The other one that hit home was change in family situation. We have baby 2 coming in October so things will change for better for sure. According to Wikipedia, the population of the City of Cleveland was , in If the inventory of homes is not decreasing but the population is, you can bet that vacancy rates are going to continue to rise. Find a market that is steadily growing but still offers good cap rates. I personally like Indianapolis : Just something to pay attention to…. Owning forever can definitely cause some pains.
Life changes. Markets change. Risk tolerance for 20 year old should be different from risk tolerance for a 40 year old.
Plan is to keep it for May be the time I head to Indonesia for a spell. Those are all great points. I agree with 2, when other passive income generates more than your property investment its best to not deal with the headaches of home maintenance, paying property taxes, issues with the tenant and worrying about finding a potential tenant when the previous one moves out. Correct me if I am wrong, but when selling in order to qualify for the k tax free gain married you must be living in the property primary residence for 2 out of the last 5 years.
Thanks for this post. The gains outweigh the pain right now. There are a ton of rentals coming and I have no idea how that will effect the rental rate. Good point on the expensive rentals perhaps raising rental prices. If the new expensive rental is close to your existing rental within several blocks , and they all get soaked up, chances are that your rental may see an uptick in rent. Eventually, the supply of new rentals will overwhelm the market and cause prices to flatline or decline.
I had 1, and it was big enough to offset the rest. I took a great job overseas, and being 12 hours ahead made the prospect of being a landlord not very appealing. Esp since I could cash out some nice gains tax free. Also, given the plethora of bs tax filing requirements as an American overseas, having yet another complexity in my taxes wasnt something I wanted.
The property tax rate in NJ and IL is pretty brutal. That alone drives a drop in volumes in the secondary market as most would prefer to hold and rent vs sell and take the hit. Incentives drive behavior.
Damn I love my Warriors! I may or may not partially own one of the largest sports blogs on the internet. I may or may not know the GM of a certain championship team. Be well-rounded for the win! BURL baby. IMHO, the most common way a person thinks of having financial independence is via the route of rental properties. It generates discipline to save, which is the precursor to any financial freedom paths.
When one has debt, they do get up at 6 AM to work. Articles like invest in K etc bores them. They automatically invest max in Ks, s, additional brokerage account. I agree with you here. I am approaching 30 and would like something with more risk. I have commented about this on other articles here on FS, but I have been shocked at the costs of having children.
Add on food, activities, extra plane tickets when traveling, college savings, etc. My advice to all of my friends and coworkers in similar situations is to save as much as you can pre-kids, and stay as liquid as possible. But, on top of that there were field trip fees, fundraisers, teacher holiday gifts, teacher appreciation dinners, sports fees, swimming, computer class fees, an optional science program, extra fees for foreign language instruction, etc. When my wife toured facilities when our first child was about 15 months old and we moved, lost our nanny, and my wife returned to work full time , she cried after visiting the first half-dozen.
Wow, that really does add up.
Thanks for the details! Still not too expensive now. Related: Public Or Private? Depends On Your Guilt Tolerance. This morning is also my introduction to Financial Samurai so forgive me for the tardiness. My wife and I are almost in identical situation. Similar in age, similar combined income, we happen to live in Falls Church, Va and also have two small children.. As previously mentioned I found this article perfect for our situation.
We currently have a rental condo my first home that has about k in equity but because of Condo and association fees are considering a Exchange on either a larger Townhouse rental in local NOVA area or a vacation property that we would look to generate rental income from. After reading this article I will be looking into Real Estate Crowdfunding , but is there anything else we should be considering with each of those options decision?
Having been a landlord for about four years now, I had my ups and downs when dealing tenants. When bad things happened you sometimes question if owning a rental property is still the right choice for you. My advice for aspiring landlords is to be prepared for bad tenants. Eventually, you will get one if you own a property long enough.
You can share the work, profit and have company when you need to work on your property. I could never understand as to why folks invest in Class C or lower properties: The kind with crime, lower income, and tenants generally mad at the world. Evictions, courts, repairs. Yes, Cash flow is the best ROI, but its the another extreme of the spectrum of being a landlord. Even here, I think only the young 35 and under are involved i. Now coming to Class A, unless bought at the right time , they do not have acceptable cap rate.
A lot of noise is on internet because folks who did buy in the aftermath of financial crisis, think they are the masters of RE investing. No, its just timing that worked in your favor in past. In conclusion, I somewhat agree with Sam.
Yup, they come in spikes, not a smooth graph, and when you have 2 kids in MS or HS — you and your life are not the same. I have given this a lot of thought, and recently passed on a condo in Denver downtown because price to rent just didnt make sense. Sam, thanks again because this is yet another article to help me see the bright side of having an underwater property!
I keep thinking I should get in to investment real estate, but my local market has been in my opinion flooded with new construction. In a town of 60, residents, having new units come on the market within a year is not a recipe for my success. This is very comprehensive list of things to consider. Personally I had to sell my investment property because I had some personal events that required my immediate attention and could no longer work on the property. In hindsight, I should have just hired a property manager and not have to deal with it. Sam, great points.
I think 8 really needs to be highlighted because the majority of folks long to have a home. And they leverage up to their eyeballs for it; but they end up being house rich, cash poor. Leverage is fine when you have the means to use it; but is a double-edged sword that is not worth using when the utility of the potential upside is far lower than the pain of the potential downside. Seattle does have one of the biggest new construction output. I wish I had a time machine and could go back to Awesome post! I know you put RE crowdfunding in high regard, but what are your thoughts on turnkey rental properties since some of us might not qualify income wise for something like realtyshares?
Can you explain your reasoning? Excellent analysis and consideration factor review. The downside risk for 1 high priced rental unit income would appear to be higher than for equivalent rental income sourced from multiple, significantly lower priced rental units and so would rather assume that risk profile instead going forward…. I think your comparison of passive income streams is spot on, but would just add that owning tangible real estate is more tax efficient than most other passive investments obviously not more favorable than muni bonds, though.
As always, this is a great article. I am interested to read more about that. Great summary. I love that book! All very good reasons, and a great list. Second Mrs. We bought in November and I wonder if the market will fizzle soon. Either way we are committed to years and hopefully the market will ripe rise rise. Great points about commercial real estate.
I will have to check out our local market and see what is happening. Great post, and very applicable for rental owners right now. I understand the appreciation bet, but how long will serious investors really lose money on a property every month AND deal with tenant headaches?
Although electricity is provided by a hookup and there's no fridge and running water, this tiny house fits the personality of its creator greatly. We respect your privacy and we are committed to safeguarding your privacy while online at our site. Many people have already heard this story because of how sweet and inspiring it is. I have a question though. It might cost less to fly to Hawaii with one airline and then use another for your return. Kyle's Gnome Dome is a one-of-a-kind construction situated in Dancing Rabbit Eco-Village which was built with recycled and reclaimed supplies. I set these alerts up for myself because I sometimes miss a great deal on the MLS.
Thanks for sharing your insights and your continued evolution on the idea of investment property ownership. These are good points to consider when one is either thinking about getting into or out of investment property. What is your ideal asset allocation based on the rankings of best passive income streams? I love articles like this. Great job breaking it down, Sam. Many are now investing for capital appreciation or in areas slated for lots of development with the hopes that it will increase their property values. I just sold one of my rental properties, as prices had gone up enough that I felt comfortable unloading one or two.
Student condos, nonetheless. Not going to sell it though, as the cash flow on that one still makes sense. Not the deciding factor, of course, but at least something to include in the analysis. We have yet to dive into real estate investing it is on our radar as a possible investment in the future , but I think you have outlined an excellent list of things to consider before purchasing a property or when deciding to keep a property. Great list of things to consider, not only about when to sell an investment property but also about when to buy one.
Excessive tax hikes, the availability of more passive income streams, etc. I particularly like the comment around commercial real estate. One renter has been in one of the properties for 14 years while the other is almost 4 years. There is no free lunch. It is a misnomer that there is a true hands-free passive investment vehicle. The most passive is putting money in the bank and your net return after adjusting for inflation is negative. While the risk of the bank defaulting is very low and yet it is still there. Especially with 8. Now it is time to drill down to a more local level.
Most of the lenders on this list provide loans in more than one state. In fact, I found that in order to provide mortgage products like these banks had to have a bigger-than-local footprint so they had enough resources to support loans for people without much cash to bring to the table. Hence, the repetition. Also, whenever I came across information about down payment assistance programs usually from state housing authorities I included a link to their programs too. It depends on how solid a work history they have.
These and so many other reasons why… it depends! Since these banks are a little closer to the communities where they work they can make decisions based on more details about an applicant than the standard checklist. The goal there is to help revitalize those communities with homeowners who plan on staying long term. Washington D. Also some of the programs say they are for first-time buyers, but they almost always define that as someone who hasn't owned a home in the past three years.
So if you got caught up in the mortgage meltdown and became a renter more than three years ago you can still qualify. Beyond that the details can vary quite a bit. Some places offer only fixed year rates.
Some require the purchase must be a single-family dwelling. If you end up researching those banks and find out more of the requirements please let me know and I can add the details to the list without giving up any of your info, of course! Borrowers can use funds from gifts, down payment assistance programs, or seller contributions to help qualify. Terms of 10, 15, 20, 25, or 30 years are available. It is a year fixed rate product. Find out more information about that and some of the first-time homebuyer programs here. The money is provided on a first come, first serve basis until funds run out for the year.
Homeowners are reimbursed the designated amount after the loan closes. It does have restrictions based on location and income, but they weren't very forthcoming with any other details about the program. The D. There is also a SmartBuy program which provides special financing for applicants to pay off their student loans as part of the purchase of selected properties.