Is it a good time to buy an investment property

Discussion in 'Economics' started by ashatet, Mar 5, 2010.

  1. lol agree on the resedential part, I only have one resedential rental.. Very good location, 1 block from the subway , Not too much headache, but I can see that * 40 = not a fun time.

    I enjoy renting out my commercial properties more
    Rent it or don't? Or get out. simple
    Nothing inside to break.
     
    #31     Mar 9, 2010
  2. drcha

    drcha

    Here are just three of my real estate experiences:

    1) Rent out a condo for a year, then the HOA passes a rule that no one can rent out their condos. Sell the condo in a falling market after it has been vacant for almost a year. Yes, I know the HOA was probably doing something illegal but lawsuits are potentially more expensive than just getting out.

    2) Put 300K down on a property, then end up with an unexpected $100K repair two years later. Spend the next eight years of cash flow to fix the problem.

    3) Get sued by someone who fell on a property. Yes, I had insurance, but it's still a pain in the ass. And your insurance company can drop you.

    Do not make the mistake of looking only at the positives. The problem with real estate is that the negatives are unknown, unexpected, and sometimes very large. That's okay, if you are prepared to deal with them.

    If I buy a stock or an option spread, all I can do is lose money, and I already know at the outset exactly how much I can lose. I prefer that scenario.
     
    #32     Mar 9, 2010
  3. Interesting - could you tell more?
     
    #33     Mar 9, 2010
  4. Heh, interesting stories. Was this in a cheap, normal, or expensive area?
     
    #34     Mar 9, 2010
  5. Anyone know of any REITs out there who buy property outright and just collect/pass on the rents?
     
    #35     Mar 9, 2010
  6. sumfuka

    sumfuka

    Any homeowners here dealt with section 8 tenants?
     
    #36     Mar 9, 2010
  7. It was shocking to see how some in South Florida had HOA fees equal to mortgages on some developments in default. Extreme examples sure.
     
    #37     Mar 9, 2010
  8. Not necessarily true. I was a renter for years and never thrashed a place. We just found tenants for my Mom's second home and manage it for her. We took the advice of our deceased family friend, RIP Richard, a 30 year millionaire next door RE investor. It's all about the upfront checks, credit, background, etc. If they are late serve them immediately and let them know you mean business. We decided to take a slighter smaller income on the rental in favor of A + tenants with exemplary credit. They pay 3 days in advance.
     
    #38     Mar 9, 2010
  9. My general feeling is that now is a good time to buy with prices relatively low and interest rates absolutely low. There may be another 5-10% drop in the next year or even 20%, but I would not try to exactly time the RE market any more than I try to exactly time the stock market.

    Some things to consider if you are going to buy an investment property and rent it out:

    1) Don't spend more than you can afford. It seems like a no-brainer, but that's how a lot of people got into trouble in the last 10 years. Spending $500k instead of $350k is a LOT of extra money.

    2) Rent a condo near a college campus where the smarter kids go rather than next to the party school. No guarantees, but they are more likely to take care of the place.

    3) Even better, market your rental property to visiting professors. They will tend to take better care of the place (you could still get stuck with someone who likes to do naked yoga or something, but like I said, there are no guarantees).

    4) Do some simple mortgage payment calculations based on current prices and interest rates. Then compare them to some hypothetical estimates based on prices rising or falling and/or interest rates rising and falling. Understand what position you could be in 5 years down the road if and when conditions change.
     
    #39     Mar 9, 2010
  10. I have actually looked at several times. The challenges seem to be

    1. Purchasers will take neg % almost to hopefully foreclose
    2. In some states, you are responsible for "issues" with the property.
    2A. I mention it because a trader friend of mine acquired a foreclosure, yes different for sure, and it turned out their was a toxic spill on it he was sued, sued the neighboring chemical company at fault and years later got lucky and made a lot of money from the suit.
    3. A variety of laws from state to state and region to region governing the intricacies.

    If I am wrong please say so as the best bank CD I can get is 3.85%
     
    #40     Mar 9, 2010