Why doesn't everyone buy rental properties...

Why doesn't everyone buy rental properties? It seems like easy money if you buy cheap and it is 100% passive if you get a property manager. What are the downsides?

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youtube.com/watch?v=Puc1CLwWNms
youtube.com/watch?v=aTXP_m8DuMg
fox40.com/2016/05/12/alleged-squatter-staying-in-fair-oaks-house-files-restraining-order-against-homeowner/
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not paying the rent.

Unforseen expenses like repairs.

the downside is having niggers live in your rental-box

Moral hazard. Tenants can be stupid and wreck your place, using federal money to pay the rent, and leaving you with repair costs.

youtube.com/watch?v=Puc1CLwWNms

>section 8
>53 dollars a month

definitely not a normal situation.

Lots of people do google "bigger pockets"

This is supposed to be a business board but apparently most people don't realize that you can just invest in a liquid security that tracks housing instead of investing in an illiquid housing asset

This is seriously so basic I don't see how people don't get it. Unless you are strongly confident that housing prices in your area will beat housing prices all over America there is literally no benefit to buying a house over just investing in housing

Most people cannot afford to pay the deposit on a loan.

you won't get anywhere near the ROI and your net worth won't increase

>100% passive

you're retarded

that´s really bad, i rent to students never had anything this bad.

The worst is cleaning ladies telling me they find used condoms hidden.

I speak from experience. PM handles everything with the tenants and I get a called whenever repairs need to be done. Dumb cunt

Holy fucking shit.
A full blooded chimpanzee wouldnt trash a house that bad.

You get cash flow per door and the tenants pay the mortgage which is then equity you can cash out for more properties.

Real estate 101 , no idea why people on yhis board blah blah blah

Dikes live next door to me - they quite literally crush out their cigaretts on the Sheetrock walls.

How dumb are you? Nobody buys rental property for the have capital gains you fucking idiot. You buy them for the RENT.

Most people don't have the capital to invest in any property.

Those that have enough money to invest in some property can only afford cheap and low-income housing which has a large moral hazard problem as discussed in this thread.

Then finally the people who can afford to rent good housing either do so or are so wealthy they don't feel like the hassle--even if it is limited--is worth it.

Also, for the record, NOTHING is 100% passive. No property manager is going to pay for the 12 bedbug outbreaks in your apartment buildings across the city.

Won't even respond because you clearly don't even understand the terms you're using lol
>tenants pay the mortgage
So, just like using dividends to pay off the leverage on your REIT?
What are dividends?

For those of you who are still too stupid to understand the difference:

A. You can either put 100k down and borrow 200k for a small house, then you earn rent, and use the rent to pay off the 200k
OR
B. You can put 100k into a housing index, borrow 200k to also put into it, and use the dividends to pay off the 200k.

Except one of these options is better than the other

There's always a risk that the unit you buy is horrendously overvalued, you won't get tenants, that tenants trash the place and leave, that people sell drugs out of it, etc

What happens if you can't get tenants for three months? You still have to pay the mortgage, and it comes from your own pocket dipshit

It is by no means "easy money"

Yeah, try paying 2+ mortgages.

OP BTFO OF THIS UNIVERSE.

OP IS NOW IN 4D.

>Unforseen expenses like repairs.
I didn't know that repairs were unforeseen.
>20yr roof
>15yr windows
>5yr hot water tanks

Man, I wish there was some way of figure this out!

> leverage

Are you saying you can't get leverage in the financial markets? Fucking top cuck

Niggers. You get sued for discrimination if you don't rent to them, and your property gets trashed if you do rent to them.

this guy is a retard, in NZ (Auckland) houses have been going up 10% minimum year on year for the last 5 years. Plug that shit in your calculator faggot

Wtf? Why wouldnt they just throw them in the garbage?
>ill just toss this semen receptacle behind the couch
>so much easier than putting it into the trash can

Someone that does this shit does not deserve any help from the government at all.

You know that's what you call a bubble right?
You may get lucky and get capital gains from your house value but the cost of upkeep almost always balances that out. This leaves renting as the income.

water heaters last a lot longer than 5 years

Because people are trash

you need to pay taxes, insurance, utilities and maintenance or assessment if you buy a condo. if you don't pay with cash you also need to pay for your mortgage. add on the cost of a property manager and in many cases and markets you will either be making nothing or so little that one month of missed rent will take you months to recoup your the loss.

the problem with property managers is that they don't give a fuck about your property. if you want it to be as passive as possible then buy a condo so that you only need to worry about the inside of the unit and not the whole building as a whole.

There are tax advantages to owning the house rather than using the financial instruments you are recommending.

For example: a person who leases out houses that are nice enough that he would want to live in them himself can eventually sell the rental property and not pay any capital gains tax ($250K single person, $500K married couple) if he moves into the rental house and lives in it for two years.

Secondly, the financial instrument exposes the investor to management risk. That is, is the manager buying trash, committing a fraud, or overpaying himself? The person who buys the a rental property with a mortgage does not have that kind of risk. Of course, he has a different type of risk but it is a risk that is more easily observable and stopped.

Finally, what kind of dividends does the financial instrument have? I seriously doubt 10% cash-on-cash, which is what a carefully purchased house can yield in net income.

I'm not saying everyone should be a landlord and ignore the financial instrument. However, there is a price to be paid for purchasing the financial instrument and, for some people, it eats too much into a return. For those who don't want the hassle of being a landlord or even dealing with a property manager, the financial instrument is the way to go. However, for a skilled landlord, I believe owning the house is going to generate superior returns over a period of 10 - 20 years.

I think you are missing by far the largest advantage of a REIT fund which is diversification. You instantly have exposure to a broad range of property across an entire country/region/world. This significantly decreases risk.

Secondly it isn't so important about how large the dividends are vs rental payments. It is all about the total return of the asset. For example if you have a fund that has an equal total return to a physical rental property you can synthetically create dividends buy selling securities equal to the rental payments you would otherwise receive.

Yeah, only leaving out acts of god, the tenants that can do damage to your properties, code violations, unforeseen safety hazards like unsafe materials, new laws that force you to update your property. There are a million different things that can pop up when you're dealing with living spaces

Do you want to know how I know that none of you have ever owned property?

Hav any of you heard about insurance? Contracts with tenants? From the beyond stupid replies to this thread I can only imagine you are americans.

Property manager? Really? You can set up a contract on your own?

And to the moron who things investing in a fund is a better investment: please go back to grade school. From just one apartment I make 17 000 USD a year, on an investment of 262 k. Add to that the market value which has gone up with 62 k USD.

How utterly dumb you must be to think you can get those gains from investing in a fund. Why are you even here? Enjoy making tens and tens of dollars

Plus don't you or a close family member have to live in the house or you lose some of the capital gains to taxes

>take all your cash
>leverage it 5 to 1 for a single asset
>stick a scumbag renter in said asset to trash it

In bongistan there are tax advantages to BTL (buy to let), although the gubment is starting to crack down on it.

For instance you can offset mortgage interest against your income tax. You could also claim back 10% or something for 'repairs' without anyone really checking.

It's even better if you buy your own home, renovate, let spare rooms and/or sell it. rinse and repeat. you pay no tax whatsoever. (you can earn something like 7800 bongs this way from rental income before you have to pay tax)

My father coowns 3 complexes and it is an extreme amount of work on top of a full time job even after highering a manager. It took 2 years of repairs and getting tenants to finally start making profit for one if them.

because i work an 8 to 5 and dont want to owe money to the bank?

is 17k your profits or revenue?
17k on 262k is just above 6%
You cant count market value because it fluctuates and history shows property prices are supposed to be a flat line after taking inflation into account. Market value going up is just a bubble that cant last forever.

> I get a called whenever repairs need to be done

passive

b/c its stressful letting other people live in your house.

Also tennants have lots of rights

You can't leverage as much and it's is a lot riskier

>he doesn't portion off a part of the rent to go to repairs

>everything needs to be diversified

Well you can just say "take care of anything that costs less than xyz with the company credit card" and the like

Honestly if you had youre nest egg in vanguard funds youd be checking stock prices and finance news daily - amiright?

So youre kind of splitting hairs

No dude - so for commercial theyll lend max 80% in most cases residential you can do low / no down on the first few - you can buy a quadplex and still get an fha loan for instance.

So 100k can buy a half million dollars lets say as a multifamily - lets call it 10% cap rate , its a multi so 60% of that income is set aside for maintenance and then we pay the mortgage put of the other 4%

Seems shitty right? Like 2% return?

Except we leverages 100k into this half million dollar property so for 100k cash im getting 10k a year in hand year one (2% of 500k) after everything.

On top of that someone else (a lot of someones) works a 9 to 5 to pay off my mortgage building me equity I can use for more properties.

then the cherry on top - the properties value can go up without me doing anything (icing on top) and the properties value is telated to its cash flow so I can just raise rents every year and the properties value goes up.

Im making money hand over fist.

Same numbers but a half million dollar mobile home park? Noe my expenses are 30 or 40% instead of 60, I dont get much appreciation (its just land with uyilities attached) BUT the depreciation time frame on the capital expenditures is 10 to 15 years instead of 25 to 30 so I get to pocket almost all the lot rent tax free.

Its spitting cash at my eyes - also with a mobile home park it wouldnt be too crazy to find 12 to 15% cap rate - so we leverage that 100k into a 500k MHP and I take home 52.5k first year - thats qyite a fucking cash on cash return , lets see hmm, 52.5% or 7.7% from vanguard...which one should I choose...

>From just one apartment I make 17 000 USD a year, on an investment of 262 k

Oh shit guys, a 6.5% yield

No I don't. Not everyone has as little self control as you.

>buy house
>live in it for a while
>move and decide to rent it out
>third month no rent arrives
>go to see tenant
>meets me at the door with a gun
>takes six months to evict him
>sell house

I'd rather invest my money into powerball tickets

don't rent to niggers. problem solved.

Have fun getting sued for discrimination.

you can rent only to seniors

You think only your house goes up but a housing index won't? What? Also, call options exist for leverage, you can get MUCH MUCH more leverage with options than a bank would ever loan you
Tax advantages sure, but buying a house involves a transaction fee of like 6%, and there is a cost to liquidity. Net net I believe securities win

Management risk is irrelevant, you're confusing active management with passive management. I'm not talking about asking your local neighborhood wealth manager and his 2 person firm to hold your money lol
Call option m8, but desu I wouldn't expect the average Veeky Forums user to understand options and how they affect leverage. Also, like the other guy you seem to think only your house will increase in value and not all houses (which would increase the value of the index)
lmao check the other responses to you

>Why doesn't everyone buy rental properties?
because everyone doesn't have enough money?

have fun getting your shit trashed.

How about I do neither, and put my money into much more sensible investments like index funds.

>not screening tenants
It's your own fault.

proper contracting solves most of these problems. This is an amateur landlord fucking up in the worst possible way.

Also section 8 is only viable in CBS houses that can't be destroyed.

as if theyd fucking know you were discriminating against them. just say you found a different renter.

id never rent to a minority, unless they were asian.

What is section 8?
Is it a USA government program where poor people rent properties that they can't afford, by paying a small part of the total while the rest is paid by the government?

At least that's what I got from that video.

Repairs

Shitty tenants

Razor thin margins made even more razor thin when you hire a property management company.

Its easy as fuck.
Don't rent to Criminals
Don't rent to people with bad credit scores
Don't rent to people with more than two children b/c occupancy issues.

The one black guy out of 100, oh we we found somebody else, we're looking for longer term but if you'd like to pay the short term lease premium of 20% higher etc...
$200 application fee, we're accepting applications for a move in next month, I'm sorry for the misunderstanding.

Government assisted housing program. Title IX Section 8 if memory serves. Any way Government subsidizes a set amount of rent based on market average, tenant pays like $50

It is a viable investment strategy provided some limitations.
Already in a Section 8 neighborhood.
Concrete building.
Contract cleaning and yard to keep an eye on the property
and appliances registered with Service America.

Talk to your local REIA and find the Section 8 guys, and ask for the horror stories and how they prevented them in the future and buy them lunch to look over your contracts, guide your tenant selection, and consult in general. Pay them handsomely and they'll hook you up.

The pros are government payments run like clockwork.

Thank you very much for your explanation. Very interesting.
I'm not from the US though, I was just asking for curiosity.

youtube.com/watch?v=aTXP_m8DuMg

Wooh
The horror stories abound. This one wasn't Section 8 but oh man. It pays to have a "cleaning service" on the books.

Call options - so financial gambling. Great ide

He said the last 2 digits was equity gain from value increase he didnt even do anything for

He probably put down 60k for the property

low liquidity, upkeep costs, managing costs, tax increases likely, 100annual return 0.2% in housing

Its not gambling when you set your success rate.

With buying a house, the mortgage gets you the 200k because you guarantee the loan with a property interest. If you can convince the bank to give you an unsecured 200k loan after sinking 100k of liquid capital into a futures market, you'd likely not need to do that anyway.

Also, I live in London. Property is going up by 10% a month here in some parts. My house went from £266,000 in 2009 to £555,000 now.

Because most fuckers can't save up for their own downpayment, much less several.

Hey Li, do you still have/mantain those .txt files with links to DL Veeky Forums tutorials?

Any new addition?

What is risk-adjusted return you spastic

REITs pay monthly dividends that if invested in a DRIP compound your principal. Fuck me you're a retard

You know, let me expound on this actually.

First, some upfront parameters.

>Base passive income from index funds averages ~10% annually
>Doubles every 8 years or so as a rule of thumb
>18% tax

Okay, by comparison:

>Put down 20%, say 30k, on a rental property
>Pay 15% of gross rent to professional property management so that the income is passive
>Pay mortgage
>Pay property tax
>Pay insurance
>No taxes on paying the mortgage, it's a special loophole

The above doubles the initial investment every four years. So in a couple of parallel timelines if you had 30k to put down, and in timeline A you put it down on a rental property while in timeline B you put it down on index funds, your rental would net you x3 on your investment without even factoring in fluctuating prices, while your index funds would only net you x2. On the other hand if you pull out the money in that rental property four years in and bought a second one after refinancing, you net x4.

Basically it's a very favorable way to make money passively, but you have to be playing around with enough money to afford regularly making down-payments on houses that people want to live in. There are other tricks to it as well, but if you want to get rich but don't have a million dollar idea real estate is the way to go.

What do you about squatters? Squatter's rights are pretty thorough, especially in California.
A renter can basically stop paying rent and stay in the property for free for as long as they want, and the landlord cant do shit.

In this is case, the squatter actually filed a restraining order on the landlord, and it was approved.

fox40.com/2016/05/12/alleged-squatter-staying-in-fair-oaks-house-files-restraining-order-against-homeowner/

>what do you do about squatters

Not live in a shithole like California or the UK.

>In AR you can be jailed for not paying rent

Are you a grill?

It depends. But from a pure investment standpoint. ROI & ROT the market is usually better. But if you're willing to venture into the higher levels and take a Little Time and put it into ROI, usually commercial, you can do pretty well.

If you took If you took 260k and invested in 1sd otm puts and transitioned them to covered calls as you built your core position. Pretty sure you'd have more than 17k dollars.

Say you had apple at 100 for most of the year.
Traded 60% of the portfolio for margin and reentering. The 1sd otm put is trading for $1.00 on apple. the 1 std dev put on apple is at $90
So total at risk capital is $157,200
Every 45 days you resell, So far we only could have entered a position on apple once on may 12.
Margin gets called at 2 std dev move or 70, 90-70 is $2000 margin. we can sell 78lot puts for $1.00
Jan 4 we collect 7,800 don't get called on exp friday
Mar feb 15 we sell 81lot 1 std dev puts for $8100
Apr 1 we sell an 86lot puts for $8,600
May 15th, we were really sweating, maybe we aquired a shit ton 8600 shares of apple on the 12th at $89 a share
and sold 86 97.5 calls for $1 collecting $8600 again at a 2 year low. or maybe we had strong hands may 12 and we can sell 90lot puts for $9000

ytd $24500 risking 60% of the capital with a pending 9000 or $8600 and 8600 shares apple at $89

trade fees $395, max ROC 15.33% ROI ytd 9%
Killing it.
This was 15 minutes of work the whole fucking year. and maybe a few moments of excitement when the ITM alerts made your phone buzz.

On the very worst day if you bought back at teh very bottom literally the unluckiest guy. you'd have lost 90-89.47= $4558. oh wait that's less than you collected making your loss a net gain. of drumroll $4042

still up $19,942

It's what liberals voted for. Just make sure you don't live in Cuckifornia.

sure man
not sure when the last time you dropped by was
dropcanvas.com/zpf5p
but I've added Ramit Sethi Money and Business essentials: PinchaPooRacingOnDesignatedStreets
&
Dynamic Hedging
&
Options as a Strategic investment

maybe tim ferriss: health wealthy wise
spirit animal.

I'll have to check with my archive which ones I don't have yet, but I think those are new for me.
Thank you very much for them.

Also, do you suggest one of them in particular to start watching from, for someone who's just starting and knows virtually nothing?

>the rental home owner is at any point risking anywhere near 60% of his risk capital
kek, nice fallacy faggot. 30% is probably worst case scenario outside of trap house niggers in video above. you're also assuming we always get stopped out at 70 which is not a reasonable assumption, if apple was trading 85 with our 90 puts on and then dropped to 60 on earnings we would've lost 240k.

go lie and shill somewhere else.

You are not comparing apples to apples. Even a moderately hedged and actively traded portfolio can destroy a passive fund and most residential real estate.

In RE you gain some useful skills in business, negotiation, contract law, and financing. Not to mention globe trotting. but it is a big time suck. This is coming from a guy who was a landlord for a time and those checks for pretty much no work were pretty sweet. Didn't break even though. Damn underclass tenants.

If you're interested in self employment at all
Eben Pagan: Self Made wealth first, (hustlemusclerehab) 4th if not
Ramit I will teach you to be rich
Ramit MBEssentials (PinchaPooRacingOnDesignatedStreets)
The Credit Secrets Bible & creditboards forums & FICO Score Effects
These should take 6-8 weeks for full implementation. Get it done fast but get it done right.
>Insert EBSMW here if wageslaving first.
Ramit How to find your Dream Job (triplemaximumwageslave)
Ramit How to earn $1k on the side 2.0 (2kshekels)
Ramit Instant Network (sINs of the poo IN loo)
Ramit OverNight Resume Makeover (Hiremeplz)
Tim Ferriss 4 hour life: healthy wealthy wise (spirit animal)

>tfw your state lets you evict within a week on nonpayment/lease expiration
based PA

>not comparing apples to apples
>actively traded portfolio can destroy a passive fund and most residential real estate

Who's not comparing apples to apples?

Thanks man, that list will be definitely helpful.

You know what , I was veing an edgy faglord.

You and guy I replied too should lay it down because now im curious

The who / what / where when etc of call options , I think its a worthy enough topic for a new thread even so whats the deal? Give us a breakdown

Simply untrue the home owner has 100% capital risk. especially if mortgaged. That 30% is simply deflationary risk. Built in insurance is a hedge.
There's all kinds of what ifs

1st) if $184B just up and vanished from the global marketplace it would be a great day for me.
2nd) the brokers would have stopped you the fuck out long before what is a 0.21% probability option.

The problem with a REIT, especially in this environment, is that yields are terrible thanks to twisted monetary policy.

Yes, you get diversification but, for a person who is a skilled landlord and has an eye for things, you end up getting the average return for real estate versus an exception return.

Of course, not everyone is going to be a successful landlord and many people do not want to be a landlord. But there are good reasons for not using a REIT, especially in this market.

Pretty much. There's an added bonus that the government uses it to increase diversity in areas. So they try to put section 8 renters in nice, all white communities instead of keeping them in ghettos with their kind. It means the government will pay even more for these peoples rent, and the quality of living in a nice place will be decreased.

The real estate agent's transaction can be reduced in certain ways. For starters, you can get your own license; it's not difficult. Secondly, holding a property for a longer time will reduce the bite the of the transaction fee since it allows greater time for property price appreciation.

As for management risk, management risk is management risk. The people running the REIT: How are you certain they won't abscond with your money instead of actually buying properties? Furthermore, even if they're honest, how can you be certain they won't make asset allocation mistakes, buying pigs in a poke?

The financial instrument gives you liquidity and, assuming good, honest management, less headache. However, such an investment always exacts a price: a lower total return. That is the nature of investment. If it weren't, only the most insane masochists would choose to be landlords rather than just passively investing in a REIT.

The reward for putting up with the extra work, headache, risk, and additional skills requirements for being a landlord is a higher rate of return. A higher rate of return is not guaranteed, of course, but landlording is not like buying stocks in companies as it does not require as broad and deep a base of knowledge to be successful.

BOOM BABY

>home owner has 100% capital risk. especially if mortgaged.

Yeh so - people with SFR rentals who got in at the peak of the bubble got owned , everyone else was fine - flippers , wholesalers , Multifamily / ommercial

See what im interested in is better than average (meaning mutual fund) returns for reduced risk using methods that can repeated , so real estate is perfect

You saying that under perfect conditions "call options are easy" is bs , how much have you made? Dont give me hypothetical apple examples tell me what youve done the last year

Otherwise it just sounds like you got burned in a bad market by shotty tenants and now youre chasing the next get rich quick scheme

>buy house in state with good rights for landlords
>rent it out
>rent house in California
>squat it out