Passive Income?

[missjordan]

I would buy dividend paying ETF’s over rental property any day. Least the stock market won’t call you on the weekend saying the basements flooding can you come deal with it.


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[riversidejeep]

I'm 66 Y/O now and have done my rental time, half a dozen or so single family homes. Bought them on the cheap ( as in junkers) and did my own rebuilds as I'm a general contractor and I also did the major repairs for a guy that had somewhere around 500 rentals. After 20 years of dealing with tenants My vote would be for commercial space or storage if you just HAVE to have rentals. I like others have said, the stock market was out performing my rentals so I eventually converted properties into funds and I have zero regrets except that I didn't do it earlier.

 

[Scottstu]

Will you be buying the rental property outright or taking out another loan and using the HELOC to pay the down payment? Paying interest on a HELOC and on the rental property will eat up margin. Make sure there is enough profit to cover the interest because a single rental property typically won’t create a huge cash flow. A big part of the value is that the renter is paying off your mortgage as you build equity.

 

[LFC911]

Will you be buying the rental property outright or taking out another loan and using the HELOC to pay the down payment? Paying interest on a HELOC and on the rental property will eat up margin. Make sure there is enough profit to cover the interest because a single rental property typically won’t create a huge cash flow. A big part of the value is that the renter is paying off your mortgage as you build equity.

After reading everyone's feedback and at my age, i think if we buy a home we will find a fixer upper and have the boy apply for a low money down FHA loan, fix it up, live in it for a year and then look for another one. Only if he's up for the task.

I am also going to research and develop a business plan for a gated RV/boat storage. More to come on that. If we did do that, it would be with a HELOC. If the numbers don't work, we'll abandon and continue with the status quo.

 

[Weldor]

Rentals are like boats, you are happy the day you buy it and very happy the day you sell it. After Covid no way. Cost of up keep has went out of this world LOL. What used to be a dollar is now $10. We had good renters, but there was still maintenance costs. We got lucky and sold Nov 2020 just before the government said you did not have to pay rent. We also owned the rentals outright so no mortgage's.

 

[fmyth]

Legacy is also part of it...my son is 27 and has an IT degree and a good job about to move out of the nest. Another thought is for him to get an FHA loan and live in it for a year, fix it up, rent it out and move onto the next one. Snow ball it that way. We can help him out on the cash flow and then we can avoid the HELOC. Ultimately he's getting it all anyways.

Try to find your son a duplex or 4 plex and get an FHA loan (requires him to move in within 60 days and occupy 1 unit for 12 consecutive months). After 12 months of occupancy he can find a second property and do it again with another FHA loan (he must move in within 60 days and occupy 1 unit for 12 consecutive months in the new property). Depending on his debt to income he may not be able to qualify for the second purchase if the lender requires 2 years of being a landlord to count the rents as his income.

 

[Danny Hoey]

After reading everyone's feedback and at my age, i think if we buy a home we will find a fixer upper and have the boy apply for a low money down FHA loan, fix it up, live in it for a year and then look for another one. Only if he's up for the task.

I am also going to research and develop a business plan for a gated RV/boat storage. More to come on that. If we did do that, it would be with a HELOC. If the numbers don't work, we'll abandon and continue with the status quo.

How much "free" time do you have now?

 

[LFC911]

How much "free" time do you have now?

Most evenings and weekends except when I'm elk or deer hunting.

 

[Danny Hoey]

Most evenings and weekends except when I'm elk or deer hunting.

A couple side hustles my wife and I currently do; growing, propagating, and selling plants and berries. And beekeeping and selling honey. Both take time, and a lot of it is during August/September which can effect hunting time for me.

Not sure if it's an option for you, but with 200k here is what I would like to do. Find a solid agricultural piece of land, 20+ acres, with power and a well, and then scale our hustle.

 

[Scottstu]

After reading everyone's feedback and at my age, i think if we buy a home we will find a fixer upper and have the boy apply for a low money down FHA loan, fix it up, live in it for a year and then look for another one. Only if he's up for the task.

I am also going to research and develop a business plan for a gated RV/boat storage. More to come on that. If we did do that, it would be with a HELOC. If the numbers don't work, we'll abandon and continue with the status quo.

Best thing you can do is find a financial advisor you trust that can help you reach your goals.

 

[280twoeighty]

$200k in home equity is not really cash and is really not that much equity in your home.
Convential wisdom is work on paying off your home. Then retire and live off of your retirement income and SS. Seems like you are going down a road that makes little sense. Ymmv.

Do you have other debt? Again, like you home. Work on paying it off asap.

 

[LFC911]

$200k in home equity is not really cash and is really not that much equity in your home.
Convential wisdom is work on paying off your home. Then retire and live off of your retirement income and SS. Seems like you are going down a road that makes little sense. Ymmv.

Do you have other debt? Again, like you home. Work on paying it off asap.

House rate is <3%, so i don't think i'll pay that off early. Got a student loan, as i just finished my MBA. We do have an RV loan but the rest of the vehicles (3 cars and motorcycle) are paid off. No CC debt.

 

[280twoeighty]

Going further in debt at your guys age makes little sense to me. Again, Ymmv. Good luck.

 

[CorbLand]

House rate is <3%, so i don't think i'll pay that off early. Got a student loan, as i just finished my MBA. We do have an RV loan but the rest of the vehicles (3 cars and motorcycle) are paid off. No CC debt.

You would be stupid to pay extra on your mortgage with a sub 3% rate. Bonds and HYSA are paying more than that.

If you want to shoot for the “legacy” part of a rental, you could achieve that by encouraging your son to buy a home that needs some work and offer to help him complete that work. I would have been more likely to do that if I had someone closer that was handy to help me tackle some projects.

 

[SDHNTR]

I would buy dividend paying ETF’s over rental property any day. Least the stock market won’t call you on the weekend saying the basements flooding can you come deal with it.


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The other advantage is liquidity. Let’s say you need a new car. Or a new roof on the house. Or a healthcare need. Say you need 50 grand and most of your wealth is tied up in real estate…

Super easy to liquidate only as much as needed from a stock/bond portfolio.

You can’t sell just a portion of your rental house to fund a need. Gotta sell the whole thing. Pay taxes on the whole gain, etc. what if it’s a bad market to sell into?

If you’re gonna own a lot of property, you better keep a hefty pile of cash on hand too.

 

[riversidejeep]

A couple side hustles my wife and I currently do; growing, propagating, and selling plants and berries. And beekeeping and selling honey. Both take time, and a lot of it is during August/September which can effect hunting time for me.

Not sure if it's an option for you, but with 200k here is what I would like to do. Find a solid agricultural piece of land, 20+ acres, with power and a well, and then scale our hustle.

How does a contractor or farmer become a millionaire ? start with 2 million.

 

[riversidejeep]

You would be stupid to pay extra on your mortgage with a sub 3% rate. Bonds and HYSA are paying more than that.

If you want to shoot for the “legacy” part of a rental, you could achieve that by encouraging your son to buy a home that needs some work and offer to help him complete that work. I would have been more likely to do that if I had someone closer that was handy to help me tackle some projects.

This^^^^^^^ If your kid has any gumption and wants to succeed in the money game a fixer upper in a good area, In his name, live in it 2 years while fixing , Zero capital gains,wash and repeat. Soon be building new houses every 2 years.

 

[pacoalcracker]

riverside....exactly. I come from a farm family, still live on the original 353 acres...but it's mostly a mixed use development now. Mom had to sell all but my 3 acres in 1995. Farming is a tough way to eek out a living and it's only profitable if you have lots of scale. Contracting isn't much different, and there are more ways to lose money than to make money. Lots of people that will hold back money when the job is complete and you have to endure costly litigation.....which is the same as just walking away with the loss.

 

[Duckhunter14]

I’d second the financial advisor. I think a lot of people have a lot of really good ideas, and what has worked for them. But when you sit down, big picture and talk to someone who can run the numbers for you right on the spot. It puts a lot of things in perspective. They take into consideration; age, debt, risk, etc. If your plan is to leave a legacy and ensure your kid(s) are set up, then take them as well. Help them set up investment accounts, even a little bit now is a start. Name of the game is to diversify.

 

[Weldor]

I'm sure we are over thinking everything today. In the old days people just went for it. Some did well ,others not so much. But that is life. Best advice is save your penny's.