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Investment Property Capital Gains

 
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Old 02-17-2018, 06:29 PM   #21
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Re: Investment Property Capital Gains


Real estate market crashes are local. Even on the last down turn, cities with growing high paying jobs still appreciated.

I Don't think Austin has had a downturn since ~1990.
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Old 02-17-2018, 08:07 PM   #22
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Re: Investment Property Capital Gains


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Having a mortgage on a rental sucks especially when the tenants stop paying and it takes time to get them evicted and you lose the income AND you have to pay the mortgage
Isn't that what "Savings" is for? Tighten the belt, put $20-$60K in the bank, then go back to living a lavish life, and even then you should be thinking about retirement savings, and with the way they are talking about cutting Social Security it better be pretty hefty.

Here is a decent website with info on rentals.
https://www.biggerpockets.com/real-estate-investing
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Old 02-17-2018, 10:31 PM   #23
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Re: Investment Property Capital Gains


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Real estate market crashes are local. Even on the last down turn, cities with growing high paying jobs still appreciated.

I Don't think Austin has had a downturn since ~1990.
The West coast has a major dip after every Republican president.

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Old 02-18-2018, 07:42 AM   #24
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Re: Investment Property Capital Gains


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Originally Posted by Golden view View Post
Actually I made $80k appreciation in just 2 years.
I was only going by the numbers you posted (i.e. - 2015 & $520K value after another 3 years of hold) I didn't see where you said when in 2015 you bought, so I had no idea whether it was in January or December, only that it was in 2015, hence the 3 years... either way it works out to $40K/year...

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I question if that trend will continue. Hard to imagine a 1650 square foot spec home selling for $520k.

I'm pretty sure I'd have to look in another city to get a rental that falls into the typical rules. $300k just about gets your a condemned house here now.

I'm selling.
Well that may be the case, but whether you sell or not, as long as you've got the money making you more money, you're golden either way...

Like I said, no matter what you decide to do, it's a good position to be in... Good fortune...
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Old 02-18-2018, 08:44 AM   #25
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Re: Investment Property Capital Gains


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Originally Posted by Windycity View Post
This would be my first choice....

Having a mortgage on a rental sucks especially when the tenants stop paying and it takes time to get them evicted and you lose the income AND you have to pay the mortgage



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Yes it does. Especially when you have multiple ones not rented while you're renovating, which cost money also.

My system for making money with rentals tries to have the renters pay the mortgage within 8 to 10 years and sell the worst of the lot to pay for the best of the Lot or build new duplexes.

Property taxes are making it unattractive to do rentals. I bought a 1700 square foot stick frame that was in terrible shape on 2 acres for 64000, way undervalued because of the renovation. I did a small renovation and rented it out, if I did a major renovation I could probably sell for 2:20... If I don't sell it then I will end up taking it on the chin for the taxes

I am selling one right now to pay the mortgage off on another.

It is a constant cycle and is not for someone who is short-term on their money, the cycle where you will be on rented and renovating on this type of system will be quite often, especially in the beginning.

My first one was a 35 year old single wide trailer, bought it for $28,000, did a $14,000 remodel to it, rented it out for 7 years at 650 a month and sold it for 64,000. Had probably 9,000 of my own money in it.

Stay away from trailers....
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Old 02-18-2018, 09:16 AM   #26
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Re: Investment Property Capital Gains


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Stay away from trailers....
One of the great deals I missed was 2 trailers on a single lot $20K cash. They would have paid themselves off in 3 years, then paid for site work, landscaping, and splitting the lot. 2 building lots in 5 years, and I would have been paid well along the way.

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Old 02-18-2018, 09:23 AM   #27
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Re: Investment Property Capital Gains


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One of the great deals I missed was 2 trailers on a single lot $20K cash. They would have paid themselves off in 3 years, then paid for site work, landscaping, and splitting the lot. 2 building lots in 5 years, and I would have been paid well along the way.
Exception to the rule. That is buying real estate not buying trailers.

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Old 02-18-2018, 09:25 AM   #28
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Re: Investment Property Capital Gains


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Isn't that what "Savings" is for? Tighten the belt, put $20-$60K in the bank, then go back to living a lavish life, and even then you should be thinking about retirement savings, and with the way they are talking about cutting Social Security it better be pretty hefty.

Here is a decent website with info on rentals.
https://www.biggerpockets.com/real-estate-investing
Agreed. I dont spend rental money i put in more rentals.
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Old 02-18-2018, 10:06 AM   #29
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Re: Investment Property Capital Gains


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Exception to the rule. That is buying real estate not buying trailers.

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True, the trailers themselves are bad investments, at the end of their life, you may have to pay to have them hauled off. If They're on land that goes with them, then it's a short term rent, and sell the land or build on it.

Once trailers get so old banks won't loan, you can wind up having some screaming deals, which was what that was.
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Old 02-18-2018, 10:33 AM   #30
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Re: Investment Property Capital Gains


Conversion of use can be one of the more lucrative approaches. Some places are price impaired due to their current use, but value can be unleashed by the conversion. Back when EPA regulations on junk yards were going to be tightened up, junk yards that weren't profitable were being sold cheap, nobody wanted them.

So I bought one with a house on it with bank financing. I think it was $22 a month cash flow negative. Found a buyer for all the junk, and they hauled it off. Had the 7 acres prepped for house lots for free (trucking and excavation sub needed a way to get rid of clean fill close to his job), sold the 7 acres, and sold the house. 9X in 3 years.

I see very few real deals in single family homes, there seem to be too many people willing to pay too much, especially for fixer uppers.

I think you can still do well on some buy and holds as long as you get the appreciation.

I've seen people get in trouble when their loan starts to get older, and They're paying too much principal so their fed taxes go up. At that point, some refinance, take out some equity, and buy another rental. Way less fees than selling one and buying another, but it's still leveraged, so more risk than a lower leveraged situation.

Long term exit strategy on tax deferred investments is always a problem, and appreciation is really a key there.

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Old 02-18-2018, 08:16 PM   #31
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Re: Investment Property Capital Gains


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Don't fall into the rental trap of thinking you're going to manage and maintain your rental properties. Evaluate it as if you'll hire all that out. Then, if you decide to self perform something, you'll at least know what crappy per hour pay you're getting.

I tend to disagree with this. Even major apartment complexes have an on site maintenance man that usually gets an apartment for free as part of his compensation. So the owners are getting maintenance done at a cut rate.
I have 9 rental units and I do the repairs to them. 7 of them are in a trust and when I do any work I am paid by the trust to do the work.
I don't charge my full normal rates, but I tend to do only minor repair work between tenants, the main one being paint.
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Old 02-18-2018, 08:20 PM   #32
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I tend to disagree with this. Even major apartment complexes have an on site maintenance man that usually gets an apartment for free as part of his compensation. So the owners are getting maintenance done at a cut rate.
I have 9 rental units and I do the repairs to them. 7 of them are in a trust and when I do any work I am paid by the trust to do the work.
I don't charge my full normal rates, but I tend to do only minor repair work between tenants, the main one being paint.
I think his point was if you look at buying a property and then plan to do all of that yourself and then you can't do it for whatever reason you will be behind
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Old 02-18-2018, 08:30 PM   #33
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Re: Investment Property Capital Gains


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Originally Posted by Windycity View Post
This would be my first choice....

Having a mortgage on a rental sucks especially when the tenants stop paying and it takes time to get them evicted and you lose the income AND you have to pay the mortgage



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True.
All my rentals are multi-family, so if you have a tenant move or if there's a deadbeat, there will still be some cash flow to make up for it.

In 25 years of being a landlord I have only had 3 bad tenants. None of which I had to go through eviction.
I buck the system in my area and do not give long term lease (1 year).
I tell the tenant it's month to month because if for some reason you don't like it here, I'm not going to hold you prisoner with a 1 year lease. I flat out say to all of them:
"If you don't like it here, you can leave when ever you want. Just give 30 days notice".
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Old 02-18-2018, 08:33 PM   #34
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Re: Investment Property Capital Gains


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I think his point was if you look at buying a property and then plan to do all of that yourself and then you can't do it for whatever reason you will be behind

Sure, if there was a health issue that put you out of work.
Otherwise, it's all business. If you can't or won't devote time to your "rental business" than maybe it's not a good idea to get into it.


I think you being a landlord too, you would agree that it takes a certain mindset and an ability to "read" people in order to make it. Not everyone is cut out to be a landlord.
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Old 02-18-2018, 08:38 PM   #35
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Sure, if there was a health issue that put you out of work.
Otherwise, it's all business. If you can't or won't devote time to your "rental business" than maybe it's not a good idea to get into it.
I agree if it is your business model, mine is if I make x amount of dollars Contracting then unless I have the spare time I want to dedicate or really just need to get something done and don't have the Personnel then I will get my guys to do it and pay for it if it doesnt make X

For number sake if you make $50 an hour and you can get your guys to do it for $35 an hour with their burden and you can stay at work and make $50 an hour then you ahead the money


I did all of my renovations and probably will for the foreseeable future in my spare time, but if I took off work to do it then I would be out a lot of money.

Repairs I generally send one of my guys

When I build something for myself that is at my home, which I don't plan to move from for at least 25 years, I do it myself generally because I am money ahead to use my spare time to do it. When I built my house I saved a lot of money self performing, same with my barn and with everything else

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Old 02-18-2018, 08:47 PM   #36
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Re: Investment Property Capital Gains


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True.
All my rentals are multi-family, so if you have a tenant move or if there's a deadbeat, there will still be some cash flow to make up for it.

In 25 years of being a landlord I have only had 3 bad tenants. None of which I had to go through eviction.
I buck the system in my area and do not give long term lease (1 year).
I tell the tenant it's month to month because if for some reason you don't like it here, I'm not going to hold you prisoner with a 1 year lease. I flat out say to all of them:
"If you don't like it here, you can leave when ever you want. Just give 30 days notice".


I donít have any rentals (my dad used to) but my neighbor has three of them and 2 are great rentals however he has one house that for some reason is like a thorn in his side because every single tenant has been bad in the five years that Iíve known him.

He just had to evict a family last month that decided to stop paying him 5 months ago. They lived there free the whole time while my neighbor payed a mortgage on the house. The icing on the cake is they actually placed an order of protection against my neighbor because they said he threaten them

When I first moved in there was a big drug bust in that house so it wasnít rentable for a while then the next tenant (an employee of his) trashed the place.

He keeps wishing the house would just burn down so he can collect a check and wash his hands from it....lol




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Old 02-18-2018, 08:57 PM   #37
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Re: Investment Property Capital Gains


Most major work I do on the rentals I am lucky enough that I can schedule it around my regular work.

My dead times are...Now and in the middle of summer.
I keep up on my properties and have a +/- 5 year life cycle with carpets and vinyl.
When I got married my wife couldn't understand why I change carpet that much.
I explained to her that it doesn't pay in the rental world to put an expensive carpet down that may very well wear for a more years because the tenants will ALWAYS spill stuff on them and get stained.
I have a carpet guy that can come in and re-carpet with new pad installed for an average of $1100-1300 depending on the unit.

With the 5 year life cycle that's like $22 month. When the next tenant comes along they see brand new carpet and vinyl and they will want it on the spot. My places always look "new" inside.
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Old 02-18-2018, 09:03 PM   #38
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I donít have any rentals (my dad used to) but my neighbor has three of them and 2 are great rentals however he has one house that for some reason is like a thorn in his side because every single tenant has been bad in the five years that Iíve known him.

He just had to evict a family last month that decided to stop paying him 5 months ago. They lived there free the whole time while my neighbor payed a mortgage on the house. The icing on the cake is they actually placed an order of protection against my neighbor because they said he threaten them

When I first moved in there was a big drug bust in that house so it wasnít rentable for a while then the next tenant (an employee of his) trashed the place.

He keeps wishing the house would just burn down so he can collect a check and wash his hands from it....lol




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One thing you have to learn quick is how to read people.
You have to weed out the losers.
I have prospects fill out an application and I contact all the references.
One of the biggest tip offs is someone who wants to move in right away.
How can you be living somewhere, and you are able move out in a few days? Unless their place burned down or got flooded, you can bet they are being thrown out. Sorry...Next!
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Old 02-18-2018, 09:17 PM   #39
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Yea I told him he needs to do better with background checks.

I told him I would Only lease to people with good credit and stable long term incomes. Thatís would solve at least half of the problem


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Old 02-18-2018, 09:58 PM   #40
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^That is why paying a Property Management Company the equivalent of half or three quarters of the first months rent for vetting a potential tenant is a great idea. My friend that owns multiple rental properties uses a local company that stands behind their processes. Most tenants do sign a 1 year agreement and tend to stay longer. The payback for their fee comes in the fact the tenant is well vetted. They run background checks, credit checks, contact past landlords, etc.

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