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EconProf
ParticipantA few years ago when I bought investment properties I took out 15-year loans in order to retire the debt faster, and to get about a 1/2% break in the interest rate. Of course cash flow suffers on these investments since so much of the monthly payments goes to principle.
Now, however, banks rake me over the coals when I try to get a loan, because “You don’t have enough cash flow”. My great balance sheet doesn’t matter to them, or my better interest rate on existing loans. (Nor, BTW, does proof of living below one’s income). They just want wage slaves, or last year’s favorable Form 1040, or commissioned salesmen coming off of a good year. Very frustrating.ParticipantA few years ago when I bought investment properties I took out 15-year loans in order to retire the debt faster, and to get about a 1/2% break in the interest rate. Of course cash flow suffers on these investments since so much of the monthly payments goes to principle.
Now, however, banks rake me over the coals when I try to get a loan, because “You don’t have enough cash flow”. My great balance sheet doesn’t matter to them, or my better interest rate on existing loans. (Nor, BTW, does proof of living below one’s income). They just want wage slaves, or last year’s favorable Form 1040, or commissioned salesmen coming off of a good year. Very frustrating.ParticipantA few years ago when I bought investment properties I took out 15-year loans in order to retire the debt faster, and to get about a 1/2% break in the interest rate. Of course cash flow suffers on these investments since so much of the monthly payments goes to principle.
Now, however, banks rake me over the coals when I try to get a loan, because “You don’t have enough cash flow”. My great balance sheet doesn’t matter to them, or my better interest rate on existing loans. (Nor, BTW, does proof of living below one’s income). They just want wage slaves, or last year’s favorable Form 1040, or commissioned salesmen coming off of a good year. Very frustrating.ParticipantLots of lessons to be learned here. The main one is that many people too casually decide to become landlords. They fail to recognize that there is a true learning curve involved, and the lessons are absorbed by trial and error–meaning that they are expensive. By the time you get to your 4th rental house you’ll be good at it.
Phone calls to previous landlords probably would have sent up red flags, as would a detailed credit report. The professional tenants often look better at first than honest people that are better risks. You need to scrutinize the application, or better yet hand the task over to a squinty-eyed, suspicious, experienced landlord friend. Another hint, show up at their current residence to ask for some more details to “complete” their application, all the while looking to decide if you want to have them as tenants.ParticipantLots of lessons to be learned here. The main one is that many people too casually decide to become landlords. They fail to recognize that there is a true learning curve involved, and the lessons are absorbed by trial and error–meaning that they are expensive. By the time you get to your 4th rental house you’ll be good at it.
Phone calls to previous landlords probably would have sent up red flags, as would a detailed credit report. The professional tenants often look better at first than honest people that are better risks. You need to scrutinize the application, or better yet hand the task over to a squinty-eyed, suspicious, experienced landlord friend. Another hint, show up at their current residence to ask for some more details to “complete” their application, all the while looking to decide if you want to have them as tenants.ParticipantLots of lessons to be learned here. The main one is that many people too casually decide to become landlords. They fail to recognize that there is a true learning curve involved, and the lessons are absorbed by trial and error–meaning that they are expensive. By the time you get to your 4th rental house you’ll be good at it.
Phone calls to previous landlords probably would have sent up red flags, as would a detailed credit report. The professional tenants often look better at first than honest people that are better risks. You need to scrutinize the application, or better yet hand the task over to a squinty-eyed, suspicious, experienced landlord friend. Another hint, show up at their current residence to ask for some more details to “complete” their application, all the while looking to decide if you want to have them as tenants.ParticipantLots of lessons to be learned here. The main one is that many people too casually decide to become landlords. They fail to recognize that there is a true learning curve involved, and the lessons are absorbed by trial and error–meaning that they are expensive. By the time you get to your 4th rental house you’ll be good at it.
Phone calls to previous landlords probably would have sent up red flags, as would a detailed credit report. The professional tenants often look better at first than honest people that are better risks. You need to scrutinize the application, or better yet hand the task over to a squinty-eyed, suspicious, experienced landlord friend. Another hint, show up at their current residence to ask for some more details to “complete” their application, all the while looking to decide if you want to have them as tenants.ParticipantLots of lessons to be learned here. The main one is that many people too casually decide to become landlords. They fail to recognize that there is a true learning curve involved, and the lessons are absorbed by trial and error–meaning that they are expensive. By the time you get to your 4th rental house you’ll be good at it.
Phone calls to previous landlords probably would have sent up red flags, as would a detailed credit report. The professional tenants often look better at first than honest people that are better risks. You need to scrutinize the application, or better yet hand the task over to a squinty-eyed, suspicious, experienced landlord friend. Another hint, show up at their current residence to ask for some more details to “complete” their application, all the while looking to decide if you want to have them as tenants.ParticipantI used to ask my students in a show of hands how many were for mass transit. Most would raise their hands.
Then I’d ask the class (at SDSU) how many rode the bus to campus today. Maybe 10% would raise their hands. Yet SDSU is largely a commuter campus well-connected by bus routes and a trolley track to apartment-type neighborhoods. SDSU also has a parking space shortage and the permit really costs.
Americans tend to want mass transit so other people get off the freeway and let them speed along in thier own car.ParticipantI used to ask my students in a show of hands how many were for mass transit. Most would raise their hands.
Then I’d ask the class (at SDSU) how many rode the bus to campus today. Maybe 10% would raise their hands. Yet SDSU is largely a commuter campus well-connected by bus routes and a trolley track to apartment-type neighborhoods. SDSU also has a parking space shortage and the permit really costs.
Americans tend to want mass transit so other people get off the freeway and let them speed along in thier own car.ParticipantI used to ask my students in a show of hands how many were for mass transit. Most would raise their hands.
Then I’d ask the class (at SDSU) how many rode the bus to campus today. Maybe 10% would raise their hands. Yet SDSU is largely a commuter campus well-connected by bus routes and a trolley track to apartment-type neighborhoods. SDSU also has a parking space shortage and the permit really costs.
Americans tend to want mass transit so other people get off the freeway and let them speed along in thier own car.ParticipantI used to ask my students in a show of hands how many were for mass transit. Most would raise their hands.
Then I’d ask the class (at SDSU) how many rode the bus to campus today. Maybe 10% would raise their hands. Yet SDSU is largely a commuter campus well-connected by bus routes and a trolley track to apartment-type neighborhoods. SDSU also has a parking space shortage and the permit really costs.
Americans tend to want mass transit so other people get off the freeway and let them speed along in thier own car.ParticipantI used to ask my students in a show of hands how many were for mass transit. Most would raise their hands.
Then I’d ask the class (at SDSU) how many rode the bus to campus today. Maybe 10% would raise their hands. Yet SDSU is largely a commuter campus well-connected by bus routes and a trolley track to apartment-type neighborhoods. SDSU also has a parking space shortage and the permit really costs.
Americans tend to want mass transit so other people get off the freeway and let them speed along in thier own car.ParticipantFor those few with the necessary liquidity, buying house rentals for cash makes a lot of sense. You avoid the transaction costs and delays of getting a loan and can hammer the seller on price. You are the only bidder on non-loanable houses like code-violaters, cracked slabs, serious fixers, etc., that lenders avoid. Fix the problem, rent it out, and enjoy the cash flow, which should be 8% to 12%+ on your investment.
Then refinance and repeat on another property. For those entrepreneurs with the knowledge and experience, this is a valuable niche. And it will clean up the debris left from the collapse in RE, and actually help the market recover.
Compared to 1% to 3% from our stingy bank CD’s, that looks pretty good. -
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