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"It’s like a doubling up. The homeowner goes to buy the next home, move up or move down. And because mortgages are so cheap, it’s a really good time to keep the

"It’s like a doubling up. The homeowner goes to buy the next home, move up or move down. And because mortgages are so cheap, it’s a really good time to keep the first one as a rental unit. And so each year I go to buy a next one and I keep my first one. And so that’s one big phenomenon. And all of a sudden I’m a real estate investor. And at the same time, institutional money’s been cheap. There’s a lot of news about the big private equity funds buying up homes, but it’s actually the individuals who are driving most of it. So in the last decade we’ve taken 8 million homes out of the resale cycle and moved them into the investment rental part of the pool. And that’s, you know, 9% of all the single family homes." This tells me that home seekers should be making offers to landlords rather than wasting their time making cold offers for people's primary residence. I bet a lot of those small time landlords are nervous about cash flow, and you could find one that's ready to get out.

willcipriano 5y ago
I think the trick to "we buy homes" or whatever is they buy way under market. My neighbor sold for something like 150k, they fixed the place up and resold it for a little over 500k. Landlords aren't going to go that low.
- bluGill 5y ago
  I'm guessing they put in 100k or more go remodel. 290k wouldn't surprise me. They are still making a lot money, but they are also taking that risk. There is far more of it going on than should be, but people who need to move in a hurry might like it. The better such companies that have existed for years without the advertising have good working relationships with contractors and thus get both a better deal and faster service than you could: the contractors know who brings in busines. They also know which contractors are actually good as opposed to scams. But the business doesn't support nearly the advertising that you see in normal markets. Call A qualified realtor with a dump house and they will call these people if your house is a hard sell. (If you know the fair value of your house you can avoid realtor fees selling direct )
  - willcipriano 5y ago
    I'm sure they put a lot of money in, these are old houses. I think they target less sophisticated sellers who don't have capital. She could've gotten a lot better deal if she put 20k - 30k in herself and fixed the major issues but she wasn't in a place to do that. A landlord with a few properties has more options and won't sell as low.
xwdv 5y ago
This will only guarantee you will buy the shittiest houses with poor cashflow or other issues, as those are the only ones landlords will sell off.
bsenftner 5y ago
Although the books are old and the author discredited, the "Rich Dad Poor Dad" real estate investment series still have a large number of people trying to follow the author's advice. They and similar "pop culture investors" are the prime landlords in over their heads that would be likely to sell. But be able to negotiate potential nonsense, as they are over their heads and tend not to be rational about their investment.
StevePerkins 5y ago
> "There’s a lot of news about the big private equity funds buying up homes, but it’s actually the individuals who are driving most of it." I realize there are a lot of "house flipper" shows on reality TV, but I don't buy this. I'm not receiving 20-30 phone calls and texts per week from "individuals" wanting to buy my house. I'm getting those calls from sophisticated commercial operations, who mask their phone numbers to include the same area code and first three digits as my own, etc. Individuals aren't putting up "We buy houses! Guaranteed offer!" billboards every few hundred feet in my city. I don't think that banks will even give individuals an endless series of mortgages. You can't declare rental income as "income" to qualify for mortgage loans.
- frankbreetz 5y ago
  This is definitely wrong in my city. Everytime something reasonable comes up for sales it sells in a couple hours and is back on the market in couple months with some cheap renovations for a ridiculous amount. They buyer/seller is almost always listed as an individual and not a corporation.
- curiousllama 5y ago
  No, but they consider a mortgage on a rental property with a signed lease separately from a mortgage on a primary/secondary residence. They’ll def give an endless series of mortgages to an otherwise wealthy person who keeps paying them back by renting out the homes.
- bognition 5y ago
  > “You can't declare rental income as "income" to qualify for mortgage loans.” You absolutely can, it is income after all. All the banks care about is if the cost of the new mortgage is going to exceed your debt to income ratio.
  - ryanianian 5y ago
    > All the banks care about is if the cost of the new mortgage is going to exceed your debt to income ratio. Not exactly. The underwriting process is very different for full-time residences versus investment/rental properties. Rates are usually higher, debt/income ratio must be lower, and appraisals and cashflow analyses include rental market considerations. Given this it's entirely reasonable to assume the rift between mortgage products for investment vs residence to widen. If congresspeople want to do something about perceived imbalance between residence and income real-estate, they could change federal subsidies or underwriting requirements for income properties making mortgages for income properties much more expensive and/or harder to get. (Just realized a peer comment said something similar.)
IAmGraydon 5y ago
What is described here (buying a chain of properties year to year) is unlikely for most people. You can’t use rental income when calculating your debt to income ratio. Unless you have a massive income or an equally massive pile of cash, you are going to quickly run out of lenders willing to lend to you in your entirely over-levered position. Also, you have to stay in a home for a certain number of years for it to be considered a “primary residence” and therefor able to be mortgaged with a low down payment. Otherwise in each transaction you’ll have to come up with 25-30% down.
- ttt333 5y ago
  > "You can’t use rental income when calculating your debt to income ratio." Do you have a source for this claim? Based on personal friends who work in the lending / single family rental home space, I don't think that's correct. [0] [1] [0]: https://www.valuepenguin.com/mortgages/claiming-rental-income-for-mortgage https://www.valuepenguin.com/mortgages/claiming-rental-incom... [1]: https://selling-guide.fanniemae.com/Selling-Guide/Origination-thru-Closing/Subpart-B3-Underwriting-Borrowers/Chapter-B3-3-Income-Assessment/Section-B3-3-1-Employment-and-Other-Sources-of-Income/1032995141/B3-3-1-08-Rental-Income-06-03-2020.htm https://selling-guide.fanniemae.com/Selling-Guide/Originatio...
  - StevePerkins 5y ago
    If that's actually the case, and many of those mortgages are adjustable-rate, then we've learned nothing and another 2007 may be inevitable. Fortunately, I still believe that the overwhelming majority of new rental units are being scooped up and placed on market by commercial entities, not individuals. You may have many individuals putting their second house up for rent, but I'm skeptical that banks are giving individuals a half-dozen loans in series. With the housing shortage as bad as it is (we're just not building enough to offset our population growth), I suspect that commercial entities would swoop in and buy up most second houses that individuals couldn't maintain anymore.
    - adwi 5y ago
      It is the case, and generally people that are savvy enough to purchase these are savvy enough to lock in a 3% rate when offered.
ianai 5y ago
Most or all of these type of landlords that I’ve spoken to strongly disliked to actively hated being a landlord. It’s very counter the “get wealthy slowly” narrative of being a landlord. Of course the financial aspects are true though they don’t mention them. This is in a location where good renters are a dime a dozen and building new units is pretty much impossible.
- nerdponx 5y ago
  Being a halfway decent landlord is a miserable pain in the ass unless you live or work very close to your rental property. And even then, it's pretty easy to see several months income go up in smoke with even a modest renovation or repair. The income is nice, but it's anything but "passive" unless your rents are so high that you can afford to pay a management company, and/or you are comfortable being a slumlord.
  - ianai 5y ago
    Yes and I’ve heard mostly complaints about management companies. All the classic principal/agent problems with the costs of bringing more people into the situation. Edit-added “more people”
- sjamaan 5y ago
  I've done the same (bought a house, kept the old one for rental) and used an agency as a middle man. They take care of collecting rent, and the day to day business if, say, a plumber needs to be called (I just have to sign off on it). This at a 6% fee of the monthly rent is quite worth it to avoid any hassle. The rent income also fully covers the mortgage of the new house so basically my living costs are for free.
- a2tech 5y ago
  Well yes, they all complain about being a landlord. However as you say, they never discuss the money side of things--just the hassle. Most landlords in a very bad year will break even, but in an average year will be in the positive. And of course you shouldn't even be looking at rental income in the short term--you should be looking at it as an asset that someone else pays for entirely and maybe slops a little extra cash to you in the short term and THEN when you're older and they've paid for your asset as a revenue generator. I've been looking at buying a rental even though the prices are insane right now simply as a source of reoccurring revenue when my wife and I are older and the loan has been paid off.
prepend 5y ago
> This tells me that home seekers should be making offers to landlords rather than wasting their time making cold offers for people's primary residence. I don’t think so as landlords are locked into a 3% fixed mortgage and have a profitable income stream. Unless there’s some life event that requires them to sell, landlords are less likely to sell than regular homeowners.

willcipriano 5y ago

I think the trick to "we buy homes" or whatever is they buy way under market. My neighbor sold for something like 150k, they fixed the place up and resold it for a little over 500k. Landlords aren't going to go that low.

bluGill 5y ago
I'm guessing they put in 100k or more go remodel. 290k wouldn't surprise me. They are still making a lot money, but they are also taking that risk. There is far more of it going on than should be, but people who need to move in a hurry might like it. The better such companies that have existed for years without the advertising have good working relationships with contractors and thus get both a better deal and faster service than you could: the contractors know who brings in busines. They also know which contractors are actually good as opposed to scams. But the business doesn't support nearly the advertising that you see in normal markets. Call A qualified realtor with a dump house and they will call these people if your house is a hard sell. (If you know the fair value of your house you can avoid realtor fees selling direct )
- willcipriano 5y ago
  I'm sure they put a lot of money in, these are old houses. I think they target less sophisticated sellers who don't have capital. She could've gotten a lot better deal if she put 20k - 30k in herself and fixed the major issues but she wasn't in a place to do that. A landlord with a few properties has more options and won't sell as low.

xwdv 5y ago

This will only guarantee you will buy the shittiest houses with poor cashflow or other issues, as those are the only ones landlords will sell off.

bsenftner 5y ago

Although the books are old and the author discredited, the "Rich Dad Poor Dad" real estate investment series still have a large number of people trying to follow the author's advice. They and similar "pop culture investors" are the prime landlords in over their heads that would be likely to sell. But be able to negotiate potential nonsense, as they are over their heads and tend not to be rational about their investment.

StevePerkins 5y ago

> "There’s a lot of news about the big private equity funds buying up homes, but it’s actually the individuals who are driving most of it." I realize there are a lot of "house flipper" shows on reality TV, but I don't buy this. I'm not receiving 20-30 phone calls and texts per week from "individuals" wanting to buy my house. I'm getting those calls from sophisticated commercial operations, who mask their phone numbers to include the same area code and first three digits as my own, etc. Individuals aren't putting up "We buy houses! Guaranteed offer!" billboards every few hundred feet in my city. I don't think that banks will even give individuals an endless series of mortgages. You can't declare rental income as "income" to qualify for mortgage loans.

frankbreetz 5y ago
This is definitely wrong in my city. Everytime something reasonable comes up for sales it sells in a couple hours and is back on the market in couple months with some cheap renovations for a ridiculous amount. They buyer/seller is almost always listed as an individual and not a corporation.
curiousllama 5y ago
No, but they consider a mortgage on a rental property with a signed lease separately from a mortgage on a primary/secondary residence. They’ll def give an endless series of mortgages to an otherwise wealthy person who keeps paying them back by renting out the homes.
bognition 5y ago
> “You can't declare rental income as "income" to qualify for mortgage loans.” You absolutely can, it is income after all. All the banks care about is if the cost of the new mortgage is going to exceed your debt to income ratio.
- ryanianian 5y ago
  > All the banks care about is if the cost of the new mortgage is going to exceed your debt to income ratio. Not exactly. The underwriting process is very different for full-time residences versus investment/rental properties. Rates are usually higher, debt/income ratio must be lower, and appraisals and cashflow analyses include rental market considerations. Given this it's entirely reasonable to assume the rift between mortgage products for investment vs residence to widen. If congresspeople want to do something about perceived imbalance between residence and income real-estate, they could change federal subsidies or underwriting requirements for income properties making mortgages for income properties much more expensive and/or harder to get. (Just realized a peer comment said something similar.)

IAmGraydon 5y ago

What is described here (buying a chain of properties year to year) is unlikely for most people. You can’t use rental income when calculating your debt to income ratio. Unless you have a massive income or an equally massive pile of cash, you are going to quickly run out of lenders willing to lend to you in your entirely over-levered position. Also, you have to stay in a home for a certain number of years for it to be considered a “primary residence” and therefor able to be mortgaged with a low down payment. Otherwise in each transaction you’ll have to come up with 25-30% down.

ttt333 5y ago
> "You can’t use rental income when calculating your debt to income ratio." Do you have a source for this claim? Based on personal friends who work in the lending / single family rental home space, I don't think that's correct. [0] [1] [0]: https://www.valuepenguin.com/mortgages/claiming-rental-income-for-mortgage https://www.valuepenguin.com/mortgages/claiming-rental-incom... [1]: https://selling-guide.fanniemae.com/Selling-Guide/Origination-thru-Closing/Subpart-B3-Underwriting-Borrowers/Chapter-B3-3-Income-Assessment/Section-B3-3-1-Employment-and-Other-Sources-of-Income/1032995141/B3-3-1-08-Rental-Income-06-03-2020.htm https://selling-guide.fanniemae.com/Selling-Guide/Originatio...
- StevePerkins 5y ago
  If that's actually the case, and many of those mortgages are adjustable-rate, then we've learned nothing and another 2007 may be inevitable. Fortunately, I still believe that the overwhelming majority of new rental units are being scooped up and placed on market by commercial entities, not individuals. You may have many individuals putting their second house up for rent, but I'm skeptical that banks are giving individuals a half-dozen loans in series. With the housing shortage as bad as it is (we're just not building enough to offset our population growth), I suspect that commercial entities would swoop in and buy up most second houses that individuals couldn't maintain anymore.
  - adwi 5y ago
    It is the case, and generally people that are savvy enough to purchase these are savvy enough to lock in a 3% rate when offered.

ianai 5y ago

Most or all of these type of landlords that I’ve spoken to strongly disliked to actively hated being a landlord. It’s very counter the “get wealthy slowly” narrative of being a landlord. Of course the financial aspects are true though they don’t mention them. This is in a location where good renters are a dime a dozen and building new units is pretty much impossible.

nerdponx 5y ago
Being a halfway decent landlord is a miserable pain in the ass unless you live or work very close to your rental property. And even then, it's pretty easy to see several months income go up in smoke with even a modest renovation or repair. The income is nice, but it's anything but "passive" unless your rents are so high that you can afford to pay a management company, and/or you are comfortable being a slumlord.
- ianai 5y ago
  Yes and I’ve heard mostly complaints about management companies. All the classic principal/agent problems with the costs of bringing more people into the situation. Edit-added “more people”
sjamaan 5y ago
I've done the same (bought a house, kept the old one for rental) and used an agency as a middle man. They take care of collecting rent, and the day to day business if, say, a plumber needs to be called (I just have to sign off on it). This at a 6% fee of the monthly rent is quite worth it to avoid any hassle. The rent income also fully covers the mortgage of the new house so basically my living costs are for free.
a2tech 5y ago
Well yes, they all complain about being a landlord. However as you say, they never discuss the money side of things--just the hassle. Most landlords in a very bad year will break even, but in an average year will be in the positive. And of course you shouldn't even be looking at rental income in the short term--you should be looking at it as an asset that someone else pays for entirely and maybe slops a little extra cash to you in the short term and THEN when you're older and they've paid for your asset as a revenue generator. I've been looking at buying a rental even though the prices are insane right now simply as a source of reoccurring revenue when my wife and I are older and the loan has been paid off.

prepend 5y ago

> This tells me that home seekers should be making offers to landlords rather than wasting their time making cold offers for people's primary residence. I don’t think so as landlords are locked into a 3% fixed mortgage and have a profitable income stream. Unless there’s some life event that requires them to sell, landlords are less likely to sell than regular homeowners.