Buy This Lincoln Park 2/2 for Under $260,000: 952 W. Altgeld
This top floor 2-bedroom at 952 W. Altgeld in Lincoln Park just came on the market.
It is bank owned and listed at just $258,500.
There are no pictures in the listing of the kitchen or baths so we don’t know if those are intact.
The unit has central air but there is no mention of washer/dryer in the unit or parking.
However, it is newer construction built in 2006 so I’m assuming there are washer/dryer hook-ups. There also was a garage behind the building but it’s unclear if this particular unit has a space.
There is a parking lot to the east of the building and then the El line tracks next to that.
I couldn’t find an original sales price but there was a mortgage in 2008 for $417,000 so I’m assuming it sold in the $400,000s. As a comparison, Unit #2 below it sold in September 2007 for $446,000.
Is this a deal?
Loretta Pruitt at Betts Realty has the listing. See the pictures here.
Unit #3: 2 bedrooms, 2 baths, 1200 square feet
- I couldn’t find a prior sales price in 2007/2008- but probably in the $400,000s
- Lis pendens foreclosure filed in October 2009
- Bank owned in January 2011
- Currently listed for $258,500
- Assessments of $120 a month
- Taxes of $8113
- Central Air
- No mention of washer/dryer but construction of this vintage would have had it in the unit
- No mention of parking
- Bedroom #1: 14×11
- Bedroom #2: 10×8
- Living room: 14×20
- Kitchen: 11×9
Makes total sense as an investment – buy w/ cash at 200k, put in 25k to fix it up and rent it out for 2000/month. Income: 24k Expenses: 10k – net= 14k upfront (6.2%) which is WAAAYYY more than any other reliable investment (no such thing) out there right now. In addition, the 1-4% appreciation on this place in the next ten years should push your return above 8% over all.
Again, people (like Sabrina) are mistaken when they think that the return on real estate is only the appreciation – you DO get quite a nice annual return on some of these places…..
I’m with Clio. This is a good deal (assuming no surprises).
Is that mold I see on the lower wall to the right of the glass doors? I wonder how much of it their is? Mold remediation can get extremely expensive.
This places is very close to the el tracks but not nearly close enough to an el stop.
If only the kitchen appliances need to be replaced, and the mold infestation isn’t too far gone, it’s a good deal.
clio, I can remember the days when the ONLY reason you bought a rental property was for the cash flow, and the price had to make sense as a rental. For a long time after WW2, house prices only kept up with inflation, which is as it should be.
When the price of a place is at rental parity, the price is right, allowing for any work that needs to be done.
“When the price of a place is at rental parity, the price is right, allowing for any work that needs to be done.”
No discount for decreased flexibility of moving without worrying about the hassle of selling the place?
It all depends on your definition of “rental parity”. If you just compare an interest only loan + taxes and HOA, you will find just about every property in Chicago is well below rental parity. However, when most people refer to rental parity, they refer to their PITI compared to renting. When you do that, you are including the principal payment. That is you paying yourself. That is not a true expense. So if your PITI is 2k per month (not using clio’s cash purchase), and the rent is 2k per month, you are getting a “discount” in there in that about 500 of that is going towards principal.
David on September 19th, 2011 at 5:36 am
“I’m with Clio. This is a good deal (assuming no surprises).”
How can you be “with clio” when his made-up price is 23% below ask?
Clearly this IS NOT a good deal at $258k.
Laura Louzader on September 19th, 2011 at 5:36 am
“If only the kitchen appliances need to be replaced, and the mold infestation isn’t too far gone, it’s a good deal.”
This is a generic 2/2 dump near the tracks and on a parking lot. Listed above $200/sf. Not even close to a deal.
Two and a half blocks away from Fullerton isn’t close enough for you?
“This places is very close to the el tracks but not nearly close enough to an el stop.”
I guess when the bubbleheads are stuck long they start preaching cash flow.
“I guess when the bubbleheads are stuck long they start preaching cash flow.”
Being “stuck” is a psychological state and it happens more in real estate than it does in other investments. It is pretty easy to get out of any real estate – you just have to accept your losses. Speaking as someone who is about to lose tens of thousands on a single purchase, I can say that at first, I was devastated and irritated and upset, but with time, the catharsis of getting rid of a problem property is SO great that it makes up for the loss of money (but who knows, maybe when the market turns around in a couple of years, I will be kicking myself for not staying put and holding strong). Again, the point is that psychology plays a HUGE HUGE role (and much bigger than anyone thinks) in real estate.
“I guess when the bubbleheads are stuck long they start preaching cash flow.”
If they were preaching cash flow from the beginning, they wouldn’t be in the trouble they are now.
Hence, I mock them.
G – the one happy thought I have is that no matter how much money I lose in real estate, stock market, etc., I am so grateful and thankful that I will NEVER be as a big a loser as you.
Clio- if I may ask- why ARE you selling the 2/2 in Lakeview then? It’s not cash flowing? If not- why not? I thought rents for 2/2s are at least $2200 (maybe more) in many parts of Lakeview and demand is high. Rents are rising.
Why take the $40k to $50k loss on it when you can just rent it out (even at a $200 a month loss) for the next couple of years and see what happens?
This unit was conveyed by QC from the developer corp *3* times.
The other tweo units were QC’d from the developer corp to the same individual as the first deed for #3, and then “sold” again by the developer corp to another individual. The #1 unit “sold” for $780k with a $741k mortgage (from Chase, in their late ’07 push into jumbo mtgs), and was f/c in Dec-08.
I feel bad for the #2 buyer, as they seem like real people actually living there. $446k in Aug-07, and they managed to refi their first in Jul-09.
haha Sabrina – I get it…..
I am in a different financial situation than most. I definitely COULD rent it out for my cost, but I just don’t feel like dealing with tenants (esp because that particular unit is VERY nice – definitely above rental grade). If I thought I would need the money in the future, I would definitely rent it out – that is the smartest financial decision – however, for me, the headache of renting it out far outweighs the 50-80k that I MAY recoup in 5 years.
But why is it a headache to rent it out? It can’t be that hard to find a decent renter in Lakeview- especially at a certain price point. How much work is it? You say you have all these rental properties. Aren’t ALL of them a pain to rent out? So why take the loss on this one because you “don’t feel like dealing with tenants”?
I’m not arguing, by the way, that it’s easy to be a landlord. Far from it. But you’ve been a landlord for a long time and have gone into it with knowledge and experience. So what’s the change now?
Clio.. you OK?
“I’m not arguing, by the way, that it’s easy to be a landlord. Far from it. But you’ve been a landlord for a long time and have gone into it with knowledge and experience. So what’s the change now?”
All of my other properties are rented out to long term renters (3-5 year leases). If any of these properties became vacant I would also consider selling them at a discount. I have realized that my personal time, freedom and mental health are SO much more important than the few hundred thousand I would lose. I don’t NEED that money anyway – most people don’t realize that they are in a similar situation. Sure, it hurts to lose money (on many levels), but most people (not all) could definitely sell at a loss (again, I’m not talking about people underwater).
This entire building should have been rentals. Something about it is oddly depressing.
Not to speak for clio, but one reason could be to better deploy that money into a higher priced unit if you think we have bottomed. One could argue that if a 390k property went down 40k, then a 600k property may have gone down 60k.
“All of my other properties are rented out to long term renters (3-5 year leases)”
Really? How common are 3-5 year leases? I would think that defeats a large part of the purpose of renting.
“Really? How common are 3-5 year leases? I would think that defeats a large part of the purpose of renting.”
INCREDIBLY COMMON – especially for houses in the suburbs (most of my properties).
“Not to speak for clio, but one reason could be to better deploy that money into a higher priced unit if you think we have bottomed. One could argue that if a 390k property went down 40k, then a 600k property may have gone down 60k.”
Exactly – but I am having a very hard time finding any “deals” out there. Honestly there is nothing but crap out there.
My neighbor rented a duplex up for 5 years @ $5000/month.
About the post, this is a good deal from the looks of it and not knowing if the association has any issues.
“Really? How common are 3-5 year leases? I would think that defeats a large part of the purpose of renting.”
INCREDIBLY COMMON – especially for houses in the suburbs (most of my properties).”
I wouldn’t say ‘incredibly” common in the city of Chicago (north side), but common. I see them on higher end properties with older renters. Not your 20-30yr old set.
This looks like a great deal to me. Wow.
This may as well be campus housing.
Who would want to rent THIS place for 3-5 years though? This seems like the type of place someone would live for a couple of years at the most until the person saved enough to buy something that wasn’t right next to El tracks.
“Who would want to rent THIS place for 3-5 years though?”
Right, I agree, I don’t think anyone would since this isn’t a high end rental.
Expensive for campus housing but not out of the question, but most likely for the “I’ve been working a couple years” set and I’m willing to pay $1000/month in rent with a roomate and I’m ready to get out of that $600/month place. Plus, this place is close to all the Lincoln ave bars.
moldy, no way is this a deal!
“moldy, no way is this a deal!”
less than 10k and you would never even know there was mold. You would be surprised at what crap is lurking in the places where we live.
“You would be surprised at what crap is lurking in the places where we live.”
Spoken like a true infestor.
“G – the one happy thought I have is that no matter how much money I lose in real estate, stock market, etc., I am so grateful and thankful that I will NEVER be as a big a loser as you.”
Had you been on to that cash flow idea in the early 90’s you would have known that the time to sell was 2004-07. Like me. And, you know you really want to be like me.
This looks like a deal to me. $2500 to clean this place up, and I could have it rented for $1800 a month. However, the timing of this listing couldnt possibly be worse. If this was available in May, I honestly would have purchased it for the asking price and had it rented for August/September move-in. Now, a December 1 move-in date would be more likely which will hurt rental prospects, or at least leave an investor with 1-2 months of carry without renting it out.
“This looks like a deal to me. $2500 to clean this place up, and I could have it rented for $1800 a month.”
At $250k all in, that’s 4.8% return. Sure, you *might* get the taxes cut to ~$5k, which takes it to 6%, but that ignores cost of appeal, and assuming tax cuts is a bad idea.
“Deal”, to me, should be north of 7%, with no contingent expense breaks. If this is an $1800/mo rental (no opinion), then it’s not a “deal” at ask, with those taxes.
This prop took 2 years from lis pendens to REO for sale. The surge in LP/LV lis pendens filings began 2 years ago. Consider that with clio’s capitulation and what could this all mean?
“Deal” @ 4.8% return = bubble ain’t over yet
I agree with you on taxes, and am using $4500 in my analysis. The cost of the appeal would not exceed $1000 (50% of the reduction up to $1000 is my general rule… and this is a slam dunk for a tax attorney.)
G, this returns over 7% with 30% down at ask (again using $4500 in taxes) and that’s right out of the gates. If rental rates continue to increase 5-10% over the next couple of years before flat-lining again, it will yield double digit returns. I dont know what your investments you look like, but I consider that pretty good for a rental investment in this location.
landlording isn’t an investment; it’s employment that requires a capital investment.
Of course you have to figure in increased taxes, assessments, maintenance and possible month or two of no rent.
Buying onesies and twosies condo units with assessments for investments has never been a ‘wise’ move in my opinion.
Buy who whole damn building instead, like a two flat, three flat, six flat or multi unit building.
I can settle one minor car accident case for more money and less work than an investor will make in ‘profit’ off this onesie unit in an entire year.
“#JP$ on September 19th, 2011 at 9:57 am
G, this returns over 7% with 30% down at ask (again using $4500 in taxes) and that’s right out of the gates. If rental rates continue to increase 5-10% over the next couple of years before flat-lining again, it will yield double digit returns. I dont know what your investments you look like, but I consider that pretty good for a rental investment in this location.”
JP$, rental construction is booming again. Rates may still increase, but it is dangerous to factor them into any calculations.
“Buying onesies and twosies condo units with assessments for investments has never been a ‘wise’ move in my opinion.”
I agree, but if you don’t have the funds/capital, you need to start somewhere…..plus if managed correctly, the 2-3 flat assessments really are not an issue since expenses are so low to begin with.
Same deal with buying/running a food franchise. You need multiple stores to make it work.
““Deal”, to me, should be north of 7%, with no contingent expense breaks. If this is an $1800/mo rental (no opinion), then it’s not a “deal” at ask, with those taxes.”
Deal for me is 10% or more given how much damn work you have to do as a landlord, especially if you get a bad tenant *1.
*1 – of course someone will chime in ‘im a landlord and it’s little work! to which i retort – tell that to my landlord.
“landlording isn’t an investment; it’s employment that requires a capital investment.”
*landlording* isn’t an investment, but *buying rental property with leverage* IS. 15 year time horizon, sure, but an investment it certainly is.
Buying onesies in assessment buildings is not ‘a place to start’. A two flat is a place to start. A three flat is a place to start. Even a SFH if it’s cheap enough is a place to start (high demand for SFH rentals in decent school dist.s in the suburbs). A 2/2 in a building with assessments is a condo.
“#Looking to buy on September 19th, 2011 at 10:16 am
“Buying onesies and twosies condo units with assessments for investments has never been a ‘wise’ move in my opinion.”
I agree, but if you don’t have the funds/capital, you need to start somewhere…..plus if managed correctly, the 2-3 flat assessments really are not an issue since expenses are so low to begin with.
Same deal with buying/running a food franchise. You need multiple stores to make it work.”
“*landlording* isn’t an investment, but *buying rental property with leverage* IS. 15 year time horizon, sure, but an investment it certainly is.”
Unless you plan on hiring a property management company to manage your investments, then you will be landlording, and using leverage to make your capital investment.
I’ve got nothign against landlording, nothing at all, it’s a great way to make money, but it’s not for the lighthearted, and you’re competing against neophytes and newbies who think they can 1) return 4.8% on their money if they can get taxes lowered, 2) have 100% vacancy; 3) have no major maintenance issues or special assesssments.
““Deal”, to me, should be north of 7%, with no contingent expense breaks. ”
then you must be sitting on a hell of a lot of cash because there are no deals out there in any segment (real estate, banking, stocks, etc.).
“Unless you plan on hiring a property management company to manage your investments, then you will be landlording”
Same thing investing in anything else–either you take an active role in managing your investments, or you pay someone else to do it.
Unless you go basic and put kruggerrands in coffee cans and bury them under mulberry trees.
“Same thing investing in anything else–either you take an active role in managing your investments, or you pay someone else to do it.”
But Sabrina just “taught” me last night that real estate isn’t an investment, and it can’t be compared to other investments.
“Speaking as someone who is about to lose tens of thousands on a single purchase, I can say that at first, I was devastated and irritated and upset, but with time, the catharsis of getting rid of a problem property is SO great that it makes up for the loss of money (but who knows, maybe when the market turns around in a couple of years, I will be kicking myself for not staying put and holding strong). Again, the point is that psychology plays a HUGE HUGE role (and much bigger than anyone thinks) in real estate.”
CLIO: elisabeth kübler-ross – five stages of grief:
(denial, anger, bargaining, depression, acceptance)
no shit, you actually have to work for your money these days.
“Clio on September 19th, 2011 at 10:31 am
““Deal”, to me, should be north of 7%, with no contingent expense breaks. ”
then you must be sitting on a hell of a lot of cash because there are no deals out there in any segment (real estate, banking, stocks, etc.).”
““Same thing investing in anything else–either you take an active role in managing your investments, or you pay someone else to do it.””
My 401(k) investments are far far far more passive than the work landlords should be doing to keep their buildings in shape.
Landlording in a good 2/2 condo in a good location isn’t that hard at all. The problems I have faced are:
1. unit vacancy (which really shouldn’t be a problem looking forward)
2. unit damage (always minor)
3. unreasonable tenant demands
These are minor inconveniences. However, if you want to talk about being a landlord for a house, that is a WHOLE different story. There are a ridiculous number of things that can go wrong that can end up costing you tens of thousands of dollars (the only good thing about houses is that most people will be long term tenants – ie over 2 years).
“At $250k all in, that’s 4.8% return. Sure, you *might* get the taxes cut to ~$5k, which takes it to 6%”
What is the math behind this?
Selling price = 250k
Down payment = 50k
Interest only = $666 per month
Taxes = $400 per month (assuming reduction)
HOA = $120 per month
Insurance = $50 per month
—————————
$1236 total per month
Rent out for $1800 = +$564 per month
$6768 profit per year on 50k investment = 13.5% return
Wow, with theoretical returns like that on paper, I’m sure an investor will ‘snap!’ this up!
“#chukdotcom on September 19th, 2011 at 11:14 am
Selling price = 250k
Down payment = 50k
Interest only = $666 per month
Taxes = $400 per month (assuming reduction)
HOA = $120 per month
Insurance = $50 per month
—————————
$1236 total per month
Rent out for $1800 = +$564 per month
$6768 profit per year on 50k investment = 13.5% return”
“
“Wow, with theoretical returns like that on paper, I’m sure an investor will ’snap!’ this up!”
Please show your math.
I’d say that the purchase of any asset that you intend to resell is an investment. Day traders spend all day managing their portfolios, but just because they’ve made a job out of investing doesn’t mean that they’re not investing.
Chuck, I assumed buying this place with 30% down, plus an extra $2500 per year for vacancy and/or maintenance.
To all of the guys who think its a bad investment, thats fine. I think its a pretty good one at this price. I run scenarios on smaller properties just to see if they would work out… 99% dont make much sense… especially for the reasons you have mentioned (alot of work, not a huge return). But, I still think this is a good investment for someone who has the time to put some work into it.
IF, I thought this was an unicorn (with the 15%+ returns that some of you think are out there), I probably wouldnt say so on a website to a bunch of would-be investors… I’d just go buy it.
15%?? those types of returns are not out there.
no one has said they are out there either.
“#JP$ on September 19th, 2011 at 1:06 pm
IF, I thought this was an unicorn (with the 15%+ returns that some of you think are out there), I probably wouldnt say so on a website to a bunch of would-be investors… I’d just go buy it.”
“Chuck, I assumed buying this place with 30% down, plus an extra $2500 per year for vacancy and/or maintenance.”
OK:
Selling price = 250k
Down payment = 75k
Interest only = $583 per month
Taxes = $400 per month (assuming reduction)
HOA = $120 per month
Insurance = $50 per month
Vacancy/Main = $200 per month
—————————
$1353 total per month
Rent out for $1800 = +$447 per month
$5364 profit per year on 75k investment = 7.1% return
Keep in mind this assumes ZERO price appreciation. Sabrina says we can expect 1-3% annual increase. Since this investment is levered more than 3-1 right now, that is an additional 3-9% per year in price appreciation as well.
Given the above equation, why do the renters keep insisting that they are saving so much per month to invest every month over owning?
You also get to deduct depreciation from your income if you have day to day job. You can depreciate over 27.5 years. Also, the benefit of a 1031 exchange in the future is advantageous so you can buy that 5+ unit building and build real wealth.
“Given the above equation, why do the renters keep insisting that they are saving so much per month to invest every month over owning?”
Yep, especially when people are paying $2K+ a month for an apartment.
“My 401(k) investments are far far far more passive than the work landlords should be doing to keep their buildings in shape.”
What do you have your 401k invested in that you don’t pay any fees? Post the fund names, please!
“What is the math behind this?”
Cash. bc I am that lazy.
“You also get to deduct depreciation from your income if you have day to day job.”
Not quite that simple, bc of recapture, but true, too.
Amazing how sentiment has gone from stupid renters, to stupid owners, and back to stupid renters, all within a time span of a few years.
“#Vlajos on September 19th, 2011 at 2:42 pm
“Given the above equation, why do the renters keep insisting that they are saving so much per month to invest every month over owning?”
Yep, especially when people are paying $2K+ a month for an apartment.”
What about the risk of changes to the condo dec? If amendments are by majority, the other two owners can get together and decide to ban rentals. Not sure how much an owner/investor could do about it but that sure would change the roi.
“Amazing how sentiment has gone from stupid renters, to stupid owners, and back to stupid renters, all within a time span of a few years.”
Funny what +100% and -50% will do to a market.
Homedelete
Unicorns dont exist… neither do deals with 15% returns. I was stating the same thing as you. I still think its a good deal.
Good deal, i don’t know so. it may be one of the better deals around right now, but that’s not saying a whole lot. Like I said, I can settle the smallest case on my shelf with about 6-8 hours work and make $6,000 just like in the example above, and I don’t need to change lightbulbs or unclog toilets. sure tehre is overhead on that $6,000 settlement fee, but when you break it down, the shared cost is minimal. I can’t justify taking on such a huge liability, a 2/2 in a condo building, for $6,000 ‘profit’ per year. Give me a 2 flat where I can make $500 per month profit, after paying PITI (not just ITI) on a 15 year mortgage and I’d consider that a good investment..it’s that the way things use to be BEFORE the bubble? At least that’s my understanding, but then again, during my post-undergrad yeras, all I’ve know is the bubble….
“#JP$ on September 19th, 2011 at 3:13 pm
Homedelete
Unicorns dont exist… neither do deals with 15% returns. I was stating the same thing as you. I still think its a good deal.”
“
“I can settle the smallest case on my shelf with about 6-8 hours work and make $6,000…”
Sounds like it’s time to hang a shingle.
“Give me a 2 flat where I can make $500 per month profit, after paying PITI (not just ITI) on a 15 year mortgage and I’d consider that a good investment..it’s that the way things use to be BEFORE the bubble?”
Not quite. Just being cash flow positive was always a victory. You are asking for quite a bit on top of that. Not only are you looking for $500 a month profit, you also want to have 300-500 per month in equity built up.
Look at it this way. At exactly cash flow neutral (assuming all factors), you are turning your 20% down payment (50k) into 250k in 15 years, assuming a completely flat real estate market. That’s not a bad return, and it doesn’t even require what you are looking for above.
i see it your way. But the problem is that the kitchens become dated, assessments go up (even though rents may not), special assessments cover the tuckpointing, or landscaping, etc. the building is constantly deteriorating, look at all the old crapshacks out there with 30 years of deferred maintenance, and in most neighborhoods other than the ‘GZ’ they’re selling for not nearly as much as you would think becaue they need all a lot of work.
What I tell people is that ‘you can’t make money in real estate if you’re losing money every month’. When you tell me “Just being cash flow positive was always a victory” you make me seriously question your financial acumen. This might be the new paradigm when that’s teh competition, but like G said in an earlier post, cash flow positive 2-flats used to be for sale in west town as far as the eye could see, and I know plenty of chicago neighborhoods were the same way. But you know, when the competition doesn’t think that positive cash flow is a necessary component of investing in real estate; maybe it is a changed market out there. some things just don’t make sense any more.
“Look at it this way. At exactly cash flow neutral (assuming all factors), you are turning your 20% down payment (50k) into 250k in 15 years, assuming a completely flat real estate market. That’s not a bad return, and it doesn’t even require what you are looking for above.”
“When you tell me “Just being cash flow positive was always a victory” you make me seriously question your financial acumen”
That’s because you don’t know what you’re talking about.
“Just being cash flow positive was always a victory”
cash flow including *all* expenses. $6k a year on a two-flat, with *only* piti covered, ain’t a ton of margin for error.
Also, with what rent was in those 2-flats in west town, $500/month was a lot to clear, especially with a 8%+ mortgage rate.
HD:
Still waiting for the list of mutual funds with NO management fees.
“Like I said, I can settle the smallest case on my shelf with about 6-8 hours work and make $6,000 just like in the example above, and I don’t need to change lightbulbs or unclog toilets”
You are so FOS, your eyes are brown!!! You probably spend 6 hours a day on cribchatter complaining about how you can’t afford anything. If you spend that 6 hours making 6k, you would make 120k a month (or 1.44 million a year). Yeah, think through your bullshit before you post.
Rule #1 in real estate rentals is that it must be cash flow positive. It’s not the ONLY rule, but its the first one. If you can’t get it to cash flow, move on. If you can, then it’s on to the next steps.
“cash flow including *all* expenses. $6k a year on a two-flat, with *only* piti covered, ain’t a ton of margin for error.”
Perhaps I chose the wrong word. I don’t mean “victory” like “you are guaranteed to make money on this”. I mean “victory”, in that it is the first battle you need to win in looking at a property to purchase for renting.
Clio- adventist bollingbrook will set a patient back 10 g’s for an er visit after a car accident. Settle after a few phone calls for 18k and earn a 6000 fee. True story. Not every case settles like that.
Chuk: your new definition of victory completely change my analysis of your financial acumen.
Anon-what? Managment fees are like payibg a management company. Cuts into profit.
“Perhaps I chose the wrong word.”
Sorry, I was actually trying to direct at HD, but cut it down just to quoting you for some reason.
He wants a low-maintenance (read cheap) easily rentable (cheap) two-flat (cheap-ish) that he can pay 15-year mtg piti and cashflow $6k a year on–prolly about $2500/month in gross rent, deduct the income, ballpark the tax, calculate the P+I for 15 years, he wants a two-flat for about the price of this 2/2. With an ROE (for you chuk) of 12%, with a huge principal payoff baked in, making it a *ton* better than that (and a ROA prolly north of 10%).
That’s what HD wants. And, yeah, so do I and so do you, chuk.
“Anon-what? Managment fees are like payibg a management company. Cuts into profit.”
Yeah, I know.
You challenged the premise that you either actively manage your investments or pay someone else to do it for you. And compared your 401k to the work “landlords should be doing”–when the correct comparison is your 401k to *a management compnay*.
Some 401k fees are very, very low. ETFs have no fees and funds like the vanguard S&P500 have like 12bps per year. Big deal. Far better of a deal than landlording.
Also the landlording assumptions on here are ridiculous, as are the belief that you can’t get 8% fairly safe returns in the equity markets. You can: look at oil land trusts (REITs) like NRT, SBR.
Yeah Chuck’s scenario earns a return. But unless you’re an active landlord adding it to your portfolio one would need to be a fool being a corporate desk jockey thinking they’re going to dive into landlording and make it work. It’s not nearly as easy as the pure numbers suggest.
Unlike the securities markets where basically there requires no hands on involvement in the least. And comparable and better returns.
“Unlike the securities markets where basically there requires no hands on involvement in the least. And comparable and better returns.”
I can’t disagree with this. But as with any investment, timing is everything. A poorly timed stock market buy will badly underperform a well timed RE buy. And vice-versa. Equally well timed? Stock market has the advantage.
Real estate investing can and IS very lucrative, but you have to have patience. I don’t have any patience and I constantly am looking for new opportunities. The whole world has become this way – real estate requires a LOT of patience. Also, you have to have discipline – b/c you cannot liquidate easily. One of my very very good friends owns 18 houses (worth an estimated 5 million in today’s market) – but this guy is so cheap because ALL of his money is tied up in these houses. Sure he has a rental income of 360k but after taxes and expenses, his take home is about 250k. Sure that is 5%, but that doesn’t go very far with a family of 6. Plus, think about it, this guy wants to be living it up (after all, his net worth is 5 million dollars!) = but instead he is living like a young bschool grad, living in a 750k house and living paycheck to paycheck.
On a side note, “operation twist” looks like its going to bring some new record lows in mortgage rates. 3% on a 30 year, here we come!
“Clio- adventist bollingbrook will set a patient back 10 g’s for an er visit after a car accident. Settle after a few phone calls for 18k and earn a 6000 fee.”
hmmmmm…..maybe we can go into business together….this could be very profitable…
Do you really need to be bringing home 360K pretax to support a family of six comfortably, especially when you already own your 750K house? Seems like he should be living pretty comfortably. Also note that he is not working (except to manage the 18 properties).
I also don’t think young bschool grads live in 750K houses.
“Do you really need to be bringing home 360K pretax to support a family of six comfortably, especially when you already own your 750K house? ”
His income is closer to 200k (pre income tax) – I was talking about expenses with the properties, and real estate tax. 200k is a lot (even for a family of 6) – but my point was that his net worth is 5 million + and he has to watch every penny because it is all tied up in real estate. Someone with 5 million in the bank could breathe a little easier.
Think about it – the guy probably has less than 100k liquid in the banks but has 5 million in real estate – do you realize how much could go wrong with 18 houses? The roof alone on one would be 10-30k, etc.