I think you should just google around to learn what a property manager does. It's completely different than what you describe. The vast majority of it is administrative tasks -- paying bills, dealing with tenant complaints and maintenance requests, filing the right paperwork, collecting and recording income, dealing with evictions. Everything else is sub-contracted to other people (e.g., shoveling snow, etc) .

So at $1,800/month, you're going to have $720/mo in expenses *on average*. Then you'll have a mortgage payment of $736, assuming 20% down, 5.5% interest, 25 years. So your cash flow will be $344/month. That's a cash-on-cash return of 14%. Then you might get rent increases over time and you might also get appreciation on top of that. How do you feel about that return?

If you were renting for $1500/mo it changes things dramatically, so be careful to be realistic about the rental rate.

Thx for the response.

Is that 720 a month allocating for repairs?

To be a little more refined after talking with a RE agent the duplex rents for only 700 a side and tenants pay all utilities except water which is 1k a year. The property tax is 2400 a year. I'd buy this house in cash and if things go well buy another that's nearly identical with 50k down and a 100k mortgage at about 4%. Good deal or should I keep looking?

I can't tell you whether its a good deal or not. But I can help you be realistic about determining the likely return so that you can decide that. My portfolio averages about 40% expenses for properties where I don't cover utilities and 50% for properties where I do cover utilities. That 40% covers both monthly repairs and maintenance, and also money set aside for larger repairs like roof replacement etc.

If you don't finance at all, you can expect to make a 7% COCR yield. You also might get lucky and get some appreciation and rent increases. If you finance with 20% down on the terms you identified, and a 30 year mortgage, you will get an 11% return plus mortgage pay down, plus possible appreciation and rent increases.

So I guess it depends on how you think about those returns. Personally, I think that the returns are too low to justify the risk compared to other investments you can make. But I think there is room for reasonable people to disagree

150k for a duplex that only rents for $659(I removed water) a side seems very high to me. How old is it? How long has the current ACs been there, how long for the roof?.

It's a designed side by side duplex built in 1992. It looks very nice with 3 bedrooms apiece and has nice flooring and all appliances are included. The tenants are in place. It's located in Nova Scotia Canada where I'm flying out to look at a house that I will likely buy for my family. We live in Ontario.

The rent is low compared to other regions of Canada because it's in a small town that doesn't have much going for it in terms of industry. (25k population)

I don't expect much repair work for at least a few years.

There are other duplexes I could buy for as low as 60k but these are all older buildings where repair bills seem more likely and the rent would likely be only $500 a month with less chance of keeping good tenants.

Thank you very much for the feedback. My longterm goal is to buy up a bunch of these duplexes with a snowball effect and live off of them in 10 years time. I realize it's more profitable to get mortgages on these but if my goal is to buy numerous duplexes the banks will look at them collectively and add up how much I owe in total... so keeping money aside for a down payment (20%) or just paying off a duplex in full is pretty much the same.

One idea that crossed my mind is renting out the townhouse that I live in now as an AirBnB. Its really hard for me to gauge what it would really rent for on average over a year. I have 3 BR, 3 BA, ~1,850 SF finished plus an 800 SF unfinished basement that could easily be finished into two more legal BRs because there are two egress windows. So I have about 2,650 SF total finished & unfinished area plus a two-car garage. It was constructed in 2016, so its in good condition.

I think I would want to average at least $2,500/mo gross in order to consider doing this. I'd want more than that if I was going to put any money into finishing the basement. I have read that AirBnB owners look for about 50% occupancy levels annually. They have some tools that suggest what my place might rent for, but its hard to know how accurate that is. The average daily rate would need to be about $170 for the year (as is), and I have no idea if I could sustain 50% occupancy or not with an average like that.

I live in MN, so I would imagine rates would be lower in winter, and I live about 24 miles SW of downtown Minneapolis and 21 miles SW of the main airport terminal, so I am away from the center of town, but there are some a few tourist attractions within about 10 minutes of here, including Valley Fair, Canterbury Park and Mystic Lake Casino. Mall of America is about 18 miles (right by the airport).

I work in commercial RE and this is the 5th house I have owned, so I know a bit about the obvious things. Do any of you have any hints or ideas about how to find realistic info about average daily rates for a property like mine? Are there any potential landmines I should be looking for if I decide to do something like this?


In going through some blogs of people who operate AirBnBs, I know there is money to be made. One other idea that a guy gave me is to rent out apartment units and operate them as AirBnBs. I've considered figuring out a way to buy a small apartment building, but the prices are so sky high right now, I doubt that's feasible in the near term for me.

Any thoughts on this last part?

Why not just buy a bigger multi family? It makes no sense to not use leverage in real estate. 4 properties with 100k in capital will built wealth much faster than 1 100k property paid in full. You get appreciation and mortgage paydown on 4 properties.

If banks don't want to finance you, it's because the numbers dont work, when you buy smaller buildings like duplexes, you will get blocked one day in the future, and then you just buy bigger buildings and commercial finance it. Banks NEED to loan money, if your situation/project makes sense they will work with you.

I'm not really following what you're saying. The banks will look at your overall debt, sure. But your net income will also be much higher, which is reflected in your higher COCR. And you'll have a bunch of cash in the bank too. In terms of ROI, you're forgetting that mortgage pay down is a big ROI generator over a 10+ year time horizon. Assuming, of course, that the property maintains its value and doesn't fall.

What are similar units renting for on AirBNB in your area? I guess you could always do a test. Put your current house on AirBNB at that rate and see if anyone bites

The hard part is that I have yet to see anything exactly like my place near my location, so I dont really know. I appraise commercial RE, so I am familiar with not having great comps to work with. I will have to keep an eye on things over time and figure it out that way.

I cant put my current place on there. I would need to move way too much stuff out of here to do it. I would need a small warehouse for all the **** I have here. I was considering trying to operate an AirBnB rather than sell if I decide to find a new place to live, which I am not ready to do yet, so I cant test the waters that way.

Thanks for the reply.

I've seen some interesting investment strategies that include buying a b&b or other rental property in certain international markets, and after 15 years of ownership, qualify for a pension in that location. Does anyone have any experience with this, and can you suggest the locations where this strategy can be implemented?

I think you can get a permanent visa from RE ownership in 1 year in panama, a place you also do not pay any income taxes under 100k annual revenue. Beats a pension after 15 tears imo. Ill be going there/costa rica this autumn to check it out

Great article about real estate agents and the lawsuits against their (semi) monopoly. Any ideas how this could effect real estate if the agents lose? Houses to become more liquid and prices go up?

https://www.cnn.com/2019/05/15/econo...ons/index.html

I expect that lawsuit to drag on for years and years and may not make a difference either way.

Realtor commissions can be and are often negotiated through different parts of a deal. A good Realtor is often highly overpaid for some transactions for the work put in, but also often highly underpaid for the value they give to their clients on other transactions. I don't see commissions for agents changing much at all in the next decade.

I don't think it would mean more liquidity. I would mean lower cost because the criminally high transaction costs in RE would be lower, meaning more people would be able to sell without being under water. That means more supply, which means lower prices on top of the lower prices due to lower transaction costs.

Generally speaking, Realtors are garbage. I have worked with dozens and dozens in my career and I respect exactly 3 of them. One of them was a commercial broker I used to find me 10,000 square feet of office space to rent. He was excellent. Commercial brokers do tend to be far more competent as a rule than people that sell SFHs.

The second is the guy I use now to find me properties in the market where I'm deploying capital. He's not perfect by any stretch, but he's decent and he keeps up with the details.

The third is the realtor I used to sell my personal residence last year. I have a lot of knowledge on how to sell rental properties. I have extremely little knowledge on how to sell $1M+ victorian homes. So I interviewed about 15 garbage realtors and found this one. She was amazing, she busted her ass (like literally came to the house every weekend to swing a paintbrush and much out the **** on the side of the yard), and generally advise us on what upgrades to make to maximize the price. She also covered $4k out of her own pocket to stage the house because I was being too cheap to pay for it. When it came time to look at offers, she nagged, cajoled, manipulated the other agents to get us the best price. It worked. We expected to sell the house for around $1.1M and we got $1.4M. She easily earned her $60k commission check. However, this is a speciality realty practice in the tightest, most difficult market the world.

So that's my 3 good experiences out of buying god only knows how many properties over the years.

I think that the fees in real estate transactions are ****ing absurd and are a huge damper on the market. Realtors by and large don't do jack **** besides sit on their fat asses and fill out paperwork, most of which is designed to protect them from liability rather than helping either the buyer or seller. The only thing they really do is make people that didn't bother to educate themselves feel better about making a gigantic purchase by using an air of competence and professionalism. It's a joke, and the vast majority of the average realtors advice can be summed up as "Don't worry the market always goes up". I hope the NAR gets smashed to smithereens and the MLS gets blown into the dustbin of history.

My wife works as managing broker for a small brokerage that works in SFHs from 300k-2.5million. That agent is the rule for them, not the exception. They also often work on 2% commissions.

I agree theres too many crap realtors out there. The barrier to entry is just laughably low. I also think the good ones, and theres plenty, are often worth more than the commission they cost.

That could definitely be true when you're dealing with high-end properties. For context, two of the 3 that I mentioned both deal exclusively with high-end stuff. One's a commercial broker that primarily does large lease deals or office acquisitions for medium to large-sized businesses, the other is high-end residential. It's when you get into the middle to lower end of the market that there you're in the real muck of the industry.

Consider this. If you buy a house today on 30 year financing terms, it takes you 6 years to pay down 6% equity off the mortgage. That means that to cover the Realtor fees to sell that property, you have to have a holding period of at least 6 years just to break even on the purchase price. Which means that your Realtor gets the first 6 years of equity gains from mortgage pay down on the house you bought. God forbid the house goes down in value, then you're extra screwed. On top of that, the Realtors gets 6% of any equity gains should the house go up in value.

Does this dynamic seem fair to anyone? The Realtor gets your first 6 years of mortgage pay down and 6% of any equity gains with no risk. If so, I'd like to hear why. I realize that some realtors work very hard. I realize being a Realtor isn't an easy business to be in. But that doesn't mean that the deal structure isn't fundamentally out of whack for the consumer.

Edit: Note that I realize that the 6% is negotiable depending on the price of the property. There are lots of realtors for high end that do 4% or less commissions for $1M+ houses. But the vast vast majority of houses are sold in the $250k range and the realtors take a 6% commissions. We ended up paying a 6% commission to the lady that sold our house. We had lower offers, but she seemed like the best so we decided to pay more for her services. I did try to negotiate her down. she responded basically, "I'm the best and I take a 6% fee. Take it or leave it". I took it.

Spex,

I must be missing something. If you sold the house for 1.4 million, how does the realtor come away with 60K? That seems like too little to account for the 6%, but too high to account for a split with the buyer's agent.

The agency gets 2%. She got 4% of the 6% charged.

What is the agency? Is that the realtor's employer?

Yes.

So, what does the buyer's agent get in this scenario? And where does it come from?

It's not uncommon for the listing agent to also be the selling agent. I believe in the case of a 6% commission that 2% goes to the agency, 2% goes to the listing agent, and 2% goes to the selling agent.

If the listing agent is also the selling, or buyer's agent, they get 4%.

So if the buying agent is someone else, then it goes 1% agency, 2% realtor, 3% buying agent?

I guess what you posted would explain it, but he does refer to other agents when he describes the process: