Can someone explain the real estate meme to me? I can't figure out how to make it work

Can someone explain the real estate meme to me? I can't figure out how to make it work.

>Work job, save 10k in 6-7 months by saving 90% of paychecks for down payment
>100k property (cheapest you'll find in my area)
>Property is roughly 500/mo mortgage
>Rent for 1k a month, pocket $500
>Making $6k a year before any landlord expenses

>Takes another 6-7 months or longer to save and recover my 10k spent
>Will take basically 2 years constant rental for property to break even on initial investment of 10k, not accounting for expenses

I make 38k a year at my job, busting my ass with a shitty schedule. My goal is to find a way to move out, seeing as I live at home right now, but in order to do so I'd need more money to not live paycheck to paycheck and actually save some money each month. An extra 500 a month from renting a property might do it, but I'd have to spend all my savings up front and then work for another 6-12 months and live at home to save enough to move out again.

How do people do this without someone giving them a small loan of a million dollars?

The property is worth money when you sell it, fool.

If you want rental income to support you entirely, then you need to invest in a lot of rental property.

If you don't have a small loan of one million dollars, then you're going to have save up money like it sounds like you're doing. Why would you think you can just buy one property and retire?

I've never thought I could just buy one property and retire, I just mean... how do people accomplish this task so quickly and seemingly easily without working for like a year and wasting all their funds on a gamble?

My realistic goal would be to own a propery or two, and work a part time job on top of that to make ends meet. I'd be happy just living comfy and doing something I enjoy, rather than not working at all by having crazy dreams of winning the lottery or some shit.

What are some of the risks involved with this? I'm assuming you're responsible for maintaining the property, so can't you get fucked money and time wise if the property needs work?

OP here

Yes, and that's one of my concerns. You might make $6k a year, but spend $4-5k of it fixing stupid shit from renters breaking it. $1-2k a year extra doesn't seem worth it at that point.

I know you can vet renters but there's no way of knowing how someone lives by themselves behind closed doors.

Real Estate is popular because banks will always loan you money for it if you have 10 to 20 percent down. It is the only asset class that banks do this. It allows you to save up 15,000 and get a loan for 15,0000. If all goes well you can use that property to eventually get a loan for 1.5 million. That's why it is popular. Just make sure you have the cash flow to pay the mortgage, don't rely on renters.

It's called the BRRRR strategy. Buy, Rehab, Rent, Refinance, Repeat. I'll keep the numbers very simple but you have to have enough cash to purchase the property plus rehab. So lets say you purchase a home for 50k that needs 20k worth of work and the after repair value will be 100k. You buy the home and rehab it for a total of 70k, rent it out so you have a cashflowing property, go to the bank for an 80% cash out refinance, you get back 80k and move on to the next one. You've recovered your initial investment and in this fictitious scenario you have gained 10k. If you can make this strategy work you can acquire rentals much much faster. Finding properties that will work with this strategy is obviously the difficult part.

Central AC goes out - $4k-$7k for a new one
Major kitchen appliance goes out - $500-$1k
Water or sewer fucks up - easily $1k+
Shitty tenant fucks your property up - $$$$
Hail storm, need a new roof - $4k+

Insurance covers some shit but not everything, you'll still have to pay the deductible if you ever need it. Property taxes are high where I live so I get a multi-thousand dollar ass fucking on that every January.

OP again

This is also my issue. Property taxes where I live are literally some of the worst in the country. It's really bad. 500k homes get like 20-30k tax a year or more.

100k house might get like 5-10k tax. Lower if you get lucky, but hard to find.

you have a post ID, no need to keep labeling yourself as op with each post

100k house gets 10k tax? Not even. I've got a 200k house and I pay about 2k in tax on it. No way you are paying 10% tax on a house. Highest property tax in the country is about 2% - some counties/cities add another 1-2% max.

You have to do it slowly. You buy property that is undervalued buying wholesale(ie of the courthouse steps) you throw a couple thousand in it to get it cash flowing. You will likely need to do much of the rehab yourself as this is how it becomes profitable in the low volume. Interest is low so you buy additional properties with the income until you reach about the 30 mark.

>rent for 1k
What makes you think you'll be able to get away with that?

Not him but my city/county combined has around 6-7% property taxes.

(OP)

Read the book "0 to 130 properties in 3.5 years" for a good roadmap on how to do it.

Sounds like you live in the highest taxed area in the country - highest city taxes are around 3% and highest counties are around 3.5%. The median is definitely sub 3%, combined.

You aren't just making 500 a month in cash you are also making 500 a month in equity (the house). You are essentially making $1k a month or $12k a year profit.

net profit will be lower as you have to take into consideration interest rate on the mortgage and any damage your tenants do to the property, as well as insurance.

Want to get into real estate but don't want to baby tenants.

What are property management businesses like? As long as they can ensure my property is taken care of and no damages are done and let me net some profit I don't mind losing up to 200/month

He doesnt sell rent to own to idiots like me who hate banks.

(Hated) banks i mean

They take 5-10% and can be good or suck dicks. Who knows

If you want to do it quickly you'll need to make more than 38k. If you continue to make 38k, you'll have to do it slowly.

But honestly dude, 6-7 months is no time at all. 2 years is no time at all. Just adjust to a long term perspective.

I guess you could try to get involved in shitty loan practices and flip something but that's really, really, unspeakably dumb.

>Want to get into real estate but don't want to baby tenants.
Just buy a REIT fund, then.

You get your initial investment back and then you plug all the rent back into the property to get rid of the loan early. Then you make 1k a month when you have a tenant. Buy your second property for 150k. If both properties have people in them then you are making bank. Sell them for 250k whenever you want but keep in mind that you might be waiting years to liquidize.

THIS OP

I work in commercial real estate and I've seen actual retards put 3 kids through college using this method with a duplex.

Learn what a cap rate is. Less than 8% on 100 isn't worth thr trouble. Also 1k rent you'll be lucky to have 850 total expenses.

The other persons brrr method is sound but in reality, anything below 50k will be a shit hole. You're better off buying your 'first home' at a lower rate, rehabing, refinance then renting. Then moving on to the next. Also multi family units will always be more profitable.

Also, construction costs are thru the roof right now, 10k won't go far, learn to fix things yourself.

You should know that we are at the top of a bubble right now tho. Now is the time to buy. Wait two years max if thr world hasn't blown up by then.

Sorry meant 100k and now is NOT the time to buy

I was exaggerating a little bit, but my area is near Chicago. Literally can't get worse than cook county, probably one of the worst places in the entire nation tax wise.

>thoroughly inspect the property
>know how to do repairs
>avoid niggers, the largest risk factor
>have 10-20K liquid
>don't need to throw your money away on insurance
>gains are much greater now

they do it by not having a shitty retail job

Not retail senpai, far from it.

I'm not saying I make great money, but I make above average for my peers. I also have zero debt and save the majority of my paychecks.

I also live at home, so no expenses. But I want to move out. I don't understand how people move out on their own without either:

>signing up for crippling debt for the rest of their lives

>living paycheck to paycheck with no emergency funds

Trying to find ways around these options. I'm up for a huge promotion in a few months, would be making at least double my current salary which would make life a lot easier.

>rent for 1k
>What makes you think you'll be able to get away with that?

Ummm.. 1k rent is LOW where I live. Most rent is $1500+.