For those who own rental property

[Elinor Everywhere]

We are looking to buy our second rental property. The first was a dream situation, but newbies that we were, we just figured it was the norm. Rubes! :) We bought a nice condo in a decent area, and it already had a tenant. That was last February, and when the lease was up, I got the renter to sign a 2-yr lease by keeping the price the same. I'm happy with that and it's going we'll - so far, easy and simple.

 

Now almost a year later, we're looking again. Property prices have risen, so we can't get as much for our money as we did last year. Also, HOA and lending rules here are such that if you buy a condo as an investment, there has to be 80% owner-occupancy rate in the complex. That's the tricky part now, because condos in our price range that we've looked at are already maxed out at the 80% limit, which means to buy it as an investor one has to pay cash. We don't have that kind of cash on hand.

 

S, we're now looking at single-family homes. Purchase price is a bit higher but there are no HOA fees so the monthly outlay is equitable. My question is this: we found a house that we like, in an area I believe is up and coming (I hope!). There are already two houses nearby for rent although each has been on the rental market for less than 30 days. Our house would be the nicest of them, as it has been completely remodeled.

 

Would you buy when there are nearby places already vacant and looking for tenants? I'm not buying properties to flip them; we are trying to get 4 or so properties to provide extra income for when my dh retires in 15 years.

[Mergath]

If you're not sure, I'd wait. My landlord has several properties, and he's completely broke. He can't fill the properties, the property taxes keep going up, and there are an insane number of rentals out there right now, probably because a lot of people are buying up properties at the current dirt-cheap prices and then renting them out. We've had him call and ask us for rent money early because he can't make the payment on the house. A few years ago, he was absolutely rolling in cash. Now, he's trying to sell off everything he can just to make ends meet. With the housing market changing so quickly, it's hard to predict what kind of situation you could find yourself in.

[Miss Marple]

We are in an area where there are more people looking to rent than to buy and there are not enough rentals. Do you know anything about the other properties: were they rented previously for long term? did they lose the tenants for a specific reason (ie raising rent)? Is the area a good or bad rental area - good/bad schools, crime, etc? Are the 2 homes available owned by the same landlord? I would find out the answers to those questions before jumping into buying anything.

 

If the other homes are overpriced, you can always come in with a lower rental price and get first shot at the available tenants :)

[Freckles]

If you want to buy my rental home in East Texas, I'll give you an awesome deal! I've discovered over the last 3 years I don't have the personality to be a landlord. I would be leary of buying if rentals are sitting empty. Just my 2 cents.

[Elinor Everywhere]

Ok, thanks everyone, holding off may be a good idea. Prices are continuing to rise, though, so that makes the decision harder. Where oh where is my crystal ball? :tongue_smilie:

[Kari C in SC]

We own 5 rental properties - 4 in SC (where we currently live) and 1 in FL (our former house). I just recently had to rerent a property because our tenants were military and needed to get out of the lease. It took me a couple months to rent. I base this on the holidays and most people not moving in the winter. We ended up renting to a family relocating for a job. That is my number one type of people looking at this time of year.

 

We started as landlords in 2008 with just the one house. We did not want to be landlords, but we had to move and could not sell our house. After my ds passed away, the house across the street from us went up as a foreclosure. We had some inheritance and we decided to invest it in that house. Throughout, 2011 and 2012, we purchased a total of 4 properties. 3 of these are in the same neighborhood we live in. Makes it very easy to show and maintain. The other is just up the road. We bought that one because it had a community pool that we can use as homeowners. I have no idea what our future holds. As of right now - today - I think this has been a great investment. We do pay a TON in property taxes and insurance, but we are still able to actively pay down the mortgages quickly. I am not a expert, so I do not know if the rug will be pulled out from under us. My only advice is to have a very good emergency fund in place. When we first started renting out of desperation - I put the first person I could find in my house. I had to pay 2 mortgages and our finances were very tights. When we expanded this business - we did it with a very comfortable emergency fund base. When something breaks - I don't stress. When it takes a month or two to place somebody - I am okay with it because I know our bills are being paid and there is no pressing need to place just anyone. Also, get an umbrella liability policy. It is cheap - $300 a year for a million dollar policy to cover 4 rentals. People like to sue and you need to have that protection. Anyway, this is long and not really helpful... do your research, have a plan in place and a financial safety net. Good luck.

[TranquilMind]

We are looking to buy our second rental property. The first was a dream situation, but newbies that we were, we just figured it was the norm. Rubes! :) We bought a nice condo in a decent area, and it already had a tenant. That was last February, and when the lease was up, I got the renter to sign a 2-yr lease by keeping the price the same. I'm happy with that and it's going we'll - so far, easy and simple.

 

Now almost a year later, we're looking again. Property prices have risen, so we can't get as much for our money as we did last year. Also, HOA and lending rules here are such that if you buy a condo as an investment, there has to be 80% owner-occupancy rate in the complex. That's the tricky part now, because condos in our price range that we've looked at are already maxed out at the 80% limit, which means to buy it as an investor one has to pay cash. We don't have that kind of cash on hand.

 

S, we're now looking at single-family homes. Purchase price is a bit higher but there are no HOA fees so the monthly outlay is equitable. My question is this: we found a house that we like, in an area I believe is up and coming (I hope!). There are already two houses nearby for rent although each has been on the rental market for less than 30 days. Our house would be the nicest of them, as it has been completely remodeled.

 

Would you buy when there are nearby places already vacant and looking for tenants? I'm not buying properties to flip them; we are trying to get 4 or so properties to provide extra income for when my dh retires in 15 years.

 

 

I prefer to buy where the homes are owner-occupied and where there are very few tenants. Then good tenants stay a long time. No one wants to live in what is perceived a "rental area".

[TranquilMind]

If you're not sure, I'd wait. My landlord has several properties, and he's completely broke. He can't fill the properties, the property taxes keep going up, and there are an insane number of rentals out there right now, probably because a lot of people are buying up properties at the current dirt-cheap prices and then renting them out. We've had him call and ask us for rent money early because he can't make the payment on the house. A few years ago, he was absolutely rolling in cash. Now, he's trying to sell off everything he can just to make ends meet. With the housing market changing so quickly, it's hard to predict what kind of situation you could find yourself in.

 

 

That would really worry me, as a tenant.

 

Yes, it is VERY expensive to maintain properties. I'm just paying off the latest $11,500 issue.

[Mergath]

That would really worry me, as a tenant.

 

Yes, it is VERY expensive to maintain properties. I'm just paying off the latest $11,500 issue.

 

Yeah, we try to help him out when we can though. He was really understanding back when dh was unemployed and worked with us on getting rent to him as we could. If the house does end up getting foreclosed on at some point, he'll let us know ahead of time.

[Mergath]

Ok, thanks everyone, holding off may be a good idea. Prices are continuing to rise, though, so that makes the decision harder. Where oh where is my crystal ball? :tongue_smilie:

 

Lol, if you find a good crystal ball supplier, be sure to give me their number. :p If it was me, I'd at least wait until all this fiscal cliff stuff has worked out one way or the other. If we fall screaming over the edge, they're saying it could send us into a second big recession, and god only knows what will happen then. But I'm not a huge risk-taker when it comes to money, so ymmv.