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September 28, 2012


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I might suggest that properties built after 1978 are the safest bet,no worries about lead based paint.
Check with city hall if there are mandatory property inspections.If there are,read the rules.

As far as financing,find a local community bank or a credit union.Many local banks don't sell their paper (loans) and you won't be subject to fanniemae rules.

A good amount of the properties I've boughten over the years were from absentee landlords.Some had moved to a different state and found out how badly they were getting ripped off by their property management companies and wanted to bail out at any cost.Others were in at very high percentage loans and wanted to bail.Most of these I bought at sixty cents on a buck.

Get involved with a landlord association and pick the brains of experienced landlords.
Spend an afternoon sitting in on court eviction hearings.

Screen,screen,screen. most of my units are in low to low middle income areas.I'm not as concerned about credit scores as I am about civil and criminal backgrounds.I check all the local muni court sites on the web for backgrounds,this can be done free.

Money makes the world go landlords and often times experienced ones will feel sorry for a tenant that has a great story as to why rent was not paid.BUT..the story is more often a lie rather than the truth.I allow a grace till the fifth of the month,no pay,no stay.You can't write off lost rents and you can't claim deadbeats on your own taxes.Give them an eviction notice,it's amazing how quickly they all of a sudden find the rent.

Remember........the landlord is the one in charge,not the tenant.

I would also suggest learning how to do many of the easy jobs rather than paying someone $100.for a ten minute fix.If tou are not sure how to do something,there are many handyman sites on the web that give directions step by step.We do everything ourselves other than roofs or carpeting.Prior to being a landlord my tool of choice was a cross pen,now I have a van load of tools.
A plumber will charge up to $ clean a p-trap on a sink,that is about a three minute job.

As a last's better to keep a property vacant rather than place a bad tenant in it.

Steps 3, 4 and 8 are the most important. If you have access to capital and are properly reserved, you can learn on the fly and having the reserve solves a LOT of problems.

I think a great way to get started is to rent out your old home when you buy a new house. You know the property very well and it already has built in equity (hopefully.) The monthly cost should also be lower if you lived there for a while.

Great advice Apex, Question what area of the country do you do your investing in? I live in the norteast and the taxes here eat up a lot of the profits a potential investor might make. Just another barrier I have noticed.


Minnesota. Next week you will see the property taxes I am paying on one of my units.

It was funny to come across this article today as I'll be giving a speech on this exact topic on Saturday. Although I agree that "just doing it" is a major obstacle that people need to overcome, I would advise that potential investors have some basic rules for the property they will purchase. You don't have to necessarily wait for your Goldilocks property but you SHOULD pinpoint your price range, desired number of units and neighborhood. These 3 factors will have a significant impact on your bottomline and your ability to effectively manage your property.

The best properties to invest in are multifamily units (3-4 families). The first two units pay your mortgage/expenses and the third unit provides the profit. Investing in single families/duplexes is for suckers.


I agree that you need to have some sort of plan. That's part of what step 5 is about. You need to be formulating that as you are looking. It is difficult for a new investor to know for sure what that plan should look like however. That is why I think the real estate agent that has experience with investment properties is important.

Along the lines of getting this plan well defined, I have a post coming in a few weeks on exactly that. I just think it's nearly impossible to have a well defined plan like that before you have any experience actually doing it.

I hope you will come back and read that post (probably about 4 weeks from now), and offer your feedback on the ideas presented in it.


So you are saying you get to keep about 1/3 of your rent as profit.

See my post next week to see actual numbers from one of my single family townhouses which show that I keep the same 1/3 that you are mentioning above.

Ari - it's all about the numbers. You can get great cash flow off of SFH just as with multi-family. The cost to invest for a SFH is lower. Single family homes are often in nicer neighborhoods than multi-family, and in some areas multi-family properties aren't common. I own 3 SFHs and the cash flow on each is great, and a problem tenant in one doesn't affect the livability of the other two homes. There are pros and cons of each.

Apex -- Thanks so much for writing this series. I'm also a huge FMF fan, and got into real estate investing myself three years ago. For me, #1 and #8 were the most important steps -- do something! I was able to figure out everything else along the way. By acting quickly, I was able to buy my first three properties in 2010, right at the bottom of the market in my area (Silicon Valley), and all were making money on day 1. While the market has turned around here, there are still great opportunities in other parts of the country.

One thing I'd add -- property management is far easier than I thought. It's an emotional challenge to pick the best tenants (and you never have perfect information, so you just have to pick and hope you're lucky), but I've had very few problems managing the challenges of mine (I always went for extended families who were already in the neighborhood). Sometimes you have to pay money to fix things (but why pay an intermediary extra to handle that?) and sometimes you have to remind them about the rent, but it all adds up to a couple hours of work a month, at most.

I'd also add that it's most important to chose the location based on running the numbers, not whether I like the look of the property or the neighborhood (though I don't look in the worst neighborhoods). Every time I see a house, I use a spreadsheet to calculate low and high income estimates by (1) calculate the expected mortgage using a conservative interest rate, (2) add 2% (of the sale price) to cover taxes and insurance, (3) add 10% property management fee to the conservative estimate, and (4) find high and low rent prices for similar properties on Craigslist.

I live in Massachusetts where housing costs are extremely high. You just can't make $$ on the single families or duplexes here because the price/rent ratio is so high.


In that case the triplexes are probably a good fit for you. You appear to be making your assessments based on what works in your area but the thing is, all real estate is local.

As Jonathan said its all about the numbers. If the numbers don't work for SFH in your area then clearly you cannot do that. The numbers do work for SFH in most areas of the country, at least right now they.

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