thinking of real estate investing..

dculberson said:

A lot of the discussion about general house price increases does not take into account what I said earlier: comparisons to owner occupied properties are invalid. Rentals sell as rentals to other investors, and the prices reflect that. You do not get the same annual growth in value from a rental that you do an owner occupied house.

In reply to Steve_Jones :

Nobody's said it can't be done. The most we've said is it doesn't make the enormous returns that people think. It's *shock* more in line with other investments.

Perhaps you missed the part where I'm a full time landlord. And I'm on the side of saying, oh, about 8% is realistic. If you're lucky. A lot of small time landlords make more like 3%.

I will say, at least it's something - even at 3% you're doing worlds better than the guys that buy high and sell low in the stock market or blow all their money on booze and expensive meals.

@Frenchy: Yes, stocks can go down and you can end up having to sell in a pinch. However, you have those same life emergencies as a landlord, only now instead of an asset you can click a single button on and sell with zero costs involved you have illiquid immobile assets with high transaction costs. Banks aren't going to loan you money on them when you're in a personal financial emergency. If the stock market is down then the economy is probably slowed as well so selling the house(s) will be difficult or impossible. The bills on the houses don't stop just because you're in a crunch. So instead of losing some money selling stocks you now might face bankruptcy and losing everything including the rental houses, your personal residence, etc. Leverage cuts deeply when you're on the wrong side of it.

You make a valid case about the illiquidity  of real estate.  But there is a little moment of protection too.  Most people are well aware of the 6 month redemption period and the 90 days you have to be late before foreclosure begins.  There are even a few things you can do to ensure you get at least a year.  
In a deep recession  like the last one some banks simply cannot take on too much foreclosed real estate For fear of the bank examiners. Thus under the right circumstances that year can be significantly extended.  
Yes some can lose everything in a down market.  On the other hand I know those  who profited in foreclosure.  They got out from under a crushing mortgage, let the bank have it back ( and offered to house sit until sold) and the bank finding no buyers  wound up selling it to the original owners for a much smaller mortgage. 
 That happened to Three banks and one chain around here.  The chain is under new ownership/ management. One bank is closed and the other two are walking wounded. 
It wasn't just real estate but cars, small business, and other investments that failed.   
 

Reviving this from last week to showcase the life of a land lord.  To make a long story short, we're loosing a tenant unexpectedly.  He's been great up until now, but suddenly January rent was late with no contact from him.  Cutting out most of the details it involves alcohol, Ex wife taking the kids, girlfriend dumping him and the poor guys life majorly hitting the E36 M3ter fast.  We are helping him get moved out and taking the rent from his deposit.  The house is going back on the market tomorrow for viewings prior to him moving out.  Let's hope it rents fast!

In reply to Adrian_Thompson :

Where's he going? 

Updates from the world of the commercial landlord: I got a text that both toilets in the men's room on 3 were "having trouble." Fortunately they were just regular clogged and a plunger made quick work of it. Other people's poop doesn't bother me any more, especially if it's safely contained in the toilet. I was going up the front stairs yesterday and "Henry" decided the side of the metal stairs was a good place to tell the world his name. Henry will be disappointed to know that Goo-D-Solv-R and a stiff bristle brush made quick work of his desperate cry into the void. Any of those might have been a problem if my office wasn't in the building but being here means it was 5-10 minutes of work in each case.

In reply to Robbie :

I don't know, but before people say we're heartless and throwing him out, he texted us saying he could be out by the end of the month.  

In reply to dculberson :

You'd be shocked at the world of foreclosure. Even in today's strong market people are walking away from their homes. 
The son-in-law is doing his second major foreclosure in a month. Both are big houses in nice neighborhoods  with the owners just walking out.
2-3  big dumpsters plus a moving truck of furniture.  Clothes, appliances, personal effects, etc Just left. 
One obviously had younger children based on toys. 
One had the rusty dragster hanging from the rafters,some tools etc.

The other some really nice furniture  and even the clothes looked nice.  Children's toys etc. 
You gotta wonder what the story is.  Why couldn't they make it?  

frenchyd said:

In reply to dculberson :

You'd be shocked at the world of foreclosure. Even in today's strong market people are walking away from their homes. 
The son-in-law is doing his second major foreclosure in a month. Both are big houses in nice neighborhoods  with the owners just walking out.
2-3  big dumpsters plus a moving truck of furniture.  Clothes, appliances, personal effects, etc Just left. 
One obviously had younger children based on toys. 
One had the rusty dragster hanging from the rafters,some tools etc.

The other some really nice furniture  and even the clothes looked nice.  Children's toys etc. 
You gotta wonder what the story is.  Why couldn't they make it?  

I can't find anything that indicates this is a growing problem or national trend. You're using personal anecdotes and applying them as though they are a proper, generalizable study.

In reply to z31maniac :

It IS a growing problem!  In Frenchy's neighborhood! 

z31maniac said:

frenchyd said:

In reply to dculberson :

You'd be shocked at the world of foreclosure. Even in today's strong market people are walking away from their homes. 
The son-in-law is doing his second major foreclosure in a month. Both are big houses in nice neighborhoods  with the owners just walking out.
2-3  big dumpsters plus a moving truck of furniture.  Clothes, appliances, personal effects, etc Just left. 
One obviously had younger children based on toys. 
One had the rusty dragster hanging from the rafters,some tools etc.

The other some really nice furniture  and even the clothes looked nice.  Children's toys etc. 
You gotta wonder what the story is.  Why couldn't they make it?  

I can't find anything that indicates this is a growing problem or national trend. You're using personal anecdotes and applying them as though they are a proper, generalizable study.

Did I say growing trend? Or did you?  My comment was that even in today's strong economy people are walking away from homes.  
Why?  OK I understand if a single person passes away with no next of kin listed or available, it's understandable. I can also understand downsizing or simplifying your life but why leave nearly everything behind?  Why not sell it off or donate it?  
I know he's not the only one doing this, there usually are several bids to clean out foreclosures.  Since he only works with one realtor,  how many more homes are put up every year? 

SVreX said:

In reply to z31maniac :

It IS a growing problem!  In Frenchy's neighborhood! 

Actually he works the opposite end of of a 3.6 million people town. 

There's one in my neighborhood.  They paid an insane $770 in 2005.  It might be worth $700 now if it was mint but the neighbors told me the interior is in shambles.  It's been unoccupied for more than a year.  All the utilities are off so it's basically a 4000sq ft. two-story shed.  The floors are all warped from water damage.   It looks like the lender finally took formal possession a few months ago if zillow is accurate.  At least they occasionally send some landscapers.

For additional drama, the IRS had a lein on it for $78k in unpaid taxes and the wife was our mayor for several terms.

The neighbor told me they were jerks.  :)  

Canoe, but what an interesting time for this thread to be revived. 

Dculberson, what is your take on the current outlook of real estate investing (both commercial and residential - although I know you're a commercial guy)?