Anybody out there hold properties long term? - Posted by DB

Posted by SusanL.–FL on December 12, 2000 at 08:22:07:


Anybody out there hold properties long term? - Posted by DB

Posted by DB on December 11, 2000 at 11:44:04:

Hi, Just wondering if anybody buys properties and keeps them long term and lives off the cash flow? I have a few properties that cash flow well and would like to get a few more and be a full time landlord. Does anyone do this and at what point do you feel comfortable quitting your job and doing this full time? It seems like most people on here are into flipping, wholesaling etc. I prefer the relative security of rental income month after month to finding and doing tons of deals even though the payoff is higher. Am I alone on this? I’m interested in any input. Thanks!

Here’s what we do … - Posted by Merle

Posted by Merle on December 12, 2000 at 20:46:06:

Why do you want rental property?

Why not all the advantages minus all the problems?

We’ve bought nearly 400 houses in the last 16 years. We offer them on an L/O contract, similar but also quite different than the ones you read about here.

Our objective is that of helping the people become qualified for a good home loan. Seems that many investors want the Lessee to default, pay another option consideration to renew, or just move. We want just the opposite. We want them to exercise their option.

Let me give you an example of a house we have under contract. Our cost is $52750. Market value is $65000. We will spend about $2000 for repairs and paint. The option consideration is $1500, the monthly payment (calculated by subtracting $1500 from $65000 and amortizing the balance over 30 years at 11%. Add $90 to cover taxes & insurance) for a payment of $690.

We pay 9% interest payments on the $52750, plus taxes & insurance, for a total of $485. That gives us $205 per month. We give them $50 credit toward their balance each month they pay on itme.

Let’s say the Lessee exercises their option in 3 years (our target date). We received $1500, $205 x 36 = $7380, they owe $61700 @ exercise. We pay off the $52750 and pick up $8950 at closing. Our total for the 3 years is $17380! Ooops, forgot tthe $2000 for repairs … make that $15380.

We invested $2000 for a return of $15380. We used to borrow the repair costs as well.

In our case, the Lessee takes care of all maintenance … after all, it is their intent and ours that they do buy the property. We have all the tax advantages of a rental (we can show that approximately 20% of the properties come back to us each year, thus making it impossible to predict who will, and who won’t actually exercise their option.

So again, I ask. Why rent? Why flip? To do that profitably, you have to find better bargains than the transaction I’ve described here.

The obvious reason most investors cannot do it this way is the financing. Perhaps it would be wise to spend some of the time one must spend looking for bargains to buy in looking for ways to create some financing.

Starting out, you should consider doing all the above … working toward being able to specialize in the area that appeals to you most.


Flip & Long-term is the way to go - Posted by ken in sc

Posted by ken in sc on December 12, 2000 at 07:18:36:

Just as the “normal” person has a job to pay bills today, and a retirement program to pay bills tomorrow, I think that doing both flips and holding long term is the natural way to go.

I have almost reached my goal of 25 rental houses (avg value of $100K). They are on 15 yr mortgages with some only having 9 yrs left. I am 37 yrs old so I know that if I stay with this, my family will be in good shape for the long run.

I make money to live on today by buying and selling houses. I use a seperate corp. for doing this, as it is totally different than my long term rentals. It also helps when doing taxes, depreciation, etc.

By doing both, any house you look at could be for one or the other program. It is such a natural fit. What if someone who wants to buy a house (flip) from you needs to sell their starter home? You could take it on trade as a downpayment and keep it for a rental. The possibilities are limitless.

If you make your money buying and selling houses, you know that market. Why invest in stocks, trusting someone else with your retirement? By buying rentals, you are in charge of ALL of your financial life.

My 2 cents. Good luck - Ken

Way back when… - Posted by David Krulac

Posted by David Krulac on December 11, 2000 at 21:40:54:

Robert Allen started, one of his strategies was to buy 1 rental house a year, for nothing down, for 10 years, then refinance the first house in year 11, seconds house in year 12, etc, etc, etc, All the borrowed money is tax free! The tenants pay for the mortgage, and you accumulate million dollar portfolio.
Even John Schaub, today is still preaching big deals on little houses.
And David Schumacher has a book or two on the Buy and Hold Strategy, which I would recommend.
Good Luck and go for it!

Re: Anybody out there hold properties long term? - Posted by Jen-LA

Posted by Jen-LA on December 11, 2000 at 19:35:17:

We haven’t yet as we have been doing rehabs to earn some cash and get out of debt- as soon as that’s done, we plan to buy either some apts or houses to rent or owner finance. I know several people here who are in their 50s and 60s now who started buying rentals young and now are just living off of the cash flow- and very nicely i might add! It seems to me to be a good way to secure some future financial stability.
good luck! -jen

Re: Anybody out there hold properties long term? - Posted by Rob FL

Posted by Rob FL on December 11, 2000 at 17:21:26:

I have several rental properties that I have bought over the last few years. It is a great way to long-term wealth in my opinion.

Probably the reason most of the people on this board are into flips, lease options, rehabs, etc. is because these types of transactions can put cash in your pocket in a matter of days or months. Many people here can tell you a story of where they quick-turned a property and made several thousand dollars within 30 days.

Rental properties on the other hand are a get rich slow type of investment. Usually after the mortgage payment, taxes, insurance, and repairs there is very little left over each month for on a newly purchased rental property. Now after owning it for 5 or 10 years, hopefully the rent has gone up and there is a positive cash flow.

Hope that helps.

That’s the route - Posted by SusanL.–FL

Posted by SusanL.–FL on December 11, 2000 at 13:44:11:

…Kenny and I originally took (buy and hold) until ‘$circumstances$’ suddenly made it necessary for us to sell our rentals and hold the Notes (WHICH, I might add, we discovered we liked a LOT better)!

No more renter headaches. No more exterminating roaches [or worse…RATS!!]

No more excuses for ‘late pays’. As a matter of fact, they pay on time AND they take pride in their properties. It was a WIN-WIN situation for us.

Re: Anybody out there hold properties long term? - Posted by phil fernandez

Posted by phil fernandez on December 11, 2000 at 13:08:24:

I buy and hold properties as rentals long term. I have many that I bought almost 20 years ago. They cashflow very nicely with no mortgages on them. This approach is surely not a get rich quick type of situation, but a get rich slow system. Where else can you buy a property with little money out of pocket, get your tenants to pay off your mortgage for you so that you can retire with no mortgage to pay and enjoy the cashflow.

I also like to do flips and other quick turn deals. It’s certainly more exciting, but the main thrust of my business is the old fashioned buy and hold as rentals thing.

Still being done today… - Posted by HR

Posted by HR on December 11, 2000 at 21:56:14:

One of the first local reia meetings I went to featured a local investor who was a buy and hold guy. He is an engineer for NASA and he bought beat up, inner city rentals cheap, fixed up himself, put tenants in, and got bank financing on the property. He had a plan he was following that an old timer showed him.

The first year, all his mortgages were due in 10 years. The second year, they were due in 9 years. The third year, eight years, etc. Thus, his properties would all be free and clear in the same year. Then, in that 10th year, he would refinance them all at 50% ltv, put them on 10 year notes, and start over.

I first met Glen about 3 years ago. His stuff will probably be free and clear within the next year. At the time, he had 50 houses worth approximately 2.5 million dollars (50k apiece). Next year, he will refi all for 1 million, which will all be tax free because it’s a loan. He will retire from NASA, live off the 1M, and do it again in 10 years. He will keep doing this until he is 70 he says, and then sell and carry paper. Glen is only about 45 now.

Not a bad plan, eh? Only problem I see: he’s a self-described re addict (as many of us are, myself included), but it cost him his marriage. Too bad, but not a bad investing philosophy.


speaking of positive cash flow… - Posted by SusanL.–FL

Posted by SusanL.–FL on December 12, 2000 at 08:35:21:

The very first little rental Kenny and I bought together netted us a MEASLEY $8.00/month in profit! :slight_smile:

We didn’t know our arse from a hole in the ground back then (as far as landlording and rentals went). We hadn’t worked the numbers on the property.

But–after a few years, the rents went up and the mortgage went down and we were seeing a pretty good cash flow each month (clearing about $350/month).

After renting for about 8 years or so, we sold it and held the Note…and could stand to make $48,000 (in interest alone – if we hold the Note for the full term).

I must admit, rentals are GREAT for the write-offs.

Re: Anybody out there hold properties long term? - Posted by Hope(Fl)

Posted by Hope(Fl) on December 11, 2000 at 15:40:06:

We buy and hold and have been doing this for 18 yrs. now. It is not a get rich quick scheme(especially in Florida where homes do not appreciate much) but we will have a decent retirement. As far as quitting your job, my dh does this fulltime. I still work as the rental incomes would not be enough for me to quit at this point too