6 ms·

In early 2016 I purchased commercial real estate, got a 25 year fixed rate mortgage, and leased it. This requires very little of my time every month, and the po

by antr 10y ago

In early 2016 I purchased commercial real estate, got a 25 year fixed rate mortgage, and leased it. This requires very little of my time every month, and the post-tax yield is above 5%. I couldn't be happier. I'm now considering doing this again in 2017. Hopefully interest rates will remain as low as they have been in order to lock-in an attractive mortgage.

chipperyman573 10y ago
As the property owner, aren't you responsible for maintenance etc?
- antr 10y ago
  Contractually, day-to-day maintenance, no. Any extraordinary maintenance (a water pipeline bursts, electrical problems, etc), yes; but that would be covered and taken care of by the insurance company.
- kornholi 10y ago
  In the commercial world, NNN (triple net) leases are popular. The tenants take care of property taxes, insurance, and maintenance, so it is a good passive investment since you don't have to worry about operating expenses.
PaulRobinson 10y ago
You don't say where you are based, but you are going to get a shock if you think interest rates are going to stay on the floor. If you can get a genuine 25-year fixed rate, great, but you need to tread carefully here. Brexit, Trump, EU sentiment, China trying to deal with their own problems, they're all pointing to the same way: devalued currencies. Where they start, rising interest start to follow. I'd also be wary of assuming commercial real estate was a lock-in. I've heard horror stories. I'm glad it's working for you right now, I'm just saying: make sure you tread carefully and have done your research before you start gearing up.
- lowpro 10y ago
  This isn't necessarily true. The US dollar is actually increasing in value as people want their money to be safe. If Trump does bring back American jobs, meaning less jobs in Asia, the dollar buy will continue, depressing Asia and strengthening the US for now. But you're right, the OP definitely needs to tread lightly with property and the contracts. The devil is always in the details.
  - threeseed 10y ago
    The unemployment rate in the US is 4.9% which is basically full employment. Now sure there are a number of people who don't report and those who wish to work more. But I don't think it's going to be easy to get those people back into work. Most are either in industries that are disappearing due to automation. Or they lack the skills/training to re-educate themselves. And without tariffs (which will impact exports) there is little chance of US being all that competitive in most industries that compete with Asia (I assume you actually mean China).
    - FrancoDiaz 10y ago
      4.9% isn't even close to being the real unemployment rate.
      - StevePerkins 10y ago
        Nor does it reflect the stagnant/decreasing income of the jobs that people DO have.
        enraged_camel 10y ago
        Not to mention hordes of underemployed college grads.
    - 551199 10y ago
      You want to look into participation rate. Compare participation and unemployment rate over time and it's clear '4.9%' is pure fallacy.
branchless 10y ago
The American dream: very little work and lots of money. Reality: others work hard and get less so rentiers can kick back.
- antr 10y ago
  because... I haven't worked hard and saved money? or, like you are implying, I shouldn't have saved any money, and spent it all... fancy cars, exotic vacations, and parties. I guess I gave up one lifestyle to reach another one. We all have different priorities.
  - branchless 10y ago
    I don't believe land is taxed highly enough so the system encourages monopolising land to appropriate value added by labour that should be going to workers. I think right now we have a situation were money makes money and selling your labour doesn't, in the average case not in the "I'm a senior engineer at google" case. I just don't see how this ends well. Workers struggling to get wage rises at all and yet 5% per anum return for those with capital. We've just had Trump and yet here everyone is basically saying "I can get further ahead by playing the system". It's not looking good.
    - antr 10y ago
      Relax, you are mixing apples and oranges. Many companies, large multinationals to small startups don't want to OWN property. It's capital intensive for them, they want to rent. Does Starbucks own its coffee shops? No. Can't you see how renting property is a service to many? Stop being apocalyptic simply because someone owns property. Take a chill pill.
      - jdcarluccio 10y ago
        You should offer chill pills as part of the property deal. :) like your style
      - branchless 10y ago
sean_patel 10y ago
> In early 2016 I purchased commercial real estate, got a 25 year fixed rate mortgage, and leased it. What was your downpayment? Asking because I tried to do the same thing earlier this year. Thought I was clever, did the math on how much I can rent out an apt on AirBnB, and what the mortgage would be on 30 year fixed, and my calcs said I need to put only 5% down to break-even. Then I contact lender and turns out, for Investment properties, they require minimum of 25% to 35% cash as downpayment. They said this was to hedge their risks against a borrower who would bail easily if an investment property goes south. Any way around this? i.e. around not having to put 25% down on investment RE?
- tomcam 10y ago
  No. Because the lender knows your AirBnB investments could easily be regulated out of existence. I suggest you live super frugally and save up cash for your real estate purchases. (We did this and so have many of our friend.)
  - sean_patel 10y ago
    Thanks tomcam (cool username btw :)

by antr 10y ago

chipperyman573 10y ago

As the property owner, aren't you responsible for maintenance etc?

antr 10y ago
Contractually, day-to-day maintenance, no. Any extraordinary maintenance (a water pipeline bursts, electrical problems, etc), yes; but that would be covered and taken care of by the insurance company.
kornholi 10y ago
In the commercial world, NNN (triple net) leases are popular. The tenants take care of property taxes, insurance, and maintenance, so it is a good passive investment since you don't have to worry about operating expenses.

PaulRobinson 10y ago

You don't say where you are based, but you are going to get a shock if you think interest rates are going to stay on the floor. If you can get a genuine 25-year fixed rate, great, but you need to tread carefully here. Brexit, Trump, EU sentiment, China trying to deal with their own problems, they're all pointing to the same way: devalued currencies. Where they start, rising interest start to follow. I'd also be wary of assuming commercial real estate was a lock-in. I've heard horror stories. I'm glad it's working for you right now, I'm just saying: make sure you tread carefully and have done your research before you start gearing up.

lowpro 10y ago
This isn't necessarily true. The US dollar is actually increasing in value as people want their money to be safe. If Trump does bring back American jobs, meaning less jobs in Asia, the dollar buy will continue, depressing Asia and strengthening the US for now. But you're right, the OP definitely needs to tread lightly with property and the contracts. The devil is always in the details.
- threeseed 10y ago
  The unemployment rate in the US is 4.9% which is basically full employment. Now sure there are a number of people who don't report and those who wish to work more. But I don't think it's going to be easy to get those people back into work. Most are either in industries that are disappearing due to automation. Or they lack the skills/training to re-educate themselves. And without tariffs (which will impact exports) there is little chance of US being all that competitive in most industries that compete with Asia (I assume you actually mean China).
  - FrancoDiaz 10y ago
    4.9% isn't even close to being the real unemployment rate.
    - StevePerkins 10y ago
      Nor does it reflect the stagnant/decreasing income of the jobs that people DO have.
      - enraged_camel 10y ago
        Not to mention hordes of underemployed college grads.
  - 551199 10y ago
    You want to look into participation rate. Compare participation and unemployment rate over time and it's clear '4.9%' is pure fallacy.

branchless 10y ago

The American dream: very little work and lots of money. Reality: others work hard and get less so rentiers can kick back.

antr 10y ago
because... I haven't worked hard and saved money? or, like you are implying, I shouldn't have saved any money, and spent it all... fancy cars, exotic vacations, and parties. I guess I gave up one lifestyle to reach another one. We all have different priorities.
- branchless 10y ago
  I don't believe land is taxed highly enough so the system encourages monopolising land to appropriate value added by labour that should be going to workers. I think right now we have a situation were money makes money and selling your labour doesn't, in the average case not in the "I'm a senior engineer at google" case. I just don't see how this ends well. Workers struggling to get wage rises at all and yet 5% per anum return for those with capital. We've just had Trump and yet here everyone is basically saying "I can get further ahead by playing the system". It's not looking good.
  - antr 10y ago
    Relax, you are mixing apples and oranges. Many companies, large multinationals to small startups don't want to OWN property. It's capital intensive for them, they want to rent. Does Starbucks own its coffee shops? No. Can't you see how renting property is a service to many? Stop being apocalyptic simply because someone owns property. Take a chill pill.
    - jdcarluccio 10y ago
      You should offer chill pills as part of the property deal. :) like your style
    - branchless 10y ago

sean_patel 10y ago

> In early 2016 I purchased commercial real estate, got a 25 year fixed rate mortgage, and leased it. What was your downpayment? Asking because I tried to do the same thing earlier this year. Thought I was clever, did the math on how much I can rent out an apt on AirBnB, and what the mortgage would be on 30 year fixed, and my calcs said I need to put only 5% down to break-even. Then I contact lender and turns out, for Investment properties, they require minimum of 25% to 35% cash as downpayment. They said this was to hedge their risks against a borrower who would bail easily if an investment property goes south. Any way around this? i.e. around not having to put 25% down on investment RE?

tomcam 10y ago
No. Because the lender knows your AirBnB investments could easily be regulated out of existence. I suggest you live super frugally and save up cash for your real estate purchases. (We did this and so have many of our friend.)
- sean_patel 10y ago
  Thanks tomcam (cool username btw :)