No, I don’t think rentals are the best way of investing. Rarely can you find that rent house that will have 98% occupancy over the years, no maintenance for 5-10 years, has equity built in, takes little down and has a positive cash flow.
Take a newer home in good condition with a little equity and find a resident beneficiary or tenant buyer. Collect a few thousand up front, positive cash flow and in a few years another payday. Little maintenance worry or management problems.
I suggest not using equity in your own home to invest. I suggest learning how to do it with little or none of your money first. Then you can use cash when it buys you something more. A participatory note is where your private investor can get a fixed return plus a percentage of the profit. He is a lien holder and you have control of the property.
i’m thinking of getting into the business of buying and renting single family residences. i’m wondering whether it is a good or bad idea to take on partners in this endeavor. since i will be the one who manages the rentals, the additional buying power that my partner will give me, for example being able to get two rentals instead of only one if i go solo, will be offset by twice the amount of work for me (dealing with two houses and two tenants) but the profit, it seems, would be the same (i’d own either 100% of one rental or %50 of two rentals). financially i’m not certain it is to my advantage to have a partner. any thoughts appreciated. thx.
Their is really an underlying question here of the advisibility of doing rental homes on a long term basis. Leaving that discussion alone, a partner needs to bring someting to the table. If it is just money, then compensation/return has to be agreed upon. Hard money loans are cheaper than a partner at 50% of the profit. A loan with a participatory note or a beneficiary agreement using a land trust can make life easier than a partnership agreement.
Those situations where you need capital for either down payment or fixup can be solved by learning how to make cash without owning rental property.
you don’t think that holding on to rentals and having the notes paid off by renters is the best way to invest? i’m not looking to get rich but i have numerous student loans to pay off. i figured i’d buy up to 12 homes over the next 10 years and sell them when the notes are paid in order to pay my student loans–or somehow cash out my equity periodically and make large lump sum payments to my student lenders. not the best way out of my indebtedness? 2) instead of using a partner for capital, would you suggest that i use the equity in my residence for the down payment on a rental? 3)also, what is a participatory note: a note that allows the lender to particpate in decision making related to the property purchased, without being a “partner”? thx for your advice.