Any real estate investors in here?

[itissteeltime]

Tiny bit of background: I graduated from UMD in 2010 with an unrelated degree. I've since been working in real estate (costar group). I'm very much interested in getting involved in investment, and plan on going back to school for an MBA focused on real estate. In the meantime, I feel like I've learned enough to make a small investment, which I feel is low risk. I plan on going halfsies with a buddy of mine, again to minimize risk on our first investment. We have our eyes set on a 2br 1.5 bath condo in a not so nice area of DC. Our dream is to eventually start up our own investment firm.

Does anybody have any advice? Any good books or other learning portals? Any awesome success stories, or failures?

[mac5155]

The obvious, is make sure your buddy wont screw you out of his half of the investment if something crazy in his life happens.

[KennyTheKangaroo]

learn how to fix stuff

learn how to have enough money sitting around just in case you have to pay for stuff you cant fix

good luck with crap tennants

dont go in with the notion that you just have to generate enough income to pay for the mortgage/real estate taxes. because you will have to pay for expensive stuff.

[KennyTheKangaroo]

note: kenny the kangaroo is not a real estate investor, but works with many people that have real estate investments.

[DudeMan2766]

[itissteeltime]

learn how to fix stuff

learn how to have enough money sitting around just in case you have to pay for stuff you cant fix

good luck with crap tennants

dont go in with the notion that you just have to generate enough income to pay for the mortgage/real estate taxes. because you will have to pay for expensive stuff.

Our plan was to put the first couple of rent checks aside to be used as 'emergency' money.

Also, it's fairly simple to run background and credit checks, right? Should be able to keep most of the terrible tenants. out.

[Troy Loney]

One of the girl's on my softball team and her husband own a duplex in brookline near the intersection of pioneer and brookline blvd. They're pulling in over $2K/month in rent from the building which is worth about $80K. I've always looked at IRE as a supplemental income sort of thing, but if your pulling in $24K from one piece of RE, you could quickly build that up to a really nice living.

[Troy Loney]

learn how to fix stuff

learn how to have enough money sitting around just in case you have to pay for stuff you cant fix

good luck with crap tennants

dont go in with the notion that you just have to generate enough income to pay for the mortgage/real estate taxes. because you will have to pay for expensive stuff.

Our plan was to put the first couple of rent checks aside to be used as 'emergency' money.

Also, it's fairly simple to run background and credit checks, right? Should be able to keep most of the terrible tenants. out.

This is saying it only costs $12 to run someone credit report.

http://www.ehow.com/how_7450_run-credit-checks.html

[itissteeltime]

Bringing in 2k on an 80k unit sounds really damn good. The condo we're looking at has an asking price of 84k, and can be rented out for about 1200 a month. It's definitely risky but if you do it right and can build up a portfolio, it sounds like a great way to make a living.

[bhaw]

My only concern looking at this is that you are looking at a "not so nice" area of DC (your words). A quality renter isn't going to want to live in a not so nice area. If it were me, I'd find a low price property in a desirable area that would be better at attracting good tenants. Having a bad set of tenants who mess up the house or decide not to tell you about issues until it's too late because they don't care will zap all of your revenue.

Just my 2 cents.

[bhaw]

Given it's your first go at it, I'd try to insulate myself as best as possible from a potential non paying tenant or tenant that messes the house up so bad you have thousands in repairs when they leave.

The people who I've seen do well in bad areas are ones who make sure they get a property that is eligible for a government program so that the gov't is paying the rent, not the tenant.

[itissteeltime]

My only concern looking at this is that you are looking at a "not so nice" area of DC (your words). A quality renter isn't going to want to live in a not so nice area. If it were me, I'd find a low price property in a desirable area that would be better at attracting good tenants. Having a bad set of tenants who mess up the house or decide not to tell you about issues until it's too late because they don't care will zap all of your revenue.

Just my 2 cents.

I hear you. We've picked this spot specifically because we both feel strongly that this area of DC is going to grow considerably in the next 5-10 years. It's in Anacostia, if you're familiar with DC. It's near the water, half a mile to the metro, and 1.5 miles to Nationals Park. There are numerous developers in the area looking to purchase large plots of land to build shops, restaurants, and hopefully a town center thing. If this does happen, the value of the property sky rockets, and the quality of the tenant does as well.

[itissteeltime]

Given it's your first go at it, I'd try to insulate myself as best as possible from a potential non paying tenant or tenant that messes the house up so bad you have thousands in repairs when they leave.

The people who I've seen do well in bad areas are ones who make sure they get a property that is eligible for a government program so that the gov't is paying the rent, not the tenant.

Yeah, that's a good call. We've been looking for a while at purchasing section 8 or tax credit properties.

[bhaw]

My only concern looking at this is that you are looking at a "not so nice" area of DC (your words). A quality renter isn't going to want to live in a not so nice area. If it were me, I'd find a low price property in a desirable area that would be better at attracting good tenants. Having a bad set of tenants who mess up the house or decide not to tell you about issues until it's too late because they don't care will zap all of your revenue.

Just my 2 cents.

I hear you. We've picked this spot specifically because we both feel strongly that this area of DC is going to grow considerably in the next 5-10 years. It's in Anacostia, if you're familiar with DC. It's near the water, half a mile to the metro, and 1.5 miles to Nationals Park. There are numerous developers in the area looking to purchase large plots of land to build shops, restaurants, and hopefully a town center thing. If this does happen, the value of the property sky rockets, and the quality of the tenant does as well.

I don't know the DC area at all, so this is just devil's advocate, and you may know enough to shoot this down off the bat...

What's the quality of renter NOW? If you are looking at the potential appreciation and increase in rents several years down the road, are you in a situation where you could be out more money than that is worth in the future? For example, if the area attracts bad enough renters who cause a modest $2k in damage beyond what a good renter would and they decide to not pay after 6 months of paying "semi" on time. That's probably 2 months before you get them out and a new renter in, so you are out $4500 because of bad renters that you wouldn't have been in a better area. And that's just one set. If you're looking at even 3-5 years before the area is better and the quality goes up, you could easily be $10k plus behind the 8 ball if this happens 2 or 3 times due to the area and holding the property in hopes of a better situation.

Again, I have no idea how "not so nice" the area is now or what types of renters you will get, but a couple bad ones can wipe out most of your potential gains when/if the area does improve.