The Core
Why We Are Here => Water Cooler => Topic started by: rcjordan on April 04, 2019, 06:50:43 PM
-
There was great wailing and gnashing of teeth when I posted this advice a couple of years ago. You make for lousy/incompetent landlords when you're 65+ but, besides that, real property is going to be gov income's whipping boy.
Property tax: Which homeowners around the U.S. pay the highest property taxes? - CBS News
https://www.cbsnews.com/news/property-tax-which-homeowners-around-the-u-s-pay-the-highest/
-
I'm already planning this. I have one small rental house, the current renter is good, but when he decides to leave I plan to sell it at auction as quickly as I can. Auction in my state means I can sell it as is.
-
I was talking to my wife a couple days ago about financial "escape velocity."
Basically, you want to work and save as long as you need, but not longer. The problem with life/finance is that there isn't a single number defined by the laws of physics as the 11.2 km/s that lets you escape the earth's gravitational well.
Anyway, what I mean by escape velocity is that at 11.1 km/s, you fly really high, but you still crash and burn. At 11.3, you can travel to the farthest star. But even though that speed takes you to the farthest star, it's very close to the speed that just brings you straight back down to earth.
All of which comes back to when do you want to keep a bit of income coming in and when to do you want liquidate, put in a safe place and hope that you've really hit escape velocity.
The thing is, both strategies have risk. The first has the risk that something goes wrong with your asset before you have a chance to cash it in (rental property, stock option, whatever). The second has the risk that you cash it in and can enver get as good an ROI on the money and... you're only at 11.1 km/s
-
>The second has the risk that you cash it in and can enver get as good an ROI on the money and... you're only at 11.1 km/s
Orbits are considered stable for a period of time, then they wander off or crash back to the planet. Our moon is slowly moving away from Earth, but will around long enough to outlast our sun. Stable enough. My planning assumed that cashed in ROI assets will convert to low- or zero-income assets with low risk. CD's, tax-exempt bonds, etc. Then the 4% rule would feed on those. The trick is to have enough for them to last until the sun goes out (death).
-
>>CD
I just put some money in a CD for the first time in my life. I used to do my grandmother's taxes and she had a lot of CDs. I think of it as an "old person" thing.
-
<update>
With the rise of rents in 1st-world urban areas, landlords are being cast as the new boogeymen. I've sent a fair number of rent-fixing laws proposed and some put into effect. Areas with existing laws are beefing them up.
UK: Renters will be able to look up rogue landlords under government proposals
https://news.sky.com/story/renters-will-be-able-to-look-up-rogue-landlords-under-government-proposals-11767468
-
https://en.wikipedia.org/wiki/NNN_lease
-
>NNN
Sh##, they'll destroy the place with deferred maintenance 'cause it's on their dime. It's bad enough with commercial tenants, I can't imagine what you'd have left with residential property.
<added>
Been there, done that. Commercial tenants didn't even replace fluorescent light bulbs or ballasts in the troffers the last 18 months or so.
-
I was a leasing agent with Coldwell Banker Commercial [now CBRE] for 10years; and, if you lease to the right tenants, NNN is great. There are always exceptions. 8)
I also lease a rental property I owned in Lake Arrowhead. Will NEVER touch residential property again. >:(
-
Our rental went under contract last Thurs.
NNN - My understanding is the landlord does the maintenance, the tenant just pays the NNN rate, built into the lease price. What am I missing?
-
I don't think you can effectively "build in" all the constantly inflating true costs for quality maintenance and repair --particularly if your tenants are careless and/or abusive. You can try, but -in the end- it won't be enough. **AND** don't forget that you're in an increasingly competitive situation pitted against landlords who are (A) overly optimistic, (B) desperately trying to cover their bills, (C) in denial, and/or (D) dumbasses.
Also, many (most?) state/local governments have fairly strict laws about what can be covered by deposit money and how much time the landlord has to take care repairs before remitting the remainder. In NC, these are pretty specific (leaving out some items that need addressing) and the time is short. You'd better have an in-house maintenance staff or a damn good buddy in the trades who will get to work ASAP or you're going to be left holding the bag.
Yes, you can write draconian leases that spell out everything but ...see competition comment above. Prospects will balk for sure.
> the right tenants, NNN is great. There are always exceptions.
My experience ranges from national chains you'd recognize immediately to Mom & Pop. A regional or store manager will cut maintenance & repair EVERY time in order to make his numbers look better to corporate. A M&P will cut it because they're living off the cash flow.
> Will NEVER touch residential property again.
FTFY
-
Remember, landlords are evil.
California governor announces deal to cap rising rent prices
https://www.cnbc.com/2019/08/31/california-governor-announces-deal-to-cap-rising-rent-prices.html
-
We lived in Berkeley when rent control was repealed. It was "hard" rent control - meaning that even up on vacancy prices were controlled. It was replaced by "soft" control, meaning that as long as you didn't change the names on the lease, it could only rise by a certain amount, but it could rise to market value when being rented to a new occupant.
One thing to note here is that the "soft" version is very similar to what homeowners get while in CA. Due to Prop 13, you are taxed at 1% of assessed value and that can only rise by a maximum of 2% (less if inflation is below 2%) per year, but when the home is reassessed, it rises to the new sale price of the home. So in a sense the "soft" version of rent control provides some equity between homeowners and renters.
But here's the thing. Why did ultra-liberal Berkeley decide to get rid of the "hard" version of rent control? Because the number of rentable units was plummeting. This is from memory, so take it with a grain of salt, but I believe Berkeley went from 17,000 rentable units to 10,000 in the space of about 15-20 years.
It had become impossible to find a unit. A friend was thinking of moving to Berkeley at the time and he went to a showing. It was a crappy, rundown apartment right next to I-80 (at the time the most congested stretch of highway in CA, and that's saying something). He said 300 people showed up for the showing and, because he was unemployed at the time, they wouldn't even talk to him though he was willing to pay 1 year's rent in advance plus the normal security deposit.
Still, allowing landlords to raise rent by 10% per year when their property tax can only rise by 2% per year does not seem draconian.
-
>landlord are evil
"The overhaul took direct aim at landlords’ income by making it almost impossible to raise rents, remove units from state regulation or even recoup the costs of capital improvements."
NYC Apartment Building Sales Plunge After New Rent Law Dents Values
https://www.nreionline.com/nrei-wire/nyc-apartment-building-sales-plunge-after-new-rent-law-dents-values
-
Fing New York City.
https://www.dos.ny.gov/info/nycrr.html
-
The problem is that elected officials will resort to rent control-ish agendas because it plays to the voting public. It won't fix the high-rent problem and might make it worse over the long haul.
-
But do govs freeze ownership costs, too? No.
Berlin Freezes Rents for 5 Years in a Bid to Slow Gentrification
https://www.nytimes.com/2020/01/31/world/europe/berlin-gentrification-rent.html
-
The flip side is, do ownership costs go up as quickly as rents? Depends on your market obviously.
I'm not disputing that you should get out of rental properties in retirement, but in Berkeley, our landlord was sitting on units purchased by his parents in the 1960s. He was allowed to raise rent to market value when a tenant left, which meant that when we left, we were paying $700/mo and all of our neighbors were paying $1200 to $1400/month.
For a building with no mortgage and minimal upkeep costs, $20,000/month was a nice retirement income for our landlord. I would guess today, based on friends who still rent in Berkeley, that building is bringing in $30,000/mo.
But of course, he wasn't "free" like he would be with an annuity or something like that. Always headache, finding renters, dealing with problems, damage, etc, etc, etc.
In fact, I thought he would be itching to get rid of us and pull in an extra $700/mo. When we left, he was so sad - he said having me work from home was like having free on-site management and he worried a lot less than he had in the past and now would have to worry more again.
-
Based on my commercial experience, I'd guess that insurance, taxes, and maintenance run 10-15% of rents and have an annualized inflation rate of 2-3%. Around here (and CA), insurance rates probably exceed 3% annually, but maybe other areas are impacted less.
-
A few years ago when I was deciding what to do first, I sat down with a guy with probably 3 dozen rentals in our area. He focused on lower income but still had solid numbers to work from with different styles and layouts (duplexes, singles, multis), with a few years of history. We were assuming owning the properties outright and figured the repairs, maintenance, admin, vacancies, marketing, taxes and we basically worked out all overhead at one meeting.
It came down to about half of gross was true net. Nicer and better properties would see less damage and other benefits so this was a conservative estimate for me, so a sort of guaranteed baseline.
-
Yet again. Get out, starting the process at age 58.
Pandemic eviction crisis leads to greater tenant protections | The Fresno Bee
https://www.fresnobee.com/news/article253179028.html#storylink=mainstage
-
>>starting the process at age 58.
And how did you pick that age?
-
Over the years, I've noticed that at/near age 58 is when medical issues start to crop up in a number of family members and friends.
-
I have crested that wondrous threshold as of a this summer.