at 3 properties for me, that's about $1800/yr in property insurance cost - which I think is a good protection just in case any of them burns down or a tornado comes through.  But if I owned say, 30 units, I don't think I'd be willing to pay $18k/yr to insure them all - at that point I'd self insure.  

@Jay Hinrichs @Andy Collins @David Krulac Gentlemen, all great points, thank you for your input.  When looking a prospective units to buy, my xls cost estimator only takes into account rehab costs, property taxes, vacancy, closing costs..etc, who would think about attorneys to review insurance policies.  In depth experience like this is what differentiates novice investors like myself from veteran investors.  The grass is always greener, until you step foot into it and become experienced.

@Account Closed Own the Mercedes, but rent out the Chevy.  :-)  Point taken.  

@Jon Holdman You're right, insurance company wasn't fraudulent per say - and like everything else in life, one needs to do their own due diligence.  But how much due diligence is appropriate?  After a certain point, it's too time consuming to be feasible.  I should have perused the policy booklet.  Imagine if you bought car insurance and someone stole your car and when you called up the insurance company they politely informed you that theft is not covered - it's only covered if trees fall on your car.   Why should property insurance be any different?  But it's all because I'm a novice at property insurance and not well versed with non-intuitive business practices.  When it's not intuitive, to me it's not 100% ethical.  But, unfortunately, we live in a world of fine print.