Making Money With Real Estate

[Slick]

So you have a house in the U.S. and want to move abroad. You know you can rent out the bedrooms while you're away so that way, you can have some income while you're abroad.

I heard that you can make money with real estate but you need very high credit and enough capital to invest in a house. I saw this show on HGTV where this couple buys houses, renovates them, and puts it up for auction. Usually, they walk away with more than what the house sold for before they fixed it up. Any thoughts?

[Cornfed]

Yeah, but how are you going to manage the property? If you have tenants who are a problem (which is not terribly unlikely) you will have a hard time in court as they will point out that you can’t know anything since you were thousands of miles away. If you use a property management service, this might be a problem because apparently most of them are losers or crooks. This is really only a good option for rich people who have everything sewn up. And you say rent out the bedrooms. I knew a man who was a professional landlord who rented out five properties of five bedrooms each in that way. It was a full time job and half of it was mediating disputes between tenants. This is not a good option for most people.

[HouseMD]

Yeah, but how are you going to manage the property? If you have tenants who are a problem (which is not terribly unlikely) you will have a hard time in court as they will point out that you can’t know anything since you were thousands of miles away. If you use a property management service, this might be a problem because apparently most of them are losers or crooks. This is really only a good option for rich people who have everything sewn up. And you say rent out the bedrooms. I knew a man who was a professional landlord who rented out five properties of five bedrooms each in that way. It was a full time job and half of it was mediating disputes between tenants. This is not a good option for most people.

Basically this. You won't have access to a good property management company unless you have a reasonably sized portfolio, and renting out individual tons of a property in which you are not in legal residence is actually illegal or difficult to do in many states (it often conflicts with hotel laws), plus there is the added difficulty of tenant management in such scenarios. Flipping houses is not easy, and only is profitable if you have tens of thousands in renovation capital and a large skill set in regard to home renovation and repair, but even then takes a great deal of time between purchase and profit, to the point it's just worth getting a regular job instead unless you're extremely talented.

Real estate can make you money, but it requires building a portfolio of homes that are sufficiently paid down to bring in a cash flow- you don't just buy one house and you're set for life.

[fschmidt]

I own 2 rental properties and I agree with Cornfed. If you are away from the properties, then clearly you need a property manager and these people tend not to be very good. A better approach, and what I am doing now, is simply to own the stock AMH. This has a price/book ratio of 0.96 which means you are getting an interest in their houses at below cost. And they manage the properties better than any property manager that you can find. Their dividend is only 1.41% but that is because they are reinvesting profits. More interesting is Core FFO per share divided by curent share price which is 4.77% which is a reasonable return. Of course the stock price will be irrational in the short-term since all financial markets today are manipulated and reflect modern insanity. But in the long run, the price must reflect the underlying value. So this how I am investing in real estate now.

[jamesbond]

I know a guy who owns 5 single family homes and manages the properties himself, he told me owning real estate is a full time job and a pain in the ass. Quite frequently, a couple of his tenants don't pay their rent on time. Also, there are repairs that need to be done periodically.

I know late night infomercials show how easy it is to make money in real estate but in reality, it is NOT easy to make money in real estate and owning property can be a pain in the ass!

[xiongmao]

I make 8.5% on my investments. Property has been pretty poor for me - this month I've paid $350 on updating my bathroom on my rental place which sucks.

Better investments for me have been short term bridging loans and asset backed loans. You need to DYOR and in general older loans have been better for me that financing brand new loans. It's weird but nobody I know does this stuff but there are some attractive rewards out there...