Comments on: Whether I Should Buy an Investment Property in The Current Housing Slump http://moneyning.com/housing/whether-i-should-buy-an-invesment-property-in-the-current-housing-slump/ A personal finance blog where we share insights on carefully saving money, investing, early retirement, mortgages, stocks because the little things matter in achieving financial freedom! Sat, 21 Nov 2009 10:57:14 -0800 http://wordpress.org/?v=2.8.6 hourly 1 By: Find Savings Accounts http://moneyning.com/housing/whether-i-should-buy-an-invesment-property-in-the-current-housing-slump/comment-page-1/#comment-8875 Find Savings Accounts Sat, 23 Aug 2008 00:02:58 +0000 http://moneyning.com/?p=1100#comment-8875 As someone who owns rental properties, you need to make sure the numbers work out, accurately accounting for vacant periods (I use 10%), and that there are often expenses such as plumbing, showers, etc that sometimes come up each month. Make sure you have enough in the bank to cover at least 4-6 months of mortgage payments for the property should it become vacant for an extended period of time. Buy where you can cashflow. Properties in AZ and NV are starting to look attractive now. One of the most important points is to find good tenants. Don't skim and think that you rather fill the property and pick a not so good tenant. Bad tenants can cause a lot of sleepless nights. As someone who owns rental properties, you need to make sure the numbers work out, accurately accounting for vacant periods (I use 10%), and that there are often expenses such as plumbing, showers, etc that sometimes come up each month. Make sure you have enough in the bank to cover at least 4-6 months of mortgage payments for the property should it become vacant for an extended period of time.

Buy where you can cashflow. Properties in AZ and NV are starting to look attractive now.

One of the most important points is to find good tenants. Don’t skim and think that you rather fill the property and pick a not so good tenant. Bad tenants can cause a lot of sleepless nights.

]]> By: Debt Free or Bust - Sherri http://moneyning.com/housing/whether-i-should-buy-an-invesment-property-in-the-current-housing-slump/comment-page-1/#comment-8491 Debt Free or Bust - Sherri Sun, 10 Aug 2008 01:43:27 +0000 http://moneyning.com/?p=1100#comment-8491 If you're financially strapped with an apartment, buying real estate isn't the place to put what money you have. You have to be able to pay the mortgage on the rental plus do all the maintenance and repairs and have enough cash to cover expenses if you don't have a tenant. If you have a bad tenant, you may have someone living in your house and not paying the rent while you have to go through eviction proceedings, and trashing the property to boot. Real estate isn't an investment unless you know what you're doing, and it doesn't sound like you do yet. I recommend building a cash reserve (emergency fund) of 3-6 months of expenses in a money market account. Pay off any debt you currently have, then start saving cash for the purchase of your primary residence (20% down, 15 year fix-rate mortgage that doesn't take up more than 25% of your take-home pay). Then invest for retirement. After retirement is fully funded, invest for kids' college, pay off the house early if you can, and then build wealth after you have no big payments. You'll also need to have cash savings for buying cars and other things. Debt is a huge risk. So be very careful whenever you look at an investment that costs you money up front. If you had a paid off house, would you get a mortgage on it to invest in other properties? I hope not. Good luck and may I suggest a growth or value stock mutual fund that isn't an index fund? Small and mid cap funds do much better than the overall stock market. Sherri If you’re financially strapped with an apartment, buying real estate isn’t the place to put what money you have. You have to be able to pay the mortgage on the rental plus do all the maintenance and repairs and have enough cash to cover expenses if you don’t have a tenant.

If you have a bad tenant, you may have someone living in your house and not paying the rent while you have to go through eviction proceedings, and trashing the property to boot.

Real estate isn’t an investment unless you know what you’re doing, and it doesn’t sound like you do yet.

I recommend building a cash reserve (emergency fund) of 3-6 months of expenses in a money market account. Pay off any debt you currently have, then start saving cash for the purchase of your primary residence (20% down, 15 year fix-rate mortgage that doesn’t take up more than 25% of your take-home pay).

Then invest for retirement. After retirement is fully funded, invest for kids’ college, pay off the house early if you can, and then build wealth after you have no big payments.

You’ll also need to have cash savings for buying cars and other things. Debt is a huge risk. So be very careful whenever you look at an investment that costs you money up front. If you had a paid off house, would you get a mortgage on it to invest in other properties? I hope not.

Good luck and may I suggest a growth or value stock mutual fund that isn’t an index fund? Small and mid cap funds do much better than the overall stock market.

Sherri

]]> By: No Debt Plan http://moneyning.com/housing/whether-i-should-buy-an-invesment-property-in-the-current-housing-slump/comment-page-1/#comment-8479 No Debt Plan Sat, 09 Aug 2008 17:15:23 +0000 http://moneyning.com/?p=1100#comment-8479 Like any risky investment or deal where you have little experience, just be prepared to lose your shirt :) As others have said, if you can afford the payments without any tenants, that's a good start. Like any risky investment or deal where you have little experience, just be prepared to lose your shirt :)

As others have said, if you can afford the payments without any tenants, that’s a good start.

]]> By: Thomas http://moneyning.com/housing/whether-i-should-buy-an-invesment-property-in-the-current-housing-slump/comment-page-1/#comment-8433 Thomas Fri, 08 Aug 2008 05:47:33 +0000 http://moneyning.com/?p=1100#comment-8433 It's not a good time to buy yet if you're a beginner. Valuations are still going down, so you'll be buying into a dropping market. This is not a decision you should make quickly. You're not hurting right now, so take six months or a year and do some serious research. Then when (or if) you decide to go for it you'll be able to make a much better purchase. It’s not a good time to buy yet if you’re a beginner. Valuations are still going down, so you’ll be buying into a dropping market.

This is not a decision you should make quickly. You’re not hurting right now, so take six months or a year and do some serious research. Then when (or if) you decide to go for it you’ll be able to make a much better purchase.

]]> By: Jon Kepler http://moneyning.com/housing/whether-i-should-buy-an-invesment-property-in-the-current-housing-slump/comment-page-1/#comment-8423 Jon Kepler Thu, 07 Aug 2008 21:12:23 +0000 http://moneyning.com/?p=1100#comment-8423 If you're okay with buying an investment property, you'll also be simultaneously building and investing in a business, which was one of your other goals. If you incorporate and purchase other properties, hire employees, etc., you now have a true business with a value that exceeds simply what the basic assets are worth. If you’re okay with buying an investment property, you’ll also be simultaneously building and investing in a business, which was one of your other goals. If you incorporate and purchase other properties, hire employees, etc., you now have a true business with a value that exceeds simply what the basic assets are worth.

]]> By: James - Forex Trading Blog http://moneyning.com/housing/whether-i-should-buy-an-invesment-property-in-the-current-housing-slump/comment-page-1/#comment-8404 James - Forex Trading Blog Thu, 07 Aug 2008 14:46:10 +0000 http://moneyning.com/?p=1100#comment-8404 I've been tempted into purchasing an investment property as well here in the UK with prices currently so cheap in some areas. However I've decided it's just too much hard work. Plus the fact that you can get much better returns from shares in my opinion. Property prices generally double every 7 years on average, but there's some fantastic companies out there, particularly miners and oil companies that have fallen a lot in the last few months, that could well double in price a lot quicker than 7 years. I’ve been tempted into purchasing an investment property as well here in the UK with prices currently so cheap in some areas.

However I’ve decided it’s just too much hard work. Plus the fact that you can get much better returns from shares in my opinion.

Property prices generally double every 7 years on average, but there’s some fantastic companies out there, particularly miners and oil companies that have fallen a lot in the last few months, that could well double in price a lot quicker than 7 years.

]]> By: marci http://moneyning.com/housing/whether-i-should-buy-an-invesment-property-in-the-current-housing-slump/comment-page-1/#comment-8379 marci Wed, 06 Aug 2008 16:15:40 +0000 http://moneyning.com/?p=1100#comment-8379 1. It's a good time to buy. (my opinion)Buy a minimum of 2 bedrooms, 3 or more is better as it allows more folks to be able to rent it, and you to move in more easily when the time comes. Buy something you 'could' live in, should the need arise. It's your backup plan for hard times. 2. Be very careful with the tenant background check. Once a meth lab moves in, you've totally lost your investment. 3. Buy in the best neighborhood you can afford, but not the best house in the neighborhood. Most important features (I feel) are that the foundation is solid, the electrical is up to code, the septic tank and drainfield are adequate (if applicable), and that the roof doesn't need replaced soon. Most everything else will be cosmetic and less cash outlay to repair. 4. Be a handyman - especially be able to paint and do minor plumbing/carpentry. Or have a good relationship with your service providers for those things. 5. The property should have a positive cash flow, plus put something into your pocket or extra for paying down the mortgage. Make sure you can cover ALL the expenses if the place is not rented for 6 months :( Eviction for non-payment of rent can take awhile if you have to go thru legal proceedings. 6. Once the property is paid for, try carrying the land sales contract when you sell it. I'm carrying an old contract now for 11% interest...better than I could be making most other places. And as I sold it to my renters of many years, the payments have been most regular. 7. A duplex or triplex is great - more income plus if one unit is not rented, at least something will be coming in. 8. Limit or ban inside pets. You'll never know the full "JOY" (major sarcasm there) of being a landlord until you have to scoop a foot of dog/cat feces out of a basement... Yuck! There's nothing passive about this type of income - but it can be a great money maker, especially once the properties are paid for. And then when the sell time comes, I usually sold on a land sales contract for better than average interest. I am still carrying one property at 11% interest - over 20 years now - that's a very good return on my money :) and that's passive :) Do your research, and if you're comfortable with it, go for it :) From: Been there, done that - Many times :) 1. It’s a good time to buy. (my opinion)Buy a minimum of 2 bedrooms, 3 or more is better as it allows more folks to be able to rent it, and you to move in more easily when the time comes. Buy something you ‘could’ live in, should the need arise. It’s your backup plan for hard times.
2. Be very careful with the tenant background check. Once a meth lab moves in, you’ve totally lost your investment.
3. Buy in the best neighborhood you can afford, but not the best house in the neighborhood. Most important features (I feel) are that the foundation is solid, the electrical is up to code, the septic tank and drainfield are adequate (if applicable), and that the roof doesn’t need replaced soon. Most everything else will be cosmetic and less cash outlay to repair.
4. Be a handyman – especially be able to paint and do minor plumbing/carpentry. Or have a good relationship with your service providers for those things.
5. The property should have a positive cash flow, plus put something into your pocket or extra for paying down the mortgage. Make sure you can cover ALL the expenses if the place is not rented for 6 months :( Eviction for non-payment of rent can take awhile if you have to go thru legal proceedings.
6. Once the property is paid for, try carrying the land sales contract when you sell it. I’m carrying an old contract now for 11% interest…better than I could be making most other places. And as I sold it to my renters of many years, the payments have been most regular.
7. A duplex or triplex is great – more income plus if one unit is not rented, at least something will be coming in.
8. Limit or ban inside pets. You’ll never know the full “JOY” (major sarcasm there) of being a landlord until you have to scoop a foot of dog/cat feces out of a basement… Yuck!

There’s nothing passive about this type of income – but it can be a great money maker, especially once the properties are paid for. And then when the sell time comes, I usually sold on a land sales contract for better than average interest. I am still carrying one property at 11% interest – over 20 years now – that’s a very good return on my money :) and that’s passive :)

Do your research, and if you’re comfortable with it, go for it :)

From: Been there, done that – Many times :)

]]> By: Dividend Growth Investor http://moneyning.com/housing/whether-i-should-buy-an-invesment-property-in-the-current-housing-slump/comment-page-1/#comment-8377 Dividend Growth Investor Wed, 06 Aug 2008 15:00:16 +0000 http://moneyning.com/?p=1100#comment-8377 The thing that turns me off about rental real estate is the lack of diversification as well as the amount of work involved in maintaining the place. I don't know how to deal with this. I don't believe that rental real estate is a passive income generation approach at all for those reasons. I own real estate investment trusts ( REITS). That way there's someone else unplugging the toilets and changing roofs. I only collect my dividends monthly or quarterly. In addition to that most reits own a variety of properties - apartments, office buildings, restaurants, stores, malls across the US. One advantage of rental properties that I see is leverage. If you can buy a property where the monthly mortgage payment is $400/month and yet you manage to rent it out for $800/month, you can do pretty well. Of course if the property becomes a money pit and you spend $1000/month to maintain the premises, then you could be in a bad situation.. The thing that turns me off about rental real estate is the lack of diversification as well as the amount of work involved in maintaining the place. I don’t know how to deal with this.
I don’t believe that rental real estate is a passive income generation approach at all for those reasons.
I own real estate investment trusts ( REITS). That way there’s someone else unplugging the toilets and changing roofs. I only collect my dividends monthly or quarterly.
In addition to that most reits own a variety of properties – apartments, office buildings, restaurants, stores, malls across the US.
One advantage of rental properties that I see is leverage. If you can buy a property where the monthly mortgage payment is $400/month and yet you manage to rent it out for $800/month, you can do pretty well. Of course if the property becomes a money pit and you spend $1000/month to maintain the premises, then you could be in a bad situation..

]]> By: MoneyGrubbingLawyer http://moneyning.com/housing/whether-i-should-buy-an-invesment-property-in-the-current-housing-slump/comment-page-1/#comment-8375 MoneyGrubbingLawyer Wed, 06 Aug 2008 12:16:41 +0000 http://moneyning.com/?p=1100#comment-8375 It could be a great time to buy in many markets right now, and real estate can prove a solid investment. Just don't forget the worst part about being a landlord- you're a landlord. When you have good tenants in place, an investment property can be a dream- however, if your tenants aren't great, it can be a terrible nightmare, and dealing with a bad tenant can wipe out any gains you may have made. Unless you contract out your responsibilities to a property management company (which reduces your earnings), renting a property is anything but passive. If you're handy at fixing things yourself and can deal with collecting rent on time and dealing with trouble tenants, go for it. If not, one of the other options you suggest might be better suited. It could be a great time to buy in many markets right now, and real estate can prove a solid investment. Just don’t forget the worst part about being a landlord- you’re a landlord. When you have good tenants in place, an investment property can be a dream- however, if your tenants aren’t great, it can be a terrible nightmare, and dealing with a bad tenant can wipe out any gains you may have made. Unless you contract out your responsibilities to a property management company (which reduces your earnings), renting a property is anything but passive.

If you’re handy at fixing things yourself and can deal with collecting rent on time and dealing with trouble tenants, go for it. If not, one of the other options you suggest might be better suited.

]]> By: Sam http://moneyning.com/housing/whether-i-should-buy-an-invesment-property-in-the-current-housing-slump/comment-page-1/#comment-8373 Sam Wed, 06 Aug 2008 09:49:24 +0000 http://moneyning.com/?p=1100#comment-8373 The thing is - before you invest in real estate ask yourself why you want to do it and what you want to get from it. If you're investing and don't plan on selling right away, now might be the perfect time to do it. If, however, you don't want to carry an inventory of properties and you're living in an area hit by the economy, now probably isn't the best time to invest. Sam Fix My Personal Finance http://fixmypersonalfinance.com/ The thing is – before you invest in real estate ask yourself why you want to do it and what you want to get from it. If you’re investing and don’t plan on selling right away, now might be the perfect time to do it. If, however, you don’t want to carry an inventory of properties and you’re living in an area hit by the economy, now probably isn’t the best time to invest.

Sam
Fix My Personal Finance
http://fixmypersonalfinance.com/

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