Madison MoneySports - Personal Finance Thread

[Tyler.M]

I'd ideally like to get to a point where I'm maxing out my 401(k) and roth and also donating a flat rate of 5% of my annual income. I attempt to get into investing every few years and sock a bit of money into an index fund but I think I'd rather get into real estate investment right now. I've been thinking about doing it for a few years but buying property and renting it seems like a better long term investment. It's been good for me and my first property anyways.

Sent from my SM-G950U using Tapatalk

Property investment is a lot of work.  Not quite as passive as I had hoped as I have had lots of turnover this year.  Profitable? Yes, charging 90 day termination fees and then having someone move in the day after has been really good this year; but its taken a bit more time.

Real estate is REALLLY long term and fraught with expense and the first couple years are lean.  Excluding termination fees I am netting ~8% this year on my original investment after expenses, 12% including termination fees.  This is including having to replace a pool (although I did negotiate 90% of it into a reduction in sale price), a dishwasher, and a washer/dryer between my properties.  Plus your mortgage stays relatively flat while rental prices increase. 

I have found though that it would take a hell of a lot of properties (and far more than I can get mortgages for) to really make it a day job.  It is a great diversification for your retirement though instead of having your entire nest egg in the market.

I've had my house for 8 years now and it's been a huge pain in my ass but at the same time, I'm glad I bought when I did.  I just enjoy having a tangible object who's valuation is based more on the local market than a piece of a company who's valuation is a lot less based on facts and based more on "mood". No investment is perfect, right? 

Hair brained idea though (and I'm no expert at this) but would buying a townhome or something and allowing a property management firm to worry about rental contracts be a good way to get into this? Get a mortgage, get it rented, PM takes 10% off of rent and then I pay for any thing that needs fixing down the road. Townhouses in the 'Burg can run into the mid 100's and with low mortgage rates right now, you'd at least beat inflation with the equity you would gain through the loan payment plus reinvestment of rental income and growth in market valuation. Stay in it for 10 years, sell it if the market is good or continue to rent it out. Mortgages are at like....4% or something right now? 

Who knows. My gramps made a killing doing this sort of thing but he also started out when houses were cheaper than hell and he had a pension from the USPS and the Airforce. I'm not so lucky.