Asshat wormie
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Investing General Discussion
- Thread starter Furious
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Furry
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Let me clarify on my real estate section.
Personally investing in real estate is usually an extremely good long term investment, such as buying a house within your means and living in it. It will generally go up in value at inflation at least (often higher), and turns your living expenses into wealth.
That said, continuing on with this idea into buying houses as a form of investment where you either repair or rent them can potentially be a good investment, but it requires going about it like it's a job. You will have to work and be knowledgeable in home repair. If you are not, and don't have people who definitely are screwing with you who are, I would stay away.
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I agree with Furry. Real estate is good so long as you can kill two birds with one stone with it. i.e. a house you are living in OR (as I've done) a house you are living in + acreage around it used for living/lifestyle enhancement (hobby/pro farm, or you hate neighbors and need space, whatever).
Otherwise, seems like there are easier things to invest in with similar or better rate of return.
I have a friend who is constantly buying and selling both individual stocks and indexes, and puts far too much into individual stocks based on crap he has heard around the news or internet. So frustrating watching a someone think he can market time, I've had to step away from trying to give him advice, make the sign of the cross and just let my investments do their thing without me thinking I am smarter than the masses.
Still, when I think how much money he COULD of had in his accounts if he just left it in a index this past 20 years instead of thinking the economy is about to implode and shifting everything periodically into bonds or real asset funds. So frustrating.
edit: this is the friend that convinced me to invest in Nokia, 2 weeks before it lost a quarter of its value........ never again.
Otherwise, seems like there are easier things to invest in with similar or better rate of return.
I have a friend who is constantly buying and selling both individual stocks and indexes, and puts far too much into individual stocks based on crap he has heard around the news or internet. So frustrating watching a someone think he can market time, I've had to step away from trying to give him advice, make the sign of the cross and just let my investments do their thing without me thinking I am smarter than the masses.
Still, when I think how much money he COULD of had in his accounts if he just left it in a index this past 20 years instead of thinking the economy is about to implode and shifting everything periodically into bonds or real asset funds. So frustrating.
edit: this is the friend that convinced me to invest in Nokia, 2 weeks before it lost a quarter of its value........ never again.
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I'm looking at purchasing a beach condo in Galveston, TX. I received some projected incomes based on bookings for this type of property from a property manager.
Purchase price: $129,000
10% down payment = $12,900 + closing costs
Estimated gross rental income: $28,995 annual, $2416.25 monthly (this is averaged over the year, it ranges from like $1000 in December to $5-6,000 during the summer.)
Monthly costs:
Principal and interest: $531
Property tax: $197
Homeowners insurance: $117
Mortgage insurance: $73
HOA dues: $433
Electricity & Internet/cable: $200
Total: $1551 per month
Vacasa (property management) fee is 30% of gross
So, monthly you could take in, on average, $2416.25, and after deducting the 30% gross PM fee, and the $1551 monthly expenses, you get $140.38. Yearly this is 1684.56
Cash on cash is 13%
The problem seems to be the fixed costs are so high with this rental property, being property tax ($197), homeowners insurance ($117), HOA ($433) and utilities ($200) = $947/month and the large property management fee (30%)
With a fully paid off mortgage, this property would generate $744.38 per month, which is a nice cash flow for sure. This is a one bedroom beach condo, and likely would not appreciate very much. The profit from here is really cash flow, not appreciation.
Would you do this?
Purchase price: $129,000
10% down payment = $12,900 + closing costs
Estimated gross rental income: $28,995 annual, $2416.25 monthly (this is averaged over the year, it ranges from like $1000 in December to $5-6,000 during the summer.)
Monthly costs:
Principal and interest: $531
Property tax: $197
Homeowners insurance: $117
Mortgage insurance: $73
HOA dues: $433
Electricity & Internet/cable: $200
Total: $1551 per month
Vacasa (property management) fee is 30% of gross
So, monthly you could take in, on average, $2416.25, and after deducting the 30% gross PM fee, and the $1551 monthly expenses, you get $140.38. Yearly this is 1684.56
Cash on cash is 13%
The problem seems to be the fixed costs are so high with this rental property, being property tax ($197), homeowners insurance ($117), HOA ($433) and utilities ($200) = $947/month and the large property management fee (30%)
With a fully paid off mortgage, this property would generate $744.38 per month, which is a nice cash flow for sure. This is a one bedroom beach condo, and likely would not appreciate very much. The profit from here is really cash flow, not appreciation.
Would you do this?
Khane
Got something right about marriage
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No. Especially since a lot of travel destination towns/cities are starting to crack down on things like AirBnB and requiring a certain amount of either vacant, or owner occupied time. Or just flat out requiring minimum lease terms (usually no less than 6 months).
While this may not be the case currently in any city you want to buy in, there's no telling if might change.
www.cnbc.com
While this may not be the case currently in any city you want to buy in, there's no telling if might change.
Miami Beach cracks down on short-term rentals
Miami Beach, Florida, which already imposes stiff fines for illegal short-term rentals, is now requiring online platforms to list specific business license information on their sites.
Furry
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Achieving full rental income is a rosy outlook at best. Since their fee is gross, you're going to get raped and probably lose money in a realistic scenario. Never mind that there is no consideration given to maintaining a property in your calculations.
This is a lot like people who buy a yacht and contract it with a chartering company to offset the costs. If you get 100% booked by responsible people it looks like a great investment. The true outcome is you get 70% booked by mostly drunk partiers. If these companies could make real money, they'd invest their own. Investing other people's money for them and taking a large fee from the top is the #1 sign that the investment isn't that great.
brekk
Dancing Dino Superstar
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Wouldn't you need to pay a PMI until you reach 20% of total mortgage paid off?
Frankly regardless of your beliefs on global warming buying beachfront real estate right now is pants on head retarded. I know at least in Connecticut FEMA has been adjusting flood zones on a yearly basis hugely increasing homeowners insurance. With your tight margins all it would take is a minor increase in insurance to kill any profit, and leave with you with a non-profiting property with a falling value.
Frankly regardless of your beliefs on global warming buying beachfront real estate right now is pants on head retarded. I know at least in Connecticut FEMA has been adjusting flood zones on a yearly basis hugely increasing homeowners insurance. With your tight margins all it would take is a minor increase in insurance to kill any profit, and leave with you with a non-profiting property with a falling value.
Sanrith Descartes
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I read someplace that storage property is one of, if not the most, profitable space per square foot to own. I think about it from time to time.
Sanrith Descartes
Von Clippowicz
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Something to consider. Only speaking for Florida, but there are laws mandating 30 or 40 year inspections on condo buildings. People tend to bail on them before the inspections because they could be on the hook for big assessments. Dont know if Texas has this type of law or how old the condo is, but something to consider.
Also, go through the HOA financials like an auditor. You could be buying into an HOA with real crappy financial solvency.
Khane
Got something right about marriage
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Parking areas as well. Especially if just paved lots with no structures to worry about.
Sanrith Descartes
Von Clippowicz
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SPY vs RSP. Cap weighted SP500 index vs equal weight SP500 index. Thoughts?
I like the appeal of the equal weight not being dominated by the top 10 companies (more than 20% of the total fund) but turnover is higher and net fee marginally higher.
I think in the current market RSP slightly underperforms SPY but in a down or volatile market it might slightly outperform SPY.
I like the appeal of the equal weight not being dominated by the top 10 companies (more than 20% of the total fund) but turnover is higher and net fee marginally higher.
I think in the current market RSP slightly underperforms SPY but in a down or volatile market it might slightly outperform SPY.
Big Phoenix
Pronouns: zie/zhem/zer
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Now factor in inflation, property taxes, maintenance/repairs, interest.
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fris
Vyemm Raider
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Yall are under estimating the profit on rentals.
My neighbor moved out and has rented it every since, 5 years now. Was empty for 17 days between his 1st and 2nd tenants. His home is about 20%smaller than mine, but charges 25% more than my mortgage. He's probably charging 50 to 60% over his mortgage.
1 rental should be easy cash flow. The risk, which is high, is if your first year goes bad. They trash the place, stop paying rent etc. That's what bankrupts first time wanna be slum lords
My neighbor moved out and has rented it every since, 5 years now. Was empty for 17 days between his 1st and 2nd tenants. His home is about 20%smaller than mine, but charges 25% more than my mortgage. He's probably charging 50 to 60% over his mortgage.
1 rental should be easy cash flow. The risk, which is high, is if your first year goes bad. They trash the place, stop paying rent etc. That's what bankrupts first time wanna be slum lords
Furry
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Yes, that is why its important to live within your means. You will have living expenses no matter what, but only a house allows you to regain a large part of your losses when you leave, effectively turning your habitation into a savings vehicle. That is a massively better investment than renting, and the reason people who buy houses and keep them 5+ years typically have a lot more wealth than those that don't.
Sanrith Descartes
Von Clippowicz
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Not to get political, but the movement that started semi-recently that tries to move people away from "the American dream" of home ownership is so bad. Assuming (major point here) that you buy within your means and avoid black swans you end up growing wealth down the road. It also assumes you dont suck out all the equity to buy bitcoin at 20k, but hey life it funny.
I keep mentally juggling the idea of moving into some commercial real estate as in NY it is much, much easier to evict businesses who dont pay their rent vs lowlife individuals. Property taxes are my biggest hurdle to making the move.
I keep mentally juggling the idea of moving into some commercial real estate as in NY it is much, much easier to evict businesses who dont pay their rent vs lowlife individuals. Property taxes are my biggest hurdle to making the move.
Khane
Got something right about marriage
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Sorry but I don't agree with any of this. And this line of thinking is what led people to make poor choices in the early 2000s leading into the housing market crash and ensuing recession. it ignores so many of the real factors associated with homeownership that renters never have to worry about. Like catastrophic failures in electrical, plumbing, HVAC, ground water, etc.
You spoke of never investing in real estate unless you have the knowledge and experience to DIY correctly, or have connections to do it for close to cost. But now you're acting like owning is always a great investment and ignoring all the same things you said were bad news when buying rental properties. So which is it?
Renting can absolutely be a better option than owning. Especially considering how shit most home inspectors tend to be and how little most people actually know about what to look at/for when viewing a property.
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Sanrith Descartes
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I have to disagree. For those who can afford to own, owning is the way to go. That is an important distinction. We suffered a near catastrophic economic meltdown in 2007/08 because a large swath of people who couldnt afford to own tried to do so. I'm not placing blame (there is enough to go around to everyone), just stating a point.
There are situations where renting is the right call and i have been a renter numerous times in the past. Outside of those home ownership is better in my opinion.
Furry
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All of your concerns are valid, and have been raised by me as well. It's situational to each person which is the better choice. Generally, if you live in one place more than 5 years, I would advise buying a house that is easily affordable. If you stay in one area for 10+ years, buying a house will be the better move for the -vast majority- of people. How long you know you will stay in an area should be a prime concern in rent vs buying. I will also agree that the american dream of the biggest house you can afford is stupid.
The guidelines that mortgage companies give on how much home you should by are actually generally good, though they will gladly give you mortgages for far more than that. A house you can easily afford should be a second major concern. I recommend a house no more than what you can pay all your reoccuring living expenses (mortgage,taxes,utils,monthly services) in half a month.