I have used debt to buy real estate. I will say this on a couple points.I look at this a mid western factory worker.
1. saving money is not rocket science. People over complicate it. Save more than you spend. Don’t keep up with Joneses. Drive your car for a long time. Pay it off and keep driving it. 700$ a month for a car is 8400 a year. I have 3 vehicles that are all over 10 years old. They all drive fine. My avalanche is about to get a tune up new suspension and 4 new tires less than 2000$ and it will be ready to go anoter 75k
2. A factory working couple each making 50k can live on 50k a year and save 50k a year. Each could also get after it and work overtime and make 80k a year.
3. Young people can do things without debt. They just can’t work part time buy a new phone ever three months and be a world traveler. Stay at home at 18 get a job in a factory work your guts out while living at home for two years save every penny and buy a house with cash or put 75% down. I work with a guy who worked 90+ hours every week right after high school saved every penny and now not even at 30 he is doing great as a factory worker.
I think a lot of time we say things can’t be done, when in actual the road is hard. It can be done. In saying that I have used debt to buy a rental and don’t think it’s wrong. That said I am trying to buy real estate in cash goin forward.
I had mental block/analysis paralysis. I had a 1000 reasons not to buy a property.
1. I was gonna get sued, I have an umbrella policy and a good lease agreement.
2. I don’t know what I’m doing, you only get better at things by doing them. I still don’t know what I’m doing 2 years later but I know a tad more
3. No one will want to rent my property, I had probably close to a 100 replies. We found a good tenant through rent redi helping with the background checks
4. I have to get a perfect deal like I hear on podcast. I bought when the market was crazy. I got out of work to go see a house at 3:30 by the time I got there it had an offer on it. This happened a couple times. I ended up getting a small place that I spent way too much time and money on. However once I got it going it has been great and I learned so much.The perfect deals of buying a duplex for 40k and then discovering it actually a triplex by putting a 500$ wall and door in, then the value is 400k cash flowing 3k a month with 41k isn’t real life. I know someone will say I get those deals all the time kuddos to them.Most of us ain’t that
5. I don’t want three o clock phone calls. If you don’t want hire a PM m, however it will take a substantial part of income. I am fairly handy and deal with calls myself. The shower wasn’t hot (I looked at anti scald it was to low. Door lock was finicky, nowhere to plug tv in hired an electrician to install a new outlet. I’m not saying things won’t happen but I don’t think that things are as bad as people make them seem. I try and stay ahead of the game on PMs I change air filters and get furnace serviced I replace shut off valves and add them where needed. Piping is old I replace it before it breaks. If I see that a pipe only has a couple years left in it I change it before it breaks.
There are a million reasons not to take the step but the reward is worth it. You can do it.
I only have one sfh right now. We put all we had into it. I work seven days a week and 12 hours a day most of the time. I would work from 3am- 3pm then renovate house from 3:30-6:00 most days. My wife and have never argued so much. When we finally got place on market on the first two months we responded to probably 5 calls with 3 of them ghost calls for nothing. We questioned what we got our selves into. Our greatest fears were coming true. Fast forward 1.5 years our tenant has been cool. We are making some money. My wife is even encouraging us to look at another property. We are so small but we still questioned our sanity more than once. What you have goin on seems like a lot, that said it seems you can handle the operations part of it, it just appears that you are sweating all that money comin out. Maybe I’m looking at it wrong but whatever money you have to put into it someone else is paying for it. You will recoup your cost. Not saying it doesn’t suck to drop 45k. However you are in a position to be able to do it through loans or cap ex funds. Regardless when the rents hit next month you will be one step closer to getting your money back. You got this. The short term kick in the stomach will be worth it
I’m very new to this. But I am confused at property managers. I self manage from 15 miles away. I take care of all maintenance and rent collection. While I have a sfh in a working class northern town I don’t get all the fees. So if I rent my property for 1000$ they take 8% a month which is 80$. Then I have to pay them one month or a 1000$ fee to place someone. The first year they get 1960$.basically they get the same profit I get. We put our place on Facebook and whoever rent redi advertise through. We took pictures with an iPhone. They can take pretty good pictures. We directed people to rent redi to pre qualify. They would qualify and we show property. The pre screen took care of most of riff raff and the 25$ application fee took care of the rest. When something happens I take care of it. I change air filters out every three months and have done some minor maintenance. Rent refi collects the rent. I guess I’m not sure what a property manager does to deserve a 50/50 split.
When tenant moves out my wife and I will clean up real good paint and patch on a Saturday afternoon.
Maybe someone can help me understand
This is just missing the forest for the trees. The first and most important answer to this is you're shifting any liability by not being directly involved.
The second thing is do the math on what your time could produce net versus if you paid someone to do that & you work more. It's just about efficiencies.
1month per annual lease is normal @Amirra Elgamiel you're investing in the greatest city in america. Don't get cute with this and cost yourself pennies to later cost yourself dollars, by nitpicking. Get a great PM by verifying the required things, pay them appropriately and then trust the systems in place but always verify as things move.
If anyone truly wants to grow a business, they learn how to build a team and let go.
I guess I blind. In my situation I have one property, would like to make it two. I asked my wife how much time we have spent on the rental “managing” it this year. She said 2 maybe 3 hours. By my math that is the equivalent of paying someone 1000$ an hour. When I change out air filter I can see if anything needs fixed. It takes me longer to walk inside than it does to change a filter. I guess I just don’t understand what a property manager does. If the furnace goes out and they respond to call I would still foot the bill to pay for furnace. I don’t need someone to call hvac guy for me. I get when scaling up and I get more properties to get a manager. I think if you set property up you shouldn’t be spending a bunch of time there. I just don’t get it. What are a manager doing that they need to make as much as me?I remodeled the house I made sure to take care of things. I just don’t understand what a property manager does every month
Not trying to sound like a total butthead. Really all I am hearing is buzzwords from the real estate world. Time is two hours a year. An app does the background check criminal background check eviction check. The app collects rent, does maintenance request, have lease details. What liability do I have? Honest question. I haven’t been to property but one time this year and that was drop off renewal lease and change air filter. That was five minutes. I totally get if someone had 5 properties to have some one on stand by. I’m still not “understanding” maybe I never will while someone with a just a few properties would need a manager. I just don’t see this vast amount of time being spent to justify it.
I think Jeremiah is just pulling everyone’s nose with his replies and laughing in the background
Let’s play nice now children
No need for tension 😘
Happy Weekend to all 🙏
My apologies if it came off this way. I did not mean to seem like a troll. My answer are real and honest. I have just described my experiences and wanted to further understand the property management side of things. As I hear about but don’t necessarily understand the value. To me I can self manage my single property and don’t see need for one. When I expand I will pay for one as the chances of things arise. I am not trying to fabricate times or amounts. Just trying to get a better understanding
@Jeremiah Dunakin By the way, no insult intended - I agree with you on the managers and on not counting unrealized gain; however, mortgage principal reduction is a realized gain - you no longer owe that money. To your other points..
PMs typically either do the evictions and appear in court or hire an attorney to do the evictions and you incur additional fees.
When you go in to change the filters please take more time as the most important thing you're looking for are leaks in your plumbing system. You want to check the toilets and under every sink, outdoor hose bibs, etc. That's where you can really save yourself some $$ if you catch it.
There are a lot of scammers out there. We will call listed number for employer and verify the paystubs we're given. If we can find their landlord by reversing the address and contact them on a number we find or via Facebook we do that and often get the real story this way. Avoided more dirt bags than i can count with just those two methods.
the belittling and disparaging remarks are not needed. My lease is from a very very very successful real estate investor whos career would rival/exceed 75% of those who appear on the podcast. Hope you have continued success.
@Jeremiah Dunakin I don't think you're accurately calculating your "profit." If you're counting mortgage principal as expense that is actually part of your profit. Our average tenancy across a large portfolio with exposure to many property classes is a little over 4.5 years; the tenant placement fee shouldn't be an annual expense. Your time calculations are also light - you spent more than 5 minutes calculating renewal terms, presenting them to the tenant, drafting and having a lease addendum signed, traveling there, changing the air filter and doing an inspection. As you add units you'll be forced to be more careful with screening (an app can't do it on its own) and you'll have more tough tenants no matter how well you screen. Right now you've just been lucky. Lucky loses to statistics/probability with more units and time.
I feel like the larger you scale the less sense using a property manager makes. If you have two vacancies near each other you can get a lot of showings done in a little time. Same with consolidating court appearances. We got a special price on windows by ordering for 6 different condos in same development (but not same address) at same time. Plus for every 25 or 30 units you can hire an employee for the same cost as the property manager who will follow the policies and procedures that you trust because they made you successful.
I'm a big believer in self managing. I've had bad experiences with PMs and OK experiences. We only used them when the investment was so far away it was impractical to do it in house. Never had a PM in those situations make everything so painless and wonderful that we loaded up on more in their market because it was so profitable and easy...
I will say that I have been fortunate/lucky. Maybe I am calculating profit wrong. I count profit as money after expenses. I understand that someone else is paying mortgage. I understand real estate mostly goes up and money is earned that way. I look at it as profit on paper only and is worth nothing until a transaction is complete. Unrealized gains are just that to me.
My time calculations are probably light. My wife and myself discussed terms for renewal while running errands(we also have discussed next years rent increase) , we added 3 new terms to the current lease for the renewal. It took longer to get the computer file than it did to type it. I delivered the new lease agreement to tenant and explained the new terms that was about 5 minutes to drive there(I guess I could have mailed it) 10 minutes to go over new terms. The air filter is four screws takes five minutes tops. An inspection is a quick walkthrough the house when I change filter.
The app does all screenings. It. Credit background employment. If they still meet criteria than we can spend 15/30 minutes looking at place. I’m not sure what more screening a person can do that the app don’t.
Does a property manager go to court for landlord? If not I would not see the benefit. I would also wonder why the property manager who screens the tenants better than an app would have so many evictions that court becomes a normal part of life.
I guess in my lucky simplistic mind I don’t see the need for a manager. When I get up to five or so properties maybe consider it. As for now I just don’t see the need. I guess I’m struggling to see how it’s justified. Probably just me
I’m very new to this. But I am confused at property managers. I self manage from 15 miles away. I take care of all maintenance and rent collection. While I have a sfh in a working class northern town I don’t get all the fees. So if I rent my property for 1000$ they take 8% a month which is 80$. Then I have to pay them one month or a 1000$ fee to place someone. The first year they get 1960$.basically they get the same profit I get. We put our place on Facebook and whoever rent redi advertise through. We took pictures with an iPhone. They can take pretty good pictures. We directed people to rent redi to pre qualify. They would qualify and we show property. The pre screen took care of most of riff raff and the 25$ application fee took care of the rest. When something happens I take care of it. I change air filters out every three months and have done some minor maintenance. Rent refi collects the rent. I guess I’m not sure what a property manager does to deserve a 50/50 split.
When tenant moves out my wife and I will clean up real good paint and patch on a Saturday afternoon.
Maybe someone can help me understand
This is just missing the forest for the trees. The first and most important answer to this is you're shifting any liability by not being directly involved.
The second thing is do the math on what your time could produce net versus if you paid someone to do that & you work more. It's just about efficiencies.
1month per annual lease is normal @Amirra Elgamiel you're investing in the greatest city in america. Don't get cute with this and cost yourself pennies to later cost yourself dollars, by nitpicking. Get a great PM by verifying the required things, pay them appropriately and then trust the systems in place but always verify as things move.
If anyone truly wants to grow a business, they learn how to build a team and let go.
I guess I blind. In my situation I have one property, would like to make it two. I asked my wife how much time we have spent on the rental “managing” it this year. She said 2 maybe 3 hours. By my math that is the equivalent of paying someone 1000$ an hour. When I change out air filter I can see if anything needs fixed. It takes me longer to walk inside than it does to change a filter. I guess I just don’t understand what a property manager does. If the furnace goes out and they respond to call I would still foot the bill to pay for furnace. I don’t need someone to call hvac guy for me. I get when scaling up and I get more properties to get a manager. I think if you set property up you shouldn’t be spending a bunch of time there. I just don’t get it. What are a manager doing that they need to make as much as me?I remodeled the house I made sure to take care of things. I just don’t understand what a property manager does every month
Not trying to sound like a total butthead. Really all I am hearing is buzzwords from the real estate world. Time is two hours a year. An app does the background check criminal background check eviction check. The app collects rent, does maintenance request, have lease details. What liability do I have? Honest question. I haven’t been to property but one time this year and that was drop off renewal lease and change air filter. That was five minutes. I totally get if someone had 5 properties to have some one on stand by. I’m still not “understanding” maybe I never will while someone with a just a few properties would need a manager. I just don’t see this vast amount of time being spent to justify it.
I’m very new to this. But I am confused at property managers. I self manage from 15 miles away. I take care of all maintenance and rent collection. While I have a sfh in a working class northern town I don’t get all the fees. So if I rent my property for 1000$ they take 8% a month which is 80$. Then I have to pay them one month or a 1000$ fee to place someone. The first year they get 1960$.basically they get the same profit I get. We put our place on Facebook and whoever rent redi advertise through. We took pictures with an iPhone. They can take pretty good pictures. We directed people to rent redi to pre qualify. They would qualify and we show property. The pre screen took care of most of riff raff and the 25$ application fee took care of the rest. When something happens I take care of it. I change air filters out every three months and have done some minor maintenance. Rent refi collects the rent. I guess I’m not sure what a property manager does to deserve a 50/50 split.
When tenant moves out my wife and I will clean up real good paint and patch on a Saturday afternoon.
Maybe someone can help me understand
This is just missing the forest for the trees. The first and most important answer to this is you're shifting any liability by not being directly involved.
The second thing is do the math on what your time could produce net versus if you paid someone to do that & you work more. It's just about efficiencies.
1month per annual lease is normal @Amirra Elgamiel you're investing in the greatest city in america. Don't get cute with this and cost yourself pennies to later cost yourself dollars, by nitpicking. Get a great PM by verifying the required things, pay them appropriately and then trust the systems in place but always verify as things move.
If anyone truly wants to grow a business, they learn how to build a team and let go.
I guess I blind. In my situation I have one property, would like to make it two. I asked my wife how much time we have spent on the rental “managing” it this year. She said 2 maybe 3 hours. By my math that is the equivalent of paying someone 1000$ an hour. When I change out air filter I can see if anything needs fixed. It takes me longer to walk inside than it does to change a filter. I guess I just don’t understand what a property manager does. If the furnace goes out and they respond to call I would still foot the bill to pay for furnace. I don’t need someone to call hvac guy for me. I get when scaling up and I get more properties to get a manager. I think if you set property up you shouldn’t be spending a bunch of time there. I just don’t get it. What are a manager doing that they need to make as much as me?I remodeled the house I made sure to take care of things. I just don’t understand what a property manager does every month
I’m very new to this. But I am confused at property managers. I self manage from 15 miles away. I take care of all maintenance and rent collection. While I have a sfh in a working class northern town I don’t get all the fees. So if I rent my property for 1000$ they take 8% a month which is 80$. Then I have to pay them one month or a 1000$ fee to place someone. The first year they get 1960$.basically they get the same profit I get. We put our place on Facebook and whoever rent redi advertise through. We took pictures with an iPhone. They can take pretty good pictures. We directed people to rent redi to pre qualify. They would qualify and we show property. The pre screen took care of most of riff raff and the 25$ application fee took care of the rest. When something happens I take care of it. I change air filters out every three months and have done some minor maintenance. Rent refi collects the rent. I guess I’m not sure what a property manager does to deserve a 50/50 split.
When tenant moves out my wife and I will clean up real good paint and patch on a Saturday afternoon.
Maybe someone can help me understand