patrick.net

Nice work, Roberto. Sounds like you know what you are doing. What resources do you use to go about finding these properties?

id be doing the same thing if I had cash and lived in a housing crash ground zero cities.

With enough rental properties You could be setting yourself up for life right now.

good job rob. you seem to have a pretty level perspective of the real estate markets which makes me think you'll be even more successful than you already are.

Rob,

How did you get a house for only $26k? That is less than what I paid for my Honda.

WOW....my skin crawls and i look for my ak47 when i drove thru that area of town.....!...good luck man. i was staying at a motel just SE of that area..over in gilbert and superstition and i was working on my laptop looking at the mls and right outside my room 3 people were shot to death in a drug deal gone bad.

i am starting to see cheap foreclosures around the union hills dr./I17 area....

i was at w guadalupe rd and s country club dr....just a couple of miles from asu. there are some very nice areas but also some pretty rough areas...i'll stick to north phoenix along 101.

roberto - did you read your own description of the properties....? if you buy a house/condo that is torn to hell..that is also the people that you will eventually rent to...! the people that lived in the condo were trash and they were there because the neighborhood is trash. the people you rent to will be like 'why dont you paint the ceiling dark blue'....!

but i wish you good luck as renting to frat boys and section8 is a tough slog.....

Roberto those purchases you are making are about as safe as you can get based on the information you are giving. Congrats and thank you for sharing.

A 40k condo that rents for 800k has a gross cap rate around 25%! Even with high vacancy/expenses you should easily get 15% cap rate.

There is no way anything in coastal Cali can be bought anywhere near that cap rate even when buying at courthouse auction. (Might be a rare example here and there though but not the norm.)

The only investing in Coastal Cali I would be doing is flipping foreclosures bought at courthouse to FHA buyers - but there is tons of competition now - but some people are making money which is not easy anymore.

Right now I'm trying to decide which area is best to invest in cash flow rentals between Vegas, AZ, or Socal High dessert (palm springs, IE, palmdale are all down up to 80% like AZ). So far my conclusion is that they are all equally distressed areas and probably the biggest issue of where to 'buy a buncha rentals' would be where I decide to live and I'm thinking AZ is the nicest of all these areas.

Currently im in Los Angeles renting and sitting on a pile o cash that is earning 1%.... Im still very angry about low CD rates and don't want Ben Bernake to 'force me to spend my money' but I'm thinking about it seriously... Ben might be able to keep rates at zero longer than I can stand earning zero....

condos below 40K... damn, I wish I had that option :-)
Good for you Roberto!

now if you can post your CREDIT CARD number and SOCIAL SECURITY number here ... *grin*

Mark - have you considered what could happen to Vegas economy over time when slowly more and more state and local governments allow gambling due to being broke? Taxpayers are fed up with higher taxes - its much easier to pass a law to allow indian gaming off the reservation. They tried to pass this recently in CA i think but no luck yet.

Really the only reason Vegas exists is due to state laws restricting gaming - as these slowly go away Vegas might end up a ghost town with a million vacants like Baltimore/Detroit. Especially if gas is $5+ a gallon it will kill vegas.

PockyClipsNow says

Mark - have you considered what could happen to Vegas economy over time when slowly more and more state and local governments allow gambling due to being broke?

Very good point!

The thing is that Vegas has a 50 year head start on all the Indian gambling casinos and such. It's not just gambling anymore that attracts people to Vegas. The entertainment infrastructure is there to the point that it'll take decades for any other locality to become the destination that Vegas is for entertainment. You won't see $100 million Cirque Du Soleil theatres/stages built anytime soon in these up-and-coming locations. It took Vegas 40 years to get to that level of maturity (I was in awe when I went to see O! at the Bellagio the first month it opened).

By the time that happens, the price/rent ratio is so well tilted in the investor's favor in Las Vegas, that it won't matter that your property is worth 10% of what you bought it for, since you will have derived so much cash-flow income by then.

Mark: I would tend to agree it will take so long for this to be a factor it wont matter....

I'm planning on spending a lot more time in 'the dessert' checking out real estate this winter.

One plan I have is to spend 500k to buy 10 rentals. If they each net 500 a month profit average thats 5000 a month and I could 'semi retire' if i wanted to assuming I could pull this off.

It sure would suck to buy into a 'future ghost town' but you can protect yourself like Roberto has done buy buying near mass transit/colleges. Also maybe buying near the local HUD /welfare office/city hall/prison/jail/food4less/walmart might be a good tip. Avoid buying near gold or silver mines! hehe.

PockyClipsNow says

One plan I have is to spend 500k to buy 10 rentals. If they each net 500 a month profit average thats 5000 a month and I could ’semi retire’ if i wanted to assuming I could pull this off.

The point is to continue your real profession, which is hopefully a career you already enjoy. The $5k per month profit is just icing on the cake. 1-2 years later you'll have enough profit to purchase another property cash.

That's the best way to protect yourself from the doom-and-gloom you hear about Social Security and Medicare being bankrupt soon.

PockyClipsNow says

Also maybe buying near the local HUD /welfare office/city hall/prison/jail/food4less/walmart

Churchill, 1909:

"And a friend of mine was telling me the other day that, in the parish of Southwark, about 350 pounds a year was given away in doles of bread by charitable people in connection with one of the churches. As a consequence of this charity, the competition for small houses and single-room tenements is so great that rents are considerably higher in the parish!

"All goes back to the land, and the land owner is able to absorb to himself a share of almost every public and every private benefit, however important or however pitiful those benefits may be.

"I hope you will understand that, when I speak of the land monopolist, I am dealing more with the process than with the individual land owner who, in most cases, is a worthy person utterly unconscious of the character of the methods by which he is enriched. I have no wish to hold any class up to public disapprobation. I do not think that the man who makes money by unearned increment in land is morally worse than anyone else who gathers his profit where he finds it in this hard world under the law and according to common usage. It is not the individual I attack; it is the system. It is not the man who is bad; it is the law which is bad. It is not the man who is blameworthy for doing what the law allows and what other men do; it is the State which would be blameworthy if it were not to endeavour to reform the law and correct the practice.

We do not want to punish the landlord.

We want to alter the law."

http://www.landvaluetax.org/current-affairs-comment/winston-churchill-said-it-all-better-then-we-can.html

Maybe some day we will realize taxing the shit out of leechfuck slumlords to break their business model is a win-win.

Not going to, as they say, hold my breath on this of course.

Troy says

Maybe some day we will realize taxing the shit out of leechfuck slumlords to break their business model is a win-win.

Landlords provide a valuable service to people who prefer to rent instead of own. Some rent because they find that it makes sense for their paticular situation financially over owning. Some rent because they live paycheck to paycheck and can never save for a downpayment (because they live beyond their means, or make too little income), even in places like Las Vegas or Phoenix where it's cheaper to buy than to rent.

Nobody forces these people to rent. Most landlords that aren't from old money simply lived way below their means and saved up for such an investment which will help their financial futures. Would you rather eliminate all landlords and only allow the horrific public housing projects to replace the valuable service they provide to society?

Now, of course it makes sense that you're more likely to make a better return on your investment if you rent close to a WIC center or Walmart instead of a Whole Foods Market.

Mark_LA says

Landlords provide a valuable service to people who prefer to rent instead of own

I really hate self-serving bullshit statements like that.

Nobody forces these people to rent.

Supply is artificially limited by all the LLs, making the price of entry of ownership higher.

LLs of SFHs as LLs are just leeches on the productive. I think LLs of MFH is perfectly respectable for economic and social reasons you state, but I'd like to see Prop 13 protections removed for LLs and their rents taxed relative to their profits.

Landlordism is an immense drain on this society and is in fact one of the dominant reasons the economy and society itself is fucked now.

Troy says

nd their rents taxed relative to their profits

Already done...the profits are reported on IRS 1040 Schedule E: http://www.irs.gov/pub/irs-pdf/f1040se.pdf .

But like you and Churchill would like to believe, they take the taxes that landlords pay and recycle them back to WIC centers and welfare checks that get cashed at Walmart, only to benefit the landlords who own properties next to those places.

If I choose to be a renter, then I can't rent a house with a yard and swings for my kids to play in? I must rent an apartment in order to keep the prices of SFHs artificially low for owner occupants by curtailing demand?

Earlier in my career I was a management consultant with one of the Big Four firms and spent most of my time traveling on business. So you're saying if I choose to go back to that career again, I shouldn't be able to rent a real home (which I get reimbursed for) when I'm assigned to a project out of town for 6 months, where my daughter can play in the back yard? My only option as a renter should be the Oakwood apartments?

Doesn't make a lot of sense to me.

Mark_LA says

the profits are reported on IRS 1040 Schedule E:

You kinda misunderstand. I was speaking of economic rent really, and more towards the confiscatory level of taxation.

Prop 13 and rent control has resulted in the basic freezing of mfh supply in LA and SF. If a LL improves his building or builds a new one he gets hit with higher taxes based on the value of the capital improvement.

This is retarded. We should encourage new building by taxing it less, not more. AND we should also tax the shit out old buildings that have run through their depreciation and should probably be replaced with better stock.

Renting out of condos and SFHs should be illegalized, as a business at least. No interest deduction. Just fuck off and find a better, more constructive use of your capital.

they take the taxes that landlords pay

LLs don't pay those taxes, those are pass-through taxes from rents. LL income is not based on costs, it's based on what the market will bear.

If I choose to be a renter, then I can’t rent a house with a yard and swings for my kids to play in?

If rents were taxed then buying wouldn't be the Major Production it is now. It's only due to the fact that the Rent is Too Damn High that houses cost so much. Eliminate rents and the price of housing will crash to the capital cost of the improvement + the premium it takes to win the bid against others who would want to live there.

My only option as a renter should be the Oakwood apartments?

Your transient story is just smoke to obscure the millions of Americans that are rent slaves in this country.

Transient homeowners in your example should not really displace people who need a place to live in their community.

AFTER those people get their homes, then the transient rental market could be accommodated.

Part of the problem this society has is the great dichotomy between SFH and MFH housing. I'd like to see us reduce this gap; I have ideas but it's pointless bringing them up here & now since all this housing crap is never going to improve in my lifetime, if ever.

Troy says

http://www.landvaluetax.org/current-affairs-comment/winston-churchill-said-it-all-better-then-we-can.html

Interesting link. Probably worthwhile for anyone in this debate, whether they agree with it - or you - or not, just to capture the different perspective.

Troy says

Mark_LA says
Landlords provide a valuable service to people who prefer to rent instead of own
I really hate self-serving bullshit statements like that.
Nobody forces these people to rent.
Supply is artificially limited by all the LLs, making the price of entry of ownership higher.
LLs of SFHs as LLs are just leeches on the productive. I think LLs of MFH is perfectly respectable for economic and social reasons you state, but I’d like to see Prop 13 protections removed for LLs and their rents taxed relative to their profits.
Landlordism is an immense drain on this society and is in fact one of the dominant reasons the economy and society itself is fucked now.

To understand your blathering anyone that makes money on any property other than an apartment complex is the devil and are evil leeches. Uncle Ho would be very proud of you, but fortunately, most of the people in VN have abandoned Uncle Ho's principles long ago! You are stuck in the past. You often quote Ho Chi Mihn, so how come you have never moved there permanently? Are the current communists in power not communist enough for you? I've spent a considerable amount of time in Vietnam over the past 2 decades, and most of the Vietnamese people don't even feel the same way you do. They love to make money and would love to be even more capitalistic. Most people are the same around the world, it's just their governments that are different. If you talk to the average Vietnamese citizen in either Ho Chi Minh City (Thành phố Hồ Chí Minh) or Hanoi they are capitalist at heart and wish they could be even more so. Your utopia in the US would be all renters living in apartments with no one renting homes from the evil American leeches. Oh yea, sort of like we have now and we call them slums, goverment housing, "The projects." U.S. "projects" are paradise compared to the equvilent in Ho Chi Minh City, Dalat, Hanoi or any other big city in VN. Get a clue because your behaviour and mindset is offencive even to the Vietnamese people.