90% of office workers have NO LIFE...

[StarcraftGG]

Great Post Starcraft GG. I think we have started off in another tangent, Do help me understand what you mean by Cap rate (Cash on Cash) of 12 %. From what I can understand is if a House is bought by casj of $ 100,000. and it brings in rent of $1,000/month that is 12,000/yr or 12 % per year.

When I read what you wrote about it bringing in rent of $1,000/month, I immediately think that is a "gross" number. The tenant actually writes you a check for that much, but it's not a "net" number where all the expenses have been deducted. Cap rate is the net amount (money left over after expenses) divided by your cash in the property.

So in your example, I see $1,000/month gross rent. Then I would deduct insurance, property tax, vacancy factor, maintenance factor, property management, utilities, etc., to arrive at a NET of... $500/month for example. Multiply this by 12 and you get your yearly NET of $6,000. NET divided by Cash in the property is $6,000 / $100,000 = .06 = 6% cap rate.

 

[Lothario]

Great Post Starcraft GG. I think we have started off in another tangent, Do help me understand what you mean by Cap rate (Cash on Cash) of 12 %. From what I can understand is if a House is bought by casj of $ 100,000. and it brings in rent of $1,000/month that is 12,000/yr or 12 % per year.

When I read what you wrote about it bringing in rent of $1,000/month, I immediately think that is a "gross" number. The tenant actually writes you a check for that much, but it's not a "net" number where all the expenses have been deducted. Cap rate is the net amount (money left over after expenses) divided by your cash in the property.

So in your example, I see $1,000/month gross rent. Then I would deduct insurance, property tax, vacancy factor, maintenance factor, property management, utilities, etc., to arrive at a NET of... $500/month for example. Multiply this by 12 and you get your yearly NET of $6,000. NET divided by Cash in the property is $6,000 / $100,000 = .06 = 6% cap rate.

Thanks for replying Starcraft, Your explanation makes more sense now as I think rental properties don't get you more then 5-6 % net profit which would make this unwise to use your cash to buy property, I would much prefer to buy 4 properties using $100,00 and get the renters to pay for it and wait till it's paid off, That would be the sweet end for me. easier said then done, lots of headaches of renters , maintenanace along the way but he who takes the headache makes the money.

 

[StarcraftGG]

Thanks for replying Starcraft, Your explanation makes more sense now as I think rental properties don't get you more then 5-6 % net profit which would make this unwise to use your cash to buy property, I would much prefer to buy 4 properties using $100,00 and get the renters to pay for it and wait till it's paid off, That would be the sweet end for me. easier said then done, lots of headaches of renters , maintenanace along the way but he who takes the headache makes the money.

I would recommend not relying on what you said about "I think rental properties don't get you more than 5-6% net profit." Investing, like red pill knowledge, is something that people need to get educated about. It's not something that you want to rely on common sense for. With bank financing at 4%, 25% return on your cash is readily achievable using rental properties. It happens all day long every day. I know you might be skeptical, but think of it like you telling a beta AFC that it's possible to meet a woman and be having sex with her within 2 hours. The beta's response would be "I think it's not possible to do that." Meanwhile, we know that 2 hours is not fast... and that something even faster like 30 minutes is doable. You just need to know what you're doing. Does it happen with every girl, no. You won't get high returns like that on most real estate. With the girls you need to screen, with the real estate you need to know what to look for.

I recommend joining a real estate club - not some crazy multi level marketing trap where they sucker you in for thousands to take classes and up-sell you. Something for real investors - talk to them and see what you come up with for your area.

 

[KingCokeSnorter]

I see both perspectives. But what happens if you lose a tenat or get a housing collapse crisis like now. Doesn't that mean people are not inclined to rent? I'd imagine the ideal place to do this would be in a college area where you are guaranteed a steady stream of renters who can pay. What happens if the renters drag out the eviction process and you aren't getting paid but still having to pay multiple mortgages? Wouldn't one be better off just building the houses and selling them if they could obtain 600k loan + 200k base?

 

[xsplat]

Rental properties can also sink you if you buy before a bubble collapses and rents adjust to below your mortgage costs. I've seen that happen to a guy.

 

[lush1]

several years ago i worked in an office. one night i left work to go to my car in the parking garage. as i was walking to my car i saw one of my bosses (mid 40s, married w/ 2 kids) just sitting in his car staring ahead. i stopped walking and watched him. it felt like an hour but for the next few minutes all he did was sit and stare while sitting in his car. i don't know what was going on in his life, as far as i could tell nothing serious as i would have heard, but just watching him do that was a wake up call for what office life does to a man. i wondered what was going through his head as he sat and stared while sitting in his car? thoughts of a shitty homelife? the futility of his existence? how miserable his life had become?

the funny thing was this boss didn´t give off a depressed vibe at work, it took me seeing him in a honest moment to get a glimpse into the sadness of his existence. yea, im glad i no longer work in an office..

Similar thing happened to me the other day at work. Very early before anyone else was in a director bigwig pulled up outside my window in a brand new aston martin. He then spent the next half an hour sat in his motor sobbing uncontrollably, part of it whilst on the phone. I saw the same bloke an hour later in a breakfast meeting holding court with some other corporate schlongs like he didn't have a care in the world.

In his defense, we all have our moments when we are down. You have no idea what is going on in his world. Mom died, kid has cancer, all kinds of shit. At least he left his shit in the car and did not bring it to work with him like a lot of women do.

Yea not knocking the bloke, just an observation. You never know whats happening in peoples lives.