Casual “Investors” becoming Landlords

[flyer]

As someone who has owned investment properties in San Diego and elsewhere for many years, and done very well–mostly because the timing was right–I don’t really think anyone jumping into the market now can predict with complete certainty what their real estate or other investments will yield in 10, 20 or 30 years–I know we never thought we could.

My feeling is–if you are truly in a positive financial position, and want to get into the game at this point in our economic history–do so–but also keep a few “Mil” around for retirement–just in case “life happens.”

In the meantime, my philosophy has always been to live the life you want to live now–today–if at all possible–because you never really know what the future may bring.

[SK in CV]

[quote=bearishgurl]

SK, if you are around, can you tell us if you think Phoenix’s growth rate will be high enough in the coming years to absorb all that is currently being built and slated to be built there, as well as a good portion of the current resale inventory and rental vacancies?

Your opn would be appreciated.[/quote]

Growth was pretty low the last couple years but I just read this week it’s expected to get back up to 2-3% per year through the rest of the decade. That’s pretty substantial growth. (I can’t really explain why.)

Net job loss from USAir/American merger is not expected to be substantial. (Fewer admin jobs, more operations jobs.)

[EconProf]

BearishGirl: Please reread and take to heart Ren’s comments about your posts. Your responses showed it had no impact on you. But it was constructive criticism and probably represents the feelings of many Piggs.
Anyone else agree?

[Ren]

[quote=bearishgurl]
Ren, you were talking about purchasing several investment properties with mortgages to eventually pay off your residence, vehicles, children’s education and retirement. Since you will supposedly never sell them, you won’t be able to get the kind of cash flow you’re thinking of to do all of these things, IMHO.
[/quote]

I wouldn’t buy a property unless I’ve done the necessary research and math. The right properties, with the right amount down, DO cash flow very well, and well beyond expenses. I’m not going to do the math for you, but I assure you I haven’t forgotten some aspect that will later result in a face palm. I’m smarter than that.

[quote]
And if you DO sell properties in those areas you mentioned even after holding them for 15+ years, you may or may not make a profit. A typical profit from sale of residential RE in those states isn’t what it is here …. and buying in “better” areas is more expensive. And you won’t be able to buy as many properties in “better areas” (to attract your “better tenant”) as you could in mostly rental areas.

Of course, you “know all this” and have already figured everything out.
[/quote]

No. Unlike you, I don’t know everything – but I do have YOU figured out.

[quote]
There are GOOD REASONS why residential RE is so much cheaper to buy and also rent in AZ, FL and even RIV County than it is in SD County. If one is thinking investing in rental properties out of state and doesn’t understand the fundamental reasons why the RE sales/rental markets are as they are in those states, then they don’t understand these markets well enough to invest in them, IMHO.
[/quote]

There you go again, humbly assuming I’m blissfully ignorant. Markets in AZ and FL are priced appropriately for the location, number of units, and employment ($120k for 2,000sf which rents for $1,100-1,200, for example). Because you know everything, you know that there’s more risk AND better cash flow in those areas. I believe I can mitigate that risk through careful choices, as have many others before me.

[quote]
I also don’t think it’s that easy for an inexperienced investor (even with good credit) to get repeated non-owner occupied mortgages … at acceptable terms, anyway.
[/quote]

Then you thought wrong. I’ve talked to several lenders, a few financial advisors, and our CPA about it. All my calculations assume 75% of rent counted as income, seasoned for one year (one property purchased per year, even though we can afford more). Slightly higher rates are expected. Requirements and rates will change beyond 5 properties, then again beyond 10. Taking this into account, we’ll pay off many of them early, just prior to retirement. Considering LLC, but there are good reasons not to. Again, not ignorant here.

[quote]
I’ve never had any problems here telling it like it is.[/quote]

But you’re not telling it like it is. You’re ignoring the enormous number of people who have been successful at rental investments, including those I know personally who did so in a variety of markets over the past 40 years. So they all just got lucky, and there’s no level of intelligence, knowledge, or income available that can give an advantage? That’s essentially what you’re saying, right? It’s a good thing we have you here to stop us from trying.

[sdduuuude]

[quote=EconProf]BearishGirl: Please reread and take to heart Ren’s comments about your posts. Your responses showed it had no impact on you. But it was constructive criticism and probably represents the feelings of many Piggs.
Anyone else agree?[/quote]

+1

[upwardspiral]

I have been a daily lurker for years now and finally clicked on ‘ignore user’ for the first time today!

[earlyretirement]

[quote=EconProf]BearishGirl: Please reread and take to heart Ren’s comments about your posts. Your responses showed it had no impact on you. But it was constructive criticism and probably represents the feelings of many Piggs.
Anyone else agree?[/quote]

I’ve been posting on internet message forums since the Internet began. I’m very active on some and less on others.

My take is this…. you will ALWAYS have people that rub you the wrong way or that you disagree with or that disagree with you.

I’ve seen it all. The “know it alls”, “the crude and rude”, the “intelligent and polite and informative”, the “people that would write things they would never say to your face in person”, etc. All kinds and all types.

My philosophy is you can’t get too offended by ANYTHING someone writes. I don’t think some people care what others think of them while others do.

I’ve been on some message boards where people drive me absolutely crazy but typically I’ve never ignored anyone because it’s very rarely that I haven’t learned something or taken something positive out of posts from people. (Even if it was what NOT to do…).

I’m only speaking in generalities here but I think you have to take what anyone says with a grain of salt and not get too frazzled on these message boards.

My philosophy on internet message boards is anytime you get too frazzled or angry or stressed or worried from reading something, then it’s typically a time to take a step back and take some time off from it for at least a while.

You will always have people on the Internet that you disagree with or that annoy you. If it annoys you that much the ignore key is helpful.

[spdrun]

Bearishgurl reminds me of a cantankerous old broad from the Upper West Side that I know. Smart, opinionated, obnoxious, yet somehow endearing all the same.

[bearishgurl]

[quote=EconProf]BearishGirl: Please reread and take to heart Ren’s comments about your posts. Your responses showed it had no impact on you. But it was constructive criticism and probably represents the feelings of many Piggs.
Anyone else agree?[/quote]

EconProf, Ren essentially stated here that he thought the monthly income from out-of-state rentals which he intended to buy with mortgages were going to pay for all his current and future personal expenses.

I stated at the end of my post that it was nothing personal. I was discussing that I felt that a family with minor children who are W-2 earner(s) could be voluntarily putting themselves in a position of potential hardship if they do this.

No insult was intended towards Ren. He has also repeatedly stated on here that he would like to move to SD County.

Who knows? Maybe Ren won the lottery and has a mil in cash stashed away to “play with.”

In recent years, too many families with minor children overextended themselves in many ways, many lost the homes their children lived in and now we are all now having to pay for this in one way or another. Some (previously, before 2000) “prominent” families here in South County bought up to five local rental houses (for the “monthly income”) with “funny money” during the millenium boom and ended up losing everything … even their longtime family residence bought long ago and later mortgaged to help with downpayments on rental properties! And these are families who KNEW their rental areas intimately and managed them themselves. A couple of them possessed CA RE Salesperson or Broker licenses and were actively working in the field. Of course, their downfall was that they purchased investment properties with NINA mortgages, which doesn’t apply here. But they were VERY knowledgeable about their rental market and still lost it all.

The two states Ren and others mentioned are trying to climb out of a VERY deep depression (FL especially, which went down in value 60-75% in most areas). The steady-paying, reliable and trustworthy tenants one (who is considering investing there) THINKS they will be able to repeatedly obtain are just not there, at least not consistently, IMHO. Ask yourselves, if a “rental grade” condo currently costs $20K to $70K in or near Orlando, FL and a “rental grade” house currently costs $70K to $220K in same location, why the locals who are currently renting there aren’t buying them. The REASON, IMO is because they have no credit established, they have credit issues AND/OR they don’t even have the necessary ~680ish FICO score and 3.5% FHA downpayment + closing costs with which to buy these low-priced properties.

Those are your available “prospective tenants” in that location.

Property mgrs just rent the easiest properties to rent every month and keep trying to rent the harder ones (ones with LL’s who are more “picky”). It’s no skin off their backs if a property remains unrented for a period of time. They’re not the ones covering the carrying costs. Everything can be rented for a price, no matter WHERE its location. But very picky LL’s are going to have a hard time renting their houses/units if they are too picky in locales where nearly every prospective tenant is undoubtedly going to have a hardship due to credit issues and possibly being previously evicted from their own home or another rental, etc.

I feel that a family with minor children whose breadwinner(s) work in SD County and live in RIV County do so for a REASON. A family who has car payments has those payments for a REASON. 99% of the time, those reasons are financial. I don’t care how HOW MUCH their gross or net income from wages are. I just feel that this is NOT the type of individual who should be taking chances with their hard-earned cash buying out-of-state rental property.

Call it “paternal” if you will but it is my opinion that persons in the same station in life as Ren shouldn’t be doing this unless they are VERY deep-pocketed (read: don’t derive their primary income from wages). It’s a recipe for disaster. It’s better left to persons who don’t have the responsibility of a FT job and supporting multiple other people (minor children and possibly spouse) in case the sh!t hits the fan. And it can, very easily, for owners of two or more out-of-state rentals. I’m entitled to my opinion and so are you, Ren and every other Pigg. If the buyer or his/her family member hold a RE license in said other state or the buyer has reliable and trustworthy friends or relatives in said state to manage rental(s) for him, then perhaps 1-2 rentals would be okay … not more, unless the friend/relative is a licensed professional property mgr or is willing to be a “resident mgr” indefinitely for the investor.

OTOH, a 60 yo single or couple who just lost $20K in rent, damage to their property and legal fees for eviction on their rental property in AZ (which they bought with cash) can just pack up their RV in the middle of the school year and park it in an RV park in PHX or even plug it into their rental home and get to work on cleaning up and repairing it for the next tenant. They won’t have to pay all the exorbitantly-priced licensed contractors that their property mgr will hire to do this job, and they don’t have any mtg payments due on the property.

If Ren or any other Pigg thinks I’m talking out my ass or giving bad advice, then they are free not to take it or post what they think is better advice. The OP here is asking why everyone who can is not buying out-of-state rentals in areas of the country where RE values were deeply depressed.

Want_to_Retire stated that he/she tried to get colleagues interested in investing in PHX, like he was and they replied that they didn’t want to “hassle” with it. There is a REASON people (who have the ability to invest) feel this way.

WTR ALSO stated that having (two?) rentals in PHX were not EASY for him and that they involved WORK.

[quote=Ren] . . . You’re ignoring the enormous number of people who have been successful at rental investments, including those I know personally who did so in a variety of markets over the past 40 years. So they all just got lucky, and there’s no level of intelligence, knowledge, or income available that can give an advantage? That’s essentially what you’re saying, right? It’s a good thing we have you here to stop us from trying.[/quote]

I’m ingoring no one, Ren. In CA, those `successful LL’s in a variety of markets over the past 40 years’ you speak of here bought their (SFR) rental properties for $20K to $90K and are currently paying $300 to $750 annual property taxes on them. Some inherited their rental properties, complete with low property taxes appurtenant thereto. They bought properties within 25 miles of their residence or the residence or business of a relative or longtime biz partner who is managing some or all of them. Except for receiving CA real property as an inheritance, this cannot be done today. A good portion of these LL’s are now over 75 years old, have always resided in the area of most of their rentals and still do and still maintain their own rental properties when tenants call with a problem and clean them up and perform repairs on them between tenants by themselves or with the help of grown children. This includes more difficult repairs such as windows, plumbing, roofing and concrete (where equipment must be rented). They bought their first rentals close to where they were raising their families and it was hard for many of them to pay their $160 PITI per month on their rental house when they only received $150 in monthly rent!

Yes, this is/was in SD County.

Many of these “experienced LL’s” didn’t see their way clear to pay the balance of their remaining mortgages off until after they retired, when they had access to retirement funds.

These were “local” LL’s who had full control over every aspect of their rental properties for the life of their ownership, NOT “absentee owners.”

***********************************

I’m not opposed to families with minor children buying rentals in or near the area of their residences and managing them themselves.

All I’m saying is KNOW the fundamental issues with the particular rental population you are dealing with, NOT the “pie-in-the-sky perfect tenant” you THINK you might get and realize that your property mgr likely has SEVERAL properties to rent which appeal to the type of tenants you want and they will rent them whatever property they apply for if they are qualified for it. That may not necessarily be your property.

I never intended to stop anyone from trying to be an out-of-state landlord. I wish Ren or any other Pigg all the luck in the world in their current and future out-of-state landlording endeavors.

[bearishgurl]

[quote=spdrun]Bearishgurl reminds me of a cantankerous old broad from the Upper West Side that I know. Smart, opinionated, obnoxious, yet somehow endearing all the same.[/quote]

I’m going to take this as a compliment, spdrun :=]

[carlsbadworker]

[quote=sdduuuude][quote=EconProf]BearishGirl: Please reread and take to heart Ren’s comments about your posts. Your responses showed it had no impact on you. But it was constructive criticism and probably represents the feelings of many Piggs.
Anyone else agree?[/quote]

+1[/quote]

-1.

Although often time I don’t agree with BG’s view, I think she offers a good and distinctive perspective. This board would otherwise have too uniform views. And I really appreciate this kind of diversity especially less and less old-timers are here now.

Let BG be BG with her unique post style.

[sdduuuude]

[quote=spdrun]Bearishgurl reminds me of a cantankerous old broad from the Upper West Side that I know. Smart, opinionated, obnoxious, yet somehow endearing all the same.[/quote]

Interesting. She is starting to remind me of powayseller.

[njtosd]

[quote=paramount]The original post/poster is nothing less than a vicious elitist attack on the proletariat.[/quote]

Was that a joke?

[Anonymous]

[quote]Want_to_Retire stated that he/she tried to get colleagues interested in investing in PHX, like he was and they replied that they didn’t want to “hassle” with it. There is a REASON people (who have the ability to invest) feel this way.

WTR ALSO stated that having (two?) rentals in PHX were not EASY for him and that they involved WORK.[/quote]

I want to make clear:
a. I was responding to the OP as to his questions regarding landlording in certain locales, one of which is Phoenix, and providing him with first hand experience.
b. What I wanted to convey in my earlier post is that people have different life plans and investment plans that dictate whether or not they want to have rentals in Phoenix. While some of my CA colleagues did not want to make that investment – for whatever their own good reasons, others have – successfully – given the unique (and yes transient) market conditions of the past few years. Same thing with my AZ colleagues – most of whom are financially equipped to pick up rentals. Some are landlords, others are not – for a variety of reasons.
c. No it’s not easy, but neither do I think it’s impossibly hard as some posters seem to suggest. I’m on my 3rd and will most likely stop because the window of opportunity (purchase price below rental parity) appears to be closing. Like I said, no free and easy money, but it provides an acceptable return on my investment in money, time and energy.

I also want to add that I’m more leery of landlording in California than in Arizona because California laws seem much unfriendlier to landlords. That said, while true, it’s probably more a fear of the unknown on my part as I am not in this market. When I look at my friends and colleagues who are landlording in California they seem to have long track records of decent tenant experience. There are no guarantees of course – due diligence and knock on wood.

[all]

Somewhat related to PHX rentals discussion

General Motors Co. will open a new information technology innovation center in the Phoenix suburb of Chandler and begin hiring what will eventually be 1,000 high-tech employees for the new location beginning in April, the automaker announced Wednesday.
http://abcnews.go.com/US/wireStory/gm-hire-1000-tech-center-phoenix-18669949

[Author]

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