Had an idea - buy a house and rent it out as income property in a decent neighborhood somewhere (west coast) so that the rent offsets the monthly mortgage. I've noticed a few other people doing this and wanted to get your guys' input on whether this might be a good investment for someone starting as an IBD analyst. Obviously time to manage the property is limited, but what if you had a family member who would take care of the day to day stuff?
Seems fairly low risk and low maintenance on my part. I'd just be taking responsibility for the mortgage...
how far along are you in your analyst role? ....I did this...it worked out pretty well.
Haha...starting in July but I've got some savings built up. Do you mind sharing details of how you did it (i.e. location, where you found tenants, if you had someone else manage it, etc.)? TIA
A rental property is like a wife. It ties you down and nags you all the time. Stuff like:
-3AM: toilet clogged. Need to show up to apartment with a plunger. Someone stuffed 14 paper cups into the toilet. Tenants keep getting dumber and dumber.
-Rent is late again. You still have to make the mortgage payment.
-Tenant lost his job. Filing for bankruptcy. Gets to live rent-free for the next three months while you wind your way through the tenant-friendly NYC courts. You still have to pay the mortgage, maintenance and property taxes.
You don't want to be a landlord as an analyst. Why not buy a REIT instead?
loco: MA (cape cod) , advertised it on VRBO, had my grandfather manage it ...it's tough though all the above is correct..... I did it a year and a half in because I knew I had to concentrate solely on banking and learning all the shit that comes along with this job.....
IP: Thanks for the input. I wouldn't be doing this in NYC, I was thinking of doing it in my hometown in the pacific northwest. I will be moving to New York though in the next few months for my IBD gig. I'd have my mom or cousin handle all the rent collection / mortgage payment aspects of it so I really wouldn't be that involved. Plus, I get to build equity from the ground up through the rent payments - I know the mortgage P&I would be mostly interest at first, but I'd be planning on holding the property for the medium to long term.
makeyourownluck: Thanks for the info. I didn't know you could advertise long term rentals on VRBO but I'll check it out.
What do you guys think of doing this through a property management company? I generally hear negative reviews of them, but still would be curious to know if this would be worthwhile investment if I could have a third party do all the dirty work.
I would not touch a prop management company, the more people that come between you and the property the more that can go wrong.
.
You should have at least 3-6 months ($15-$30k) of living expenses saved before you consider any type of investing. Once you have that saved you are much better off building a well-balanced stock portfolio consisting of individual securities, ETFs, index funds, etc. depending on experience, risk tolerance and time to manage the accounts. I own several properties and will tell you that unless you build in a margin of safety (true of all investments) you will likely not earn a great return on a real estate investment when you take into account all of the associated frictional costs of ownership: closing expenses, mortgage, taxes, utilities, eventual selling expenses, etc. The small gain that you may receive is not worth the headache of being a LL while you are an analyst (based on my experience). you would be better served buying a few REIT stocks or building a portfolio as mentioned above.
Meh unsure if all that interesting from equity investment standpoint. Returns: -What kind of 1-2yr pre-tax IRR (levered) do you think you could make on that? -How does this compare to what you could do in your p.a.? Remember this is private capital so you should require better returns for the illiquidity. I think it's not that attractive and ties up a ton of your capital (my assumption here) for what could amount to be unattractive returns on your equity right?
CF - Make sure to due dilly the CF sources and uses carefully. Maintenance, property taxes, etc. Seems by your answers ("moving to IBD gig") you are pretty much @ the beginning of your career --do you have the necessary liquidity to make necessary follow on investments? I don't know maybe you sold your biz during college and have $100k+ (pulled that required capital base out of my) sitting around.
Valuation - PNW did not get hit as hard as the rest of the country. Are you really going to be finding bargains like other areas (e.g. FL, AZ).
Common sense - If you ARE capital constrained and are consequently aiming to be a landlord in the bottom of the barrel / ghetto are u prepared to flash a gat if dudes don't pay? I'm serious. Dude's behind by 2 months - what do u do? Dispatch ur mom to break his legs while ur NYC getting cremated by your IB VP?
how about these dirt cheap bank owned homes selling for $50K-$100k? Buy with 100% cash for an even better deal. fix it up for another $50K. rent it out and sell after a few years. no mortgage payments to worry about. I'm asking this because I'm about to do this. any thoughts?
The analytical rigor (lack thereof) honestly makes me cringe here
Purchasing Real Estate (Originally Posted: 05/10/2010)
I am in the middle of purchasing an apartment building (just graduated from college) and want to know how to put it on my resume/where to put it on my resume? Any ideas?
Thanks
put "inherited money and put it in real estate."
but seriously, do a search for real estate resumes at top b-schools. every now and then, but not too often, you'll see someone with a section about their personal real estate portfolio that they built on the side while working as an analyst. i think the resumes i was sifting through were at Tuck, but i don't remember, found it off google
yes, tuck has many resumes up online...try to find relevant metrics to describe the deal as well
capital structure, leverage/coverage ratios, any covenants/requirements by lenders, debt/value, cap rates, etc
bidding process could be described as well
seriously? anybody with half an asshole for a brain can purchase an apt building with enough cash. its not exaclty a complex transaction. and you cant put all those whack metrics on you resume. this type of thing is a talking point, if it ever comes up in an interview or otherwise.
seriously??? no offense, i just LOLed my ass off.
you might want to leave that out all together. mostly bc it will look like you inherited money and are flaunting it on your resume, as said above. also, bc it doesnt add anything to your qualifications, work exp, skill sets. just leave it off.
Money wasn't inherited- turned my Bar Mitzvah money ($13,000) into $40,000 in 8 years. Combined with my business partners capital it's enough to purchase this $700K property
but thanks for assuming
that's thing. i didnt assume, but if you put that you purchased an apt building on you resume, anyone reading it will assume so.
unless you can fit "Money wasn't inherited- turned my Bar Mitzvah money ($13,000) into $40,000 in 8 years. Combined with my business partners capital it's enough to purchase this $700K property" on your resume without making it look clumsy.
^ Tim Sykes?
hahaha, I totally thought the same thing when I saw $13k in Bar Mitzvah cash. I think Tim turned his into like 1mm in college though.
You're contributing $40K toward the purchase of a $700K property? Is your business partner chipping in $660K or are you guys taking out a mortgage?
gee, do people use mortgages to buy properties?
20% down the bank doesn't require insurance, but if you put down 10% for example you get charged an insurance premium, but yes a mortgage is a must.
None of this sounds right.
40k equity PLUS business partner (s) 's equity, could very well be 20% of an asset worth approx 700k.
^^^ He's referring to PMI insurance. It's basically a CDS the bank takes out on the borrower and makes the borrower pay the premiums. Banks do this on properties purchased with greater than 80% LTV.
What kind of banks? I've been involved in different types of real estate finance in the US and Europe for 5 years and have never come across this...
You've never come accross PMI? Residential real estate in the US will typically require PMI if your loan is in excess of 80% of value.
To address a few questions above: - PMI is different than homeowners insurance. PMI is insurance for the lender against mortgage default, homeowners insurance is for the owner. - There is definitely real estate lending in the US. I am currently building a house and I have many options for my mortgage. I have good credit and a decent chunk of money in the bank, which obviously helps, but I've had no issues obtaining a mortgage. As a matter of fact, I'm probably going to do an 80/10 to avoid PMI. This is not thought of as an easy loan to obtain, but I'm having no issues whatsoever.
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