Bitcoin is going to halve twice in the next 5 years. It sure as **** is going to outperform real estate. And the best part is, you don't have to work your ass off.

Work smarter not harder.

Totally inappropriate. This is a good, informative, thread that doesn't deserve such a dumb take.

Thanks so much for the input spex I appreciate it. I will start to build an US credit history this year. Can't hurt to have a few assets in the land of opportunities.
All of these things and also I think we get taxed too much, plain and simple. The bugs down there are some scary stuff tho. I'm looking for an evental move, nothing serious right now.

Great thread and I'm halfway through it.

Question for you.

I assume that when you invest in homes in different markets that you hire a property manager.

Do you pay this bill as a salary or does he collect a % of the rent collected? Does 25% on a 1k rent house seem reasonable to you?

25% is ridiculous.

US ballmark is 6%-10%, maybe a rooming house would charge more. You usually pay a flat fee to find a new tenant on top of that fee.

I think working smarter means working on things in which you're competent. I don't think it means jumping on the bandwagon of the hot investment of the moment when one has not idea what the risks are or what makes it a good investment. That's my two cents.

Edit: If "halve twice in the next 5 years" means its going to 4x the current value in 5 years, then that's roughly what my real estate investments do on a cash-on-cash basis. If I get lucky and get some rent increases too, I do even better. If I get lucky and get some appreciation, I do even better still.

Yes I have outsourced property managers. They get 6%-8% of gross rents depending on my volume in that market. More volume, lower cost. No, 25% is way too high, the highest I've seen is 10% and that's for properties where the rent rates are super low.

I forgot to mention mortgage pay down! I get that too.

Along with this, you need to understand how PMs make money. A lot of them charge ~15% markup on repairs and maintenance. If you need them for bigger jobs, they'll get you there too. They may take late fees, renewal rent, etc. Find one that is very transparent and through referral as there are a lot of shady ones out there.

Glad to see this thread back up and running.

Seems like there are some smart people in here. I've been learning about real estate for the last two years and love the idea, tax efficiency, leverage, appreciation, etc. I'm 27 and bought a house last summer renting out two of the rooms which covers my mortgage utilities and taxes.

Looking to get around 50k saved then buy another property in a lower price point market (OKC, I live in Dallas). Price point around 90-120k. Currently planning to go slow and steady and see how the out of state thing works. If it does I'll be looking to jump in pretty hard after the first house.

Thoughts?

That's a really good point. Also, some of them won't give you any operating data on the property if you fire them. There are scams where they take kickbacks from vendors that charge inflated service fees. Lots of shady stuff, it's a shady business.

I'm not really sure what you're asking. The price of a property on it's own is irrelevant, it only matters relative to the net income of the property, which determines the COCR. Can you provide more information

Epic thread spex x thanks a lot for this.

I am just starting to invest in property. I am not working at the moment so I can focus time on this. My father passed away and I am renting out his property in Central London and now looking to buy places, hopefully at a discount due to the uncertainty of Brexit, many properties are not selling. I think shops/commercial are probably better than residential right now due to all the regulations here nowadays.

Do you ever invest in leases? People here were not that familiar with it but are more so now. At auctions you can pick them up and get a return of around 5-6% per year, plus payments when they want to extend the lease. If it drops below 80 years, you get paid a lot more. Not sure if this work the same way where you are but I imagine that it is pretty similar.

Thanks again.

James

I'm not sure about this. Could be a strategy that I'm not familiar with, or it could be a strategy that I'm aware of but you guys call it something different in the UK. I'm sort of assuming you're talking about land leases, which are super common in some major cities (e.g. Manhattan, London, Paris) but otherwise pretty rare. But you might mean something else completely. Can you walk me through an example deal?

Maybe I should just start a REIT for you guys to invest in....

I believe that it is just the common one you mentioned.

So flats in the City of London for example can have a lease of say 125 years. The City of London owns the freehold. Many flats in London are leaseholders. These leases can sell at auctions. So I could go to an auction and buy a lease with x amount of years left for x amount of money. The leaseholder (usually person living in the flat or person renting it out) pays a ground rent to the person who owns the lease. This can go up to 5% or 6% per year for example, depending on what you paid for the lease. Also, say the lease has x amount of years left and the leaseholder wants to extend it (to say 125 years, which makes the property more valuable if they decide to sell), they have to pay you money.

I have not done enough research yet to see whether the amount you get paid for a lease extension generally outperforms the property appreciation (as a percentage) for example. That might be handy in knowing if you were to compare this to buying a property and renting it out.

There is a formula which kicks in when leases drop below 80 years. It gets expensive. By the way, I have a flat in the City of London and my ground rent is abolished. I am just about to extend the lease (there is currently around 90 years left) and the City of London wants 10k.

Anyway, what is your opinion on owning these if you can get one and get a ground rent/income of 5% per year? What is appealing to some is that you can invest a small amount of money. You can pick these up for 10k, 20k, or probably any amount. For example, if you found a lease in a expensive area in London and with not many years left, it would cost much more. This is because if for whatever reason somebody did not extend the lease, then the property would then get owned by the person who owns the lease after it expires.

Frankly if your goal is to invest small amounts of cash and get a 5-6% return then you're probably just better off buying REITs than these leases. REIT shares are highly liquid, easy to buy and sell, carry roughly the same risk profile if not less than buying leases. Plus my guess is that there's a hefty transaction fee for buying at auction, whereas with REITs the fees are small. I'm no expert on ground leases, but that's my gut reaction to what you're describing.

Tien! Glad to see you're still around. I was just thinking about IRR and I wanted to amend my statement that it's a junk metric for REI. I was thinking that it could be useful to calculate IRR using historical performance of properties post-acquisition. I wouldn't use it to project future returns, but to get a sense of the total ROI that was actually achieved I could see using it. Then at least you could have some common metric to compare the performance of properties against one another, as well as your aggregate total returns of your portfolio. I don't currently use IRR for anything, but I might start. What do you think?

On a house that rents for 1k a month that's only 60-80 bucks a month... doesn't seem like much for shovelling snow, finding tenants and finding contractors for repairs.

I have my eyes on a duplex that I could get for 150k and will have property tax of 2200 a year and each side would rent for 750-900 a month with tenants paying utilities. Good deal or is it a pass considering I don't expect property value to appreciate as much as other markets.

They dont shovel snow, they deleguate it and charge you. They also charge you to find a new tenant with a flat fee and like mentionned earlier they take a cut from hiring contractors.

I think it’s a good metric to use for historical comparisons actually.

Real estate investors, even great ones, make mistakes in my opinion when they only look at cash on cash return.

Capital pay down and appreciation has been historically just as good return wise as cash on cash and sometimes in certain markets even better than cash on cash. Historical IRR will take into account capital pay down and appreciation. Obviously you get to use the cash right away so the time value of money on cash is important.

An investor friend of mine had good cash on cash return on half a dozen mult unit buildings in a further suburb of my city, but when it came to sell the appreciation was flat compared to what was happening in the metropolitan city. He would have doubled his aggregate return getting less cash on cash if he had bought in the city. Of course we run into the “buying into appreciation” debacle but it’s good to know historically what happens in resale. That particular suburb always had flat appreciation.

For me. I always take into account resale potential in what I buy. Maybe you can also throw in an “appreciation roi” as well so you can differentiate between historical IRR as well as just appreciation.

OP and some others in here know more about this than I do, but I am a commercial RE appraiser and know a little about your question. Typically what I see in apartment properties that are well managed is total operating expenses (including property tax, excluding debt service) usually range from about 40% to 50% of gross income in my area (MN). Again, that is in properties that are managed pretty well. Your range of $750 to 900 is pretty wide. Also, how likely is it that the property tax remains the same? I'd look into everything associated with figuring that out, as that is an expense that you will probably never be able to reduce while you own the property. Also figure out what you are going to need to spend money on during the time you own the property, like appliances, renovations, etc. The condition of a property matters quite a bit.

Does anyone reading this have any knowledge or experience with owning Air BnB properties?

Looks very familiar. Pretty sure you wrote the same thing word for word earlier in the thread. Thanks again for starting the thread and keeping up with it as long as you did. Really got me interested in learning about REI.

Thanks Spex

Only second-hand knowledge, I haven't personally done it. But if you post your questions I'm sure that me and some others here would take a crack at either answering them or helping you understand what you need to go find out.