All Forum Posts by: Bart H.

Congrats on the tenant, I think there is fairly strong enforcement if you arent a real estate agent.

I dont know if you did it this time, but I personally believe that any rental discount is best given in the last month of the successful completion of the lease.  Ie 6 month lease. $50/month discount applied all in the 6th month if rent is paid on time.  So in month 6 they get $300 off the rent. vs 6 individual month at $50/month.  Thay way the tenant only gets the discounted rent if they go the whole term of the lease.

I personally think the best way to start is a house hack of one sort or another, maybe find a duplex or something like that.

Unless you have a lot of construction or rehab experience or very deep pockets going in , I dont think I would recommend your first rental be a rehab.  IMO there are too many things that can go wrong right out of the chute.

My wife and I started with a duplex, we lived in one half and rented the other half.  Our duplex was mostly move in ready, we did a couple of minor things like paint.  It taught us a lot about rental real estate.

Learn if you want to deal with tenants, learn how to buy properties etc.  Then imo move on to rehabbing or possibly out of state.

Rehabbing imo has the most upside, because when its successfully done, you are unlocking value.  But it has a lot of risk, if you dont know what you are doing with regard to construction, imo, I would consider taking a smaller step first, develop a team, real estate agents, inspectors, electricians, plumbers, contractors, foundation, roofing, AC etc. 

I know a lot of people swear by out of state rentals, I personally would not make my first rental an out of state property.  We dont own anything out of state, I cant imagine managing a rental or rehab project remotely ie outside of driving distance, without having the experience to do it locally first.  

 @Ariel G 

I think its not that cash flows are unaffected, its that they would be affected to a much lower degree.  First of all leases are longer term, rents dont drop overnight.

Also if people are losing their job in a downturn, or more importantly are worried about job loss, they wont be buying houses, or will be selling their current house, if they arent home owners, they will still be renters.

There is also a reasonable argument to be made that the next downturn will occur due to a sharp rise in interest rates.  If that happens, inflation likely returns and you will be really happy to have buy and hold properties with mostly fixed rate loans.  If you are needing price appreciation, or cheap credit to keep your business going, then I think things could be a little more difficult.

I think IF I thought there was a imminent bear market coming in real estate, I would get rid of any of my assets that had marginal cash flow, and I would be wary or at least less reliant on loans that didn't fully amortize.  IE if you have a downturn and need to go out and refinance in 3-5 years, you could be in trouble if credit gets tight or interest rates go way up. 

I could be wrong, but I dont see a major crash in real estate (at least not in the middle part of the country. 

 Imo there are always deals, if you keep your buying standards the same, then even if a downturn happens, it wont wipe you out.  Where I believe you get into trouble is being cautious in the downturn and overly aggressive near the top.  

We have had it happen to us twice. (non military renters).  Both times we have made it clear we were doing them a favor and set out terms that tried to keep us whole.  In one case we charged them an extra months rent payable up front before the lease was canceled.

The other time we settled in advance with the tenant and changed a fee to cover our cost for a turn.

In the second case we had given a monthly discount on the rent for an 18 month lease.  I learned then and there that if we ever again offered a discount on our rent it would be recognized in the last month of a completed lease where all payments had been made on time.  IE instead of giving $100/month discount on a $1,200/m lease, we'd give 11months at $1,200 and one month free.

 I think there is a max on the capital gains, something like 550K or 600K and then it is subject to taxes.

 @Erick Hernandez I am fairly certain the property cant be owner occupied to do a 1031 exchange.  And I think (although I could be mistaken one) this that it has to have been a rental property for a certain period of time to be eligible for a 1031.

@Kenneth Kussman  IT looks to me as though @Brie Schmidt has given you some excellent advice,  She said it a lot more efficiently than I did.  

I might recommend that if you can, and yes it will be a little more pricey, but you will get the most out of the Chicago experience, to be close to that brown line or red line going north.  Give or take a few stops north or south from Fullerton.  That is just an area that has a lot of activities, is  a quick commute into downtown and there are a lot things to do in the area.

@Kenneth Kussman  I used to live in Chicago.  IMO if you are single, i'd just find a place in Wrigleyville, or Lincoln Park one of the other neighborhoods north of downtown.

I dont see an address number I assume Randolph puts you in the loop.

IF it were me, i'd find a condo or apartment near enough to the L that you could commute in without driving.  It will save you a bundle.  and you will have access to the really cool things about Chicago that you just wont have if you live in the burbs.

I might be careful about buying property in Illinois, the state is actually losing people at a fairly fast pace.  I think I heard 100K+ over the last year.  Maybe the folks on this board who are in the Chicago area might have a better handle on the market.

Feel free to send me a note if you get an actual address and I can give you feedback.

Good Luck, Chicago is a great city!!!

@Corey D.  welcome to Dallas.  I am not a long in the tooth investor by any means, but I'd meet up over a cup of coffee to go over what my wife and I have done over the last couple of years to get in the game.  Send me a DM.

@Mark Allen Just a question on the Dallas REIA, are you saying you didnt think it was worth it?

My wife and I were interested in finding some active real estate groups in the area. 

@Jane Du I think part of the discussion is what are your goals?  If you were a doctor with a high income, maybe you'd want to deploy capital that has little to no return now in exchange for high clash flow in 15 years (ie when they with to retire).  

Maybe you are a young investor trying to get as many properties with as much cash flow in hand with a minimum amount of available capital.  In that case you would want non amortizing loans, or 30 yr notes that allow you to get as much leverage (debt) as possible.

From a finance theory perspective, debt is 'cheaper' than capital.  So finance theory would tell you to control as many properties as possible with as little capital as possible.

If you were older and on a fixed income, maybe the cash flow from paid off properties would be most important.  The 'risk' would be the lowest, but the return would also be theoretically lower.

Beyond cash flow, maybe your focus is on capital appreciation, or maybe you want to minimize risk, or focus on capital return, or risk adjusted return.

You are discussing a 15 year note. Think at first about your returns without leverage, ie without a loan. If a deal makes sense without a loan, THEN consider the financing. IF you think about it, a property paid for with 100% cash will have the highest cash flow. On the other side a house with 100% debt will show the highest return on investment. (ROI).

There is no absolute right or wrong.  But know that identifying your goals ahead of time will go a long way to identifying how you personally want to invest.