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This doesn't seem to be her case though - she owns "27 low-income apartments" - I don't know if those are buildings or just apartments, but 1.2 million in mortg
by SketchySeaBeast 7y ago
This doesn't seem to be her case though - she owns "27 low-income apartments" - I don't know if those are buildings or just apartments, but 1.2 million in mortgages owed after 2 months is insane if it's just 27 individual apartments. And she only made $24,0000 last year on all that? These numbers are just insane to me.
Edit: Ah, 1.2 million total, not currently owing.
- richthegeek 7y agoHer total mortgate exposure is $1.2m, not her currently owed amount. $24k is a yield of only 2% so yeah she's on razor thin margins... which does explain why she's immediately in jeopardy from the slightest economic wobble (not that this is a slight wobble).
- SketchySeaBeast 7y agoAh, that makes way more sense. Thanks! Me read bad sometimes.
- akgoel 7y agoThis really becomes a question of leverage. If she only put down 20%, then her return on invested capital is 10%.
- intortus 7y agoProbably $27k of income per month with $29k of expenses, implying a $1.2M loan due in a few years? Just speculating.
- klmadfejno 7y agoBeing a landlord is much less profitable than intuition would lead you to assume.
- sokoloff 7y agoIndeed. I find the people who complain most loudly about how easy and profitable it is to be a landlord generally have no first-hand experience on the topic.
- refurb 7y agoIndeed! Just talk to professional landlord about cap rates. Generally you aim for 10%+ cap rates, which are exceeding difficult to find with the exception of a few markets. If your cap rate is less than 10%, you’re on thin margins and a new roof would probably push you into the red.
- lotsofpulp 7y agoIt’s definitely work and a lot of risk unless you were gifted property in a high demand urban area or vacation hotspot. Putting your money in VOO or a bunch of FAANG stock will prob net you a lot more for a lot less work based on how the government needs to keep the equity markets appreciating. Real estate purchased decades ago in hot spots might be easy money, but buying it these days is just for diversification of assets for me.
- treis 7y agoShe's probably not counting appreciation and principle reduction. Her 1.2 million in mortgages is probably on ~2 millionish in property. Last year she probably saw their value go up a few percent while paying down 40k in principle. Her profit is probably in the 6 figures and the 24k is cash flow.
- SketchySeaBeast 7y agoHopefully. She's probably just considering the profit that enables her to eat.
- thrower123 7y agoThere are a lot of games you can play with the IRS to reduce the amount of profit that you show from rental properties. You can count depreciation, property taxes, mortgage payments, utilities, maintenance, improvements, and a whole host of other expenses. Particularly with depreciation thrown in, it's not uncommon for small-time landlords to show losses on their rentals. But even if it's low-income housing in Connecticut, that's got to be close to $500-1000/month in rent per unit. Accounting for some amount of delinquency or vacancy, that's still $150k-$300k in revenue, and I think I'm being conservative. Something doesn't add up with this story.
- shuckles 7y agoEverything you listed count as legitimate expenses.
- thrower123 7y agoI know, I am a landlord. Depreciation, as it is normally calculated, is somewhat nonsense on properties, especially over the past decade as they have increased by leaps and bounds in value.
- zaroth 7y agoNot to mention the depreciation has to be recaptured at the time of sale.
- AjithAntony 7y agoNot if you die first!
- shuckles 7y agoYou are depreciating the built structure, not the land. It’s land values which increase.
- thrower123 7y ago