Investment in Real Estate

[Debater Slayer]

Due to recent inflation where I live, property prices in a lot of areas have gone down because there's little demand. With some planning, I may be able to buy a small apartment as an investment. The population here is also growing rapidly, which has steadily increased property prices for the last few decades.

I wouldn't live in the apartment I'd buy, so it would only be for rental or flipping for profit. If anyone here has experience investing in real estate, what are some tips you would give a beginner in that area? I'm still doing a lot of research, asking brokers, etc., but I figured it couldn't hurt to also read the input of anyone here who has experience in real-estate investment.

 

[ChristineM]

I think @Revoltingest could be the guy you want

 

[Revoltingest]

I think @Revoltingest could be the guy you want

I'm wanted, eh.
Who's gone bonkers?

 

[Revoltingest]

Due to recent inflation where I live, property prices in a lot of areas have gone down because there's little demand. With some planning, I may be able to buy a small apartment as an investment. The population here is also growing rapidly, which has steadily increased property prices for the last few decades.

I wouldn't live in the apartment I'd buy, so it would only be for rental or flipping for profit. If anyone here has experience investing in real estate, what are some tips you would give a beginner in that area? I'm still doing a lot of research, asking brokers, etc., but I figured it couldn't hurt to also read the input of anyone here who has experience in real-estate investment.

I know people who've developed real estate.
I've done some myself.
It's not as simple or as easy as one might think
from watching those scripted reality TV shows.
Before you do it...talk to people who have.
Learn from their mistakes before making your own.

More advice....
- Treat real estate as a long term investment.
This is safer than speculative investment & "flipping".
- Calculate the investment's performance before
buying with a pro forma.
- Challenge your assumptions.
- Consider all that might go wrong. Things will.
- If you self manage a property, research what
the law requires of you. Fines can be spendy
if you don't have all the required notices.
- Know that running real estate isn't just about
investing....it's a service industry. You'll have
customers with often unreasonable wants.
Are you ready for that?

 

[Debater Slayer]

I know people who've developed real estate.
I've done some myself.
It's not as simple or as easy as one might think
from watching those scripted reality TV shows.
Before you do it...talk to people who have.
Learn from their mistakes before making your own.

I'm working on that nowadays. I know a seasoned real-estate agent, and he has been through hell and back with all kinds of issues from scammers to legal rigmaroles. There are others I know who have worked in real estate, too.

More advice....
- Treat real estate as a long term investment.
This is safer than speculative investment & "flipping".

Yeah, that's how I'm approaching it—it will be years before I decide to flip anything I buy, in any case. I don't want to sell too early and regret doing so.

- Calculate the investment's performance before
buying with a pro forma.

Noted.

- Challenge your assumptions.

I believe this is good life advice in general, not just for investment.

- Consider all that might go wrong. Things will.

Ditto.

Also, for my first-ever investment, I want to buy something that is certain to generate profit. When the margin of error allows me more leeway for mistakes, I might start considering riskier (and also more potentially rewarding) purchases.

- If you self manage a property, research what
the law requires of you. Fines can be spendy
if you don't have all the required notices.

Yep. Lots of potential loopholes where I live, too.

- Know that running real estate isn't just about
investing....it's a service industry. You'll have
customers with often unreasonable wants.
Are you ready for that?

If the profit is worth it for me, I can put up with some headaches.

My long-term plan is to move from being middle-class to being a millionaire. It might sound too ambitious or even delusional, but I fully believe I have a decent shot in the long term.

 

[Shadow Wolf]

Due to recent inflation where I live, property prices in a lot of areas have gone down because there's little demand. With some planning, I may be able to buy a small apartment as an investment. The population here is also growing rapidly, which has steadily increased property prices for the last few decades.

I wouldn't live in the apartment I'd buy, so it would only be for rental or flipping for profit. If anyone here has experience investing in real estate, what are some tips you would give a beginner in that area? I'm still doing a lot of research, asking brokers, etc., but I figured it couldn't hurt to also read the input of anyone here who has experience in real-estate investment.

When my parents did it they had to deal with some nasty tenants and not paying and all the repairs and damages. And even if the tenant(s) didn't break it you still gotta fix it (a tremendously great perk if renting, in my opinion).
In the end it just wasn't a good thing for my parents because my mom especially trusts other people less than I do.

 

[Revoltingest]

I'm working on that nowadays. I know a seasoned real-estate agent, and he has been through hell and back with all kinds of issues from scammers to legal rigmaroles. There are others I know who have worked in real estate, too.

Be cautious about taking advice from a real
estate agent who is actively selling to you.

Yeah, that's how I'm approaching it—it will be years before I decide to flip anything I buy, in any case. I don't want to sell too early and regret doing so.

"Flipping" has inefficiencies. Depending on
where you live, there are costs, eg, commissions,
transfer taxes, carrying costs during idle time,
capital gains taxes, & who knows what else.
But if you have a rental property that you keep,
you enjoy appreciation without triggering capital
gains taxes, you avoid sales costs, & you avoid
having to research where to invest the proceeds.

Also, for my first-ever investment, I want to buy something that is certain to generate profit. When the margin of error allows me more leeway for mistakes, I might start considering riskier (and also more potentially rewarding) purchases.

Give up on the expectation of certainty.
You're managing the balance between
risk & reward.
One risk you dint think of....
You have a tenant who endures some life problem,
& can't pay the full rent. Are you hard hearted enuf
to evict'm quickly? Or will you work with them, &
risk lower returns, & perhaps even a loss?

Yep. Lots of potential loopholes where I live, too.

What is a "loophole"?
Also, that question doesn't address the many
legal requirements you must meet, eg, lead
exposure notification, rental rights notification,
security deposit notification, tenant's rights
notification, Fair Housing Law notification, etc.

If the profit is worth it for me, I can put up with some headaches.

My long-term plan is to move from being middle-class to being a millionaire. It might sound too ambitious or even delusional, but I fully believe I have a decent shot in the long term.

Good luck.
I truly hope that you succeed, & become one of us.

 

[Kenny]

Due to recent inflation where I live, property prices in a lot of areas have gone down because there's little demand. With some planning, I may be able to buy a small apartment as an investment. The population here is also growing rapidly, which has steadily increased property prices for the last few decades.

I wouldn't live in the apartment I'd buy, so it would only be for rental or flipping for profit. If anyone here has experience investing in real estate, what are some tips you would give a beginner in that area? I'm still doing a lot of research, asking brokers, etc., but I figured it couldn't hurt to also read the input of anyone here who has experience in real-estate investment.

Usually a good investment. Main problem comes when there is a downturn that puts you upside down.

Long-term still good though. IMV.

I'm flipping mobile homes in our area. (low investment). Also have a home that I sold but held the mortgage. A retirement income so to speak.

If your population is growing rapidly in your area it will weather a downturn. IMV

 

[Curious George]

Due to recent inflation where I live, property prices in a lot of areas have gone down because there's little demand. With some planning, I may be able to buy a small apartment as an investment. The population here is also growing rapidly, which has steadily increased property prices for the last few decades.

I wouldn't live in the apartment I'd buy, so it would only be for rental or flipping for profit. If anyone here has experience investing in real estate, what are some tips you would give a beginner in that area? I'm still doing a lot of research, asking brokers, etc., but I figured it couldn't hurt to also read the input of anyone here who has experience in real-estate investment.

If it is a long term investment, it will likely be profitable.

careful though. Remember that you are part of the increased demand that is raising the prices and making ownership unaffordable for some. Chances are someone else will do it if you don’t, so don’t lose too much sleep over it. But perhaps approach land-lording with a little humility because of it.

the majority of the profit comes and should come from the property itself. Don’t expect to turn a large profit from renting.

ensure that you have available funds to address any livability issues that might arise, whether from normal use, from tenants choices, or from “acts of god.” You have a duty to provide a livable space. If you don’t have a nest egg to fix or provide a new fridge, water heater, roof etc, then you shouldn’t be a landlord. If you don’t have the time and mental space to address the myriad problems that may arise, then you shouldn’t manage the property by yourself.

you should research landlord tenant laws in your area. Many areas have landlord associations that can be very helpful. Be careful listening to other landlords, they love to complain and frame landlords and tenants as an “us and them.” While “war stories” can be helpful in avoiding potential pitfalls, listening to too many is not healthy.

Respect your tenants rights. Property ownership is a bundle of rights. When you rent to another person they are paying for some of those rights, which means you do not at that time possess those rights. Often times people who own property feel a sense of entitlement greater than they actually possess because they are the “owner.” Avoid this type of thinking.

you can make good money flipping or popping in and out of the market at the right times. But to do either of these well requires specific skills. Make sure you are qualified if that is your intent.

 

[Revoltingest]

....the majority of the profit comes and should come from the property itself. Don’t expect to turn a large profit from renting.

Bad advice.
Don't depend on appreciation providing the return on investment.
Plan initially on profit from renting. This is safer.

 

[Curious George]

Bad advice.
Don't depend on appreciation providing the return on investment.
Plan initially on profit from renting. This is safer.

How much does real estate in your area appreciate on average?

how long does it take to get a return on your investment?

That one would hope to make substantially more on the price of rent than a mortgage + management costs would cost on a similar property is the mark of a bad landlord. If the shoe fits though.

 

[It Aint Necessarily So]

Due to recent inflation where I live, property prices in a lot of areas have gone down because there's little demand. With some planning, I may be able to buy a small apartment as an investment. The population here is also growing rapidly, which has steadily increased property prices for the last few decades. I wouldn't live in the apartment I'd buy, so it would only be for rental or flipping for profit. If anyone here has experience investing in real estate, what are some tips you would give a beginner in that area? I'm still doing a lot of research, asking brokers, etc., but I figured it couldn't hurt to also read the input of anyone here who has experience in real-estate investment.

I'm not sure that past experience is as useful anymore as it has been. With the world's climate and the economy going off into uncharted waters, who can say what a given piece of property will be worth in ten years? Will you be able to rent it for what you need to make the mortgage if the standard of living around you falls? Do you have any climatological concerns where you are, which I believe you said was Saudi Arabia. Is it getting hotter? Is water an issue? These ought to be huge issues for Americans thinking of investing in the States, but they are contending with wildfires, drought, an increasing need for heating and cooling in the face of rising power costs, hurricanes, tornadoes, floods, and blizzards. That might not be relevant where you live, but if it is, those are things that can devalue your property and even make it uninsurable - things no realtor will broach with you.

Goodluck to you.

 

[lewisnotmiller]

Hey @Debater Slayer...
I was a landlord of a 2 bedroom unit for quite a few years (since sold).

A few thoughts;

1) Advice given here needs to be considered in a local context, as the rules, costs, advantages, etc are heavily impacted by local laws.
2) Be clear about why you're getting into this. Is it for long term capital gain, and if so what is the smartest plan around this. Using a simplified local Australian example, that might mean;
- buying in areas of long term capital growth over short term rental need, and being able to service a lower occupancy rate.
- moving into your own rental property for a year or two before trying to realise the capital growth via a sale (that would circumvent capital growth tax here)
3) check out any long term infrastructure planning in the area youre purchasing, particularly transport, which is generally at least under consideration many years in advance.
4)if you get a good renter, look after them and treat it to some degree as a partnership. So much less stress or repair considerations if you get someone in who treats it like their own place.

Lots more I guess, but I'm keeping it very helicopter view, since it will vary from place to place.

 

[Shaul]

Have you looked into Real Estate Investment Trusts(REIT)?
Real Estate Investment Trust (REIT): How They Work and How to Invest

 

[Revoltingest]

How much does real estate in your area appreciate on average?

Meh...I don't know.
Haven't kept track of that in years.

how long does it take to get a return on your investment?

It varies greatly.

That one would hope to make substantially more on the price of rent than a mortgage + management costs would cost on a similar property is the mark of a bad landlord.

That's exactly the kind of comment I'd expect from you.

 

[Curious George]

Meh...I don't know.
Haven't kept track of that in years.

It varies greatly.

That's exactly the kind of comment I'd expect from you.

Given your answers here I don’t think you really have any rationale to claim that the majority of the return should come from rent.

And try not to take the bad landlord bit too personal, I am sure you were a very good engineer.

 

[Revoltingest]

Given your answers here I don’t think you really have any rationale to claim that the majority of the return should come from rent.

I knew you'd believe that.

 

[Curious George]

I knew you'd believe that.

That your numbers don’t add up?

I suppose I expected you to know that I believed it. In fact, I also expect that you realize it too.

 

[Revoltingest]

That your numbers don’t add up?

Duh!
I dint post any.

 

[Debater Slayer]

Be cautious about taking advice from a real
estate agent who is actively selling to you.

Oh, he's not selling anything to me. He's an agent with whom my family has a long-term relationship.

"Flipping" has inefficiencies. Depending on
where you live, there are costs, eg, commissions,
transfer taxes, carrying costs during idle time,
capital gains taxes, & who knows what else.
But if you have a rental property that you keep,
you enjoy appreciation without triggering capital
gains taxes, you avoid sales costs, & you avoid
having to research where to invest the proceeds.

Give up on the expectation of certainty.
You're managing the balance between
risk & reward.
One risk you dint think of....
You have a tenant who endures some life problem,
& can't pay the full rent. Are you hard hearted enuf
to evict'm quickly? Or will you work with them, &
risk lower returns, & perhaps even a loss?

That type of scenario is exactly why I'm hesitant about buying to be a landlord. I don't think I could evict someone going through such a situation, which could well prove to be an issue if I had to collect money and make profit.

One approach could be to only rent to individuals rather than families. That way, aside from knowing it would be easier for them to find somewhere to go if I had to evict them, I also wouldn't have to worry as much about negligence or damage to property, although I could be wrong about that last part. (It's just based on inexperienced intuition.)

What is a "loophole"?
Also, that question doesn't address the many
legal requirements you must meet, eg, lead
exposure notification, rental rights notification,
security deposit notification, tenant's rights
notification, Fair Housing Law notification, etc.

Loopholes are specific to local laws here. I wouldn't be able to list even a fraction of them in proper detail, but here's an example: some properties entitle you to a piece of the land on which the building is located when you buy them. Sometimes contracts include fine print or elusive language that waives your ownership of any land, however, which is something you have to be aware of beforehand so that you don't get scammed.

Good luck.
I truly hope that you succeed, & become one of us.

Thanks!