THE Rental Property Income Thread (merged)

[gego]

No, not the sociable type, and quite content with the rewards of my lifestyle.

And do not feel apologetic for pointing out a poor investment.

What are the odds of an acceptable return on the investment? The location of the property is in loserville, the future of loserville by the assesment of the investor is bleak.

What kind of idiot would put his money in an investment he, himself thinks is poor? He should lose his limited wealth, since the rules of the free market system say that capital is moved from the hands of the inept into the hands of the stealthy.

Why should anyone encourage an idiot to be an idiot?

Plus, anyone who is seeking investment advice from this or any website is displaying a prima faca case of being a jerk supreme.

[threadbear]

Fox V, You're thinking of getting a rental property in an area that's seen little appreciation in value, at a time when even optimists are wondering if there is a bubble ? Is this because interest rates are low, and a renter could cover your mortgage payments? It's very tempting to leave money parked in the bank, when you could be acquiring property, true. But that money maker down the street is going to be an albatross around your neck in a couple of years, if you go ahead now.

There will be so much vacant property, as people will move in with their parents, friends, live in motor homes, etc...Imagine this scenario. Every other person with property, doubles up with someone else with property. How many homes would that leave just sitting? Suburbs could look like ghost towns. Small single industry towns (WalMart doesn't qualify as an industry) are not the best bets in good times. In tough times. Whoo Boy.

Peak oil doesn't have to happen for the economy to come unglued. It's going to happen anyway. I'd definitely wait it out.

Gego, Interesting thoughts on free markets, idiots and the stealthy. Tell me, as things stand now, how much rent are you receiving for the missing parts of your personality?

[Anjorni]

Well, my take on this would be to not purchase the property. If the town is in decline NOW - just imagine what it's going to be like when gas hits $5 a gallon? Say bye bye to the Walmart distribution center... There goes everyone's bread and butter (most everyone) and they will either leave town, or squat in one of the many abandoned buildings in the area.

If anything - use that money to invest in securities - like today would be oil or prescious metals... Even tools, or renewable power generation... I'd say these are more useful investments.

This is coming from a young buck who owns a rental property in Los Angeles... one of the 'hottest' markets out there. Unfortunately where I own, I will probably get shot in one of the many riots that will spring up there when times get rough.

So I'm in a red-hot market, and considering getting out - if you're in a cool market, I'd say park your money somewhere else (hell - even Euros are a good choice at the moment)

[FoxV]

Just to address some things:

I believe this website is a invaluable source of advice at least in these preliminary stages. All mainstream advisers will simply say Mutual funds wieghted heavily in American energy and Tech stocks. I do have personal sources of advice, but none of them will even hear peak oil let alone provide advice on it.

As for the soundness of the investment, Landlording has always been a solid business practice since the first permanent human villages were built. Rents have more flexibility to follow inflation/deflation trends then other investments. The relative value of a rent tends to be a constant when compared to the local economy. As for a return from property appreciation, I assume the property value will drop incredible (or not appreciate with an incredible rise in inflation). All in all, as long as the mortgate is maintaned my losses stand to be at most my initial 20% payment minus inflation

And just to shed some light on the economics of this CANADIAN Loserville, welfare recipients are actually a reliable source of income for Landlords. Their money is stable and as solid as the government. We also have rules here that if a welfare recipient is late on rent payment we can recieve our rent straight from the welfare office (I would not get into landlording otherwise). Also Welfare recipients DO NOT move back in with their parents. Welfare around here is the primary tool kids use to leave their parents (A disgusting practice I know, but it keeps the vacancy rate low around here).

The other benefit this town has is it is extremely localized so lends itself well to incoming people from the outskirts and country side (especially those going on welfare)

So my primary concern about the validity of owning a rental property is:
A) Will Canada's welfare system collapse (not as likely as it seems considering the majority of voters may be welfare recipients)
B) Will squating of abandoned homes destroy the vacancy rates (I don't think this city (40K) is big enough to have a squating problem)
C) Can rents be made to match the increase to mortgage interest in times of hyper inflation (I would only get fixed term mortgages from a large bank so I think hyper inflation can be kept in check)
D) How significant will the emptying of the rural areas to the cities be (no suburbs here)

As for investing in other prospects, I am currently looking into a few, but would like to stick with rental properties for the purpose of this topic.

In the end, as far as buying a property now, I think from what I've read so far, the best bet is to "wait and seen". This may cause me to take a hit with future interest rates, but I maybe able to make up for that with buying devalued properties

(my apologies for the long post)

[JoeW]

I've thought about buying additional property as well, but it doesn't make sense if you think that prices are going to come down.
I think that prices will eventually come down somewhat, so I am downgrading real estate from "buy" to "hold or sell".

[JoeW]

I have to learn to stop using the 'back' button on my browser because it keeps giving me double posts.

But on the same subject, I have been looking for individuals (with cash) that live nearby that would consider partnering for real estate investments. If you can go in with cash and avoid the bank loan, you eliminate the risk of foreclosure on the property.

[pip]

I've looked into rental property myself. I live in a ag community with no real bubble either. 3 bedroom/2 baths can be had for 40-50K. However, the rents will range from $400-550/month for a decent house. That will just barely cover the mortgage, taxes and interest. A friend owns several rental properties and says a good rule of thumb is you need two times your monthly payments in rent income to make decent profit. In my area, I would have to offer about 50% of the asking price to make it work. For my investing dollar, I'm buying oil stocks. Guaranteed in my opinion to double in the next few years and no work involved.

[JoeW]

I've thought about buying additional property as well, but it doesn't make sense if you think that prices are going to come down.
I think that prices will eventually come down somewhat, so I am downgrading real estate from "buy" to "hold or sell".

[pstarr]

Tell me, as things stand now, how much rent are you receiving for the missing parts of your personality?

[Yavicleus]

Keep in mind that foreclosure rules can be really nasty. Consider this scenario:

You buy a rental property for $100,000. For now, you are able to rent it out. But in a few years, once there are no jobs around, you can't find any renters. For awhile you can pay the rent yourself, but then you too become unemployed. You try to sell the property, but there aren't any buyers around. You are forced into foreclosure.

But wait...your property, which was valued at $100k when you bought it, is now only worth $80k. So, you loose the property, and you still owe the bank $20 grand.

Welcome to life as a debt slave.

[EnemyCombatant]

I think JoeW has it right.

It is risky to acquire another property now unless you can get owner financing. In the upcoming years, there should be plenty of opportunity for that. As any RE investor knows, that's a definite win.
Also consider sandwich LO. That's sweet too.

[threadbear]

FoxV, Oh. I didn't notice you're from Canada. Sorry. This changes things a bit. I bought a little condo in Victoria, BC, last year, with peak oil in mind. It's in a high demand area where people can walk to work, university town, great public and social services. The price was very good. Even in a worst case scenario, it shouldn't be a problem.

In the West we have oil and natural resources that will provide a buffer in a downturn and keep the govt. coffers from draining altogether. On the prairies they're starting to grow red wheat and manufacture noodles for the Chinese market, rather than just selling them wheat. This alone is enough to keep the prairies going and the govt solvent.

In the event of a depression like downturn, the federal govt should still have the ability, in this country, to assist people who need help. That represents security for landlords.

So I'll change that nay to an aye.--or eh!

[uNkNowN ElEmEnt]

I have to agree that this web site has been a source of valuable information. Just because you don't think something like buying rental property (and I agree with you) doesn' mean you have to slap the person down and shut down discussion.

Why not tell them why, give them the benefit of your experience and share the info you have. That is why we are here. To share what we know and get to know others who think like us (and those who don't think like us).

Yavicleus has totally hit on the main reasons why I would not think that buying a secondary property is a good idea. it used to be that you could get a pretty good return on your investment.

In a town of 40 thou you might not have a lot of squatters but you can and will see a large number of family and friends grouping into the same home when TSHTF. We live appart because we can but there will probably come a time when that will reverse.

It would make more sense as a primary dwelling, but I'm betting we are too close to the crash to really make it profitable. once TSHTF there will be land to buy up (it might take a while) so as long as you have the skills and contacts to make it worthwhile you'll make it after the fact.

[threadbear]

Unknown, Provided we don't have a complete Mad Max scenario, another thing to consider when thinking about investing in Canada via real estate, is that there could be many people fleeing the US for a safer haven. Canada would be the obvious first choice. This is just starting to happen, and I think it's a trend that's going to continue.

Liberals in the US, at this time, are flirting with a position that's comparable to Jews in pre war Europe. It's becoming a very hostile environment for them. I honestly think the Bush govt WANTS them to leave the country, and I think the pressure is going to keep ratcheting up. Most of them will come here.

[uNkNowN ElEmEnt]

Liberals in the US, at this time, are flirting with a position that's comparable to Jews in pre war Europe

I've heard this. A couple of my US friends have made the mistake of taking their kids to a peaceful demonstration when Bush was in town. None of them will make that mistake again.

There is also a web site with a US state with a petition to join Canada. I think it was West Virginia but can't remember now. It started as a joke but some people actually started thinking seriously about it.

Pretty much all of my US relatives support Bush (strong military background) those who don't are to very opposed. its going to start a family fight one day and I could easily see how it could start a civil war.

[Pops]

We have 40 ac., mostly suitable for grass though other crops can be grown on part.

We seem to be heading towards raising dairy calves (Holstein or Gurnsey) to sell as lightweight calves (300#) or feeders (700#). Our capital outlay is modest to this point and we can feed 15 new calves at a time.

Generally bull calves are taken from momma right after birth and raised on a bottle, then grain, then pasture until time to go to the feedlot. There isn’t much to be gained, money wise, feeding them to the higher weight on a small parcel. The labor intensive part is from day one to 300# so we may start doing some serious bottle warming.

Much has been said about subsistence farming, anyone else trying to make money from their land?

[skyemoor]

We have 40 ac., mostly suitable for grass though other crops can be grown on part.

We seem to be heading towards raising dairy calves (Holstein or Gurnsey) to sell as lightweight calves (300#) or feeders (700#). Our capital outlay is modest to this point and we can feed 15 new calves at a time.

Generally bull calves are taken from momma right after birth and raised on a bottle, then grain, then pasture until time to go to the feedlot. There isn’t much to be gained, money wise, feeding them to the higher weight on a small parcel. The labor intensive part is from day one to 300# so we may start doing some serious bottle warming.

Much has been said about subsistence farming, anyone else trying to make money from their land?

At the current time, we have 10 acres and are raising sheep. We raise about 32 lambs/year, and prices vary, though if all goes well we usually get about $100 each. So I have a long way to go before quitting my day job.

We also have a garden, though small right now (20x30), that reduces our grocery bill. And there is also the raspberries, blueberries, apples, pears, and grapes. Each of these will be expanded significantly this fall.

We plan to have draft horses, and look to foal about 1 every year or so.

We have an English Shepherd female, that we plan to breed once every other year or so. English Shepherds are excellent herding/guarding/hunting dogs, otherwise known as 'the old scotch collie'.

We may return to running a couple of steers on our property, as they do well with sheep on the same pasture (eat different plants), so the output of the land can be increased.

We plan to offer to plant neighbors fields if the economy hits hard times, so that would augment our income flexibly.

[Ludi]

I'm planning to make a tiny income from selling fruit and vegetables, eggs, possibly chicks, wool items, maybe milk and cheese, possibly olive oil, herbs.

This is all a few years in the future. My current main goal is to reduce the need to earn by getting out of debt and scaling down energy use and other expenses.

[papalegba]

I might be jaded from growing up in an area where farming was the mainstay of the local economy, but I just can't see the sense in trying to make money from farming. It might be good practice for the completely different economic situation we are likely to see in the next few years, but at the moment, trying to raise food to sell for money is a losing proposition.

I have a largish garden and small orchard on my six acres, and I see it as a means of reducing my dependence on distant sources of food and reducing my costs. Food is relatively expensive if you're buying it, but very cheap if your selling it. If you are doing it with the idea of getting the infrastructure and know-how in place for a time when people are willing to pay a lot more for their food, it makes some sense, otherwise I think you'd be better off trying to make your money in other ways.

[pip]

I raised 7 holstein calves a few years ago, and I raised quite a few when I was a kid. There is some nice money to be made there. The lack of a will to live is the only thing I don't like about those darn dairy calves. It's a stressful job trying to keep them alive.

I have a Holstein cow due to calve in a few weeks. I plan to put two calves on her at a time, weaning them every two months and then getting a couple more baby calves. I hope she can raise 6 or 8 calves per year. My wife is planning to make butter and cheese and maybe sell some to friends. We have no experience here so plans are all subject to change.