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/biz/ - Business & Finance

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11248804 No.11248804 [Reply] [Original]

I always thought purchasing rental properties is a great form of passive income. However I'm doing some quick maths in my area and it doesn't add up. Someone please explain this to me

>typical single family home in my area goes for 700k
>I'm looking at a home in a slightly worse area for 600k
>I can afford a 25% down payment so need to borrow 450k
>Mortgage payment comes in at around 2200/month not counting property taxes insurance or maintenance
>homes in this area are renting for about 1800-2000/month

Essentially I just 'lost' 150k, and each month I'm losing an additional few hundred dollars.

So, what's the point??? I guess in 30 years I get a 'free' house but in the meantime I'm maintaining something that makes a negative profit. How does real estate make money unless you bought your property a decade ago right after the housing bubble crashed?

>> No.11248886

just like shitcoins, their are shit houses and shit areas for rentals

just keep looking and you can find deals where the math works out

>> No.11248892

>>11248804
>How does real estate make money unless you bought your property a decade ago right after the housing bubble crashed?

It doesn't.

Buying a property now, literally at the second bubble peak will leave you holding a bag of worthless particle board shit that you can't sell without taking massive losses.

Rentals only make sense if you buy a literal shitshack and fill it with illegal immigrants without papers who pay over the odds.

>> No.11248973

>>11248804
>Mortgage payment
imagine being this poor, lol.

>> No.11249001

>>11248892
>Rentals only make sense if you buy a literal shitshack and fill it with illegal immigrants without papers who pay over the odds.
are you braindead anon? rentals work fine if you live in 1st world countries like germany.

>buy condo for 400k$
>rent it for 2k$
zero maintenance because its small as shit anyways and you dont rent it to niggers. for a single condo you have like 1000 applicationd who are dying to live in the city.

pick some fucking doctors and its case closed.

>> No.11249050

>>11248973
did you read my OP? You have 600k sitting in a savings account?
Even 400k for a condo.

>> No.11249061

>>11249050
>so need to borrow 450k
you are getting kiked by interest you dumb nigger. make the cash and the math will work out for you.

>> No.11249084

>>11248804
it only works when you can acquire properties for cheap. 2011-2013 was an amazing time to stock up on properties because prices were at/near the bottom but the economy was "picking up" so there was demand for rental properties.

i bought a 70k condo in early 2014 that's making me $500 in profit a month and is worth about 120k right now. i fucked up and bought another for 80k in mid 2015 that was a bitch to find tenants for and had a shit association. i sold it this year, and at the end my profit from rent was only $300 for the entire time i had it. i did make about ~$6k profit from the sale. mind you, i bought both with a 20% down payment. i would advise against buying outright with cash. if the property is good, it should cover your mortgage and still turn a profit.

i'm just sitting on the cash from the sale right now and i can't bring myself to buy another condo, because as you've observed the numbers just don't work out in your favor. you can also buy in the ghetto and do section 8 housing where the government pays you, but dealing with niggers and spics is a full time job that i don't want.

>> No.11249092
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11249092

>>11248804
>annual maintenance is 1% of home value ($6,000)
>property taxes, depending on the region, will be roughly 1.2% of the value of said property ($7,200) and goes up as the value increase.
>that doesn't include utilities, HOA dues, landscaping, etc.

You're smart to DYOR OP. Most people throw their life savings into a house without realizing the actual cost of owning a home. Don't waste your money, there's already big indicators that the market is slowing down and there's going to be a massive correction. Wait till it bottoms out and buy something on the cheap.

t.real estate appraiser

>> No.11249125

>>11249061
so even if i can somehow put away 60k a year after taxes that still means i need 10 years before I can start.
Impossible

>> No.11249167

>>11249125
>Impossible
oh well anon, the first million is the hardest they say. there is a reason people go all in on speculative assets because there is no other way to make it right now.

dont fucking take a half a million loan ever. dont fuck with real estate if you have to enslave yourself for the rest of your life. real estate is for people who are able to flip them like you would flip phones on ebay.

unless a 2008 tier correction comes. thats your moment so keep accumulating cash

>> No.11249195
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11249195

>>11249092
how do you like that as a career

>> No.11249199

>>11248804

yea i can tell you where your math is wrong, you didn't separate the principle and the interest on the mortgage payment, you should only calculate with the interest, since that's the money that goes out. the principle part is you paying to yourself, since you own the house/apartment.

assuming 5% increase in value of house, you can remove this if you want

interest + property taxes? + maintenance - taxshield from borrowing - housevalue*1.5/12

vs

rent


usually owning a property is better, but this depends on the interest on loan and the increase in value of home. sometimes and at some places renting is better