Those of you who own rental properties...

[2boysmom]

Read the retirement thread. pretty interesting that some of you own rentals to supplement your income.

How does one begin with finding a rental property?

What sort of issues goes with having a rental property?

What is the best kind of rental property/bang for your buck, maintenence, etc?

 

Thanks for any replies as we are considering this...

 

[ILiveInFlipFlops]

:lurk5:

 

DH and I were literally just discussing this very issue, and I was just on Realtor.com looking at properties :lol: I'll be very interested to hear what experienced owners have to say.

[Kari C in SC]

We started as accidental landlords, meaning we could not sell our home when we needed to move out of state. It was in our best interest to rent the property because the income paid the mortgage on the rental and the house we moved to. We always thought when the market recovered we would sell that house and pay down or pay off the house we live in now. Well... Our life changed drastically when our oldest son was killed in an auto accident. He was in the army and I was his beneficiary for his life insurance. We left that in an account for nearly a year because I just could not deal with it and it caused me lots of anxiety. Then one morning I woke up and saw the house across the street was for sale. I messaged a realtor friend and asked the price. It was like I knew that was what we were supposed to do. It was a foreclosure and a great price. It needed work, but we did it ourselves. Well... In the last 3 years, we have bought 6 houses. I shop interest rates on bankrate.com and I have gotten some pretty amazing rates for investment properties. We also have equity loans to buy part of the properties. It is a well worked financial puzzle. For our purposes, we stick to single family homes. I prefer them to be in the 1500 to 1600 sq ft range. I like 3 bedrooms. We find the larger the house, the higher the rent, the more unique situations you get. If you stick with a bit smaller, you get couples starting out and a bit less drama. I am pretty picky on my tenants. I would rather the house be empty than deal with a nightmare down the road. We do take dogs because that is a must in our area. Everyone has a dog. The maintenance issues are appliances, hvac, plumbing and all your typical stuff times 7 houses. My dh is handy and does a lot of repairs himself. We have a good friend that does all our hvac repairs and is quick when we need it done. Our one property is out of state and I have accumulated a list of go to repair people for that house. It is not easy work, but in the end, it should provide us with a good retirement income.

[creekland]

Make sure you run the numbers to see if rental house owning is decent for your area.  What works in one area is not necessarily so good in another.

 

We also started as a landlord when we decided we didn't want to sell our house in FL - just in case we wanted to move back.  We found out how easy and "income producing" it was to rent - though we've also since decided it's a bit of a hassle having one out of state, so sold it a few years into having it as a rental.

 

Locally, we've bought two.  We also like single family houses as I don't want to be bothered with apt or duplexes or similar.  Many potential tenants want 3 bedrooms - then 2 baths and/or a garage are also biggies.  By not going rock bottom with places, we tend to get better tenants and we don't care for the hassle of bad ones.  A relative we have invested in apt buildings... huge difference in hassle IMO.  We often have a choice of who we want in as nice places around here rent super quickly even at prices above what Zillow estimates.  Our last opening was rented within 3 hours of posting an ad for it on Craigslist.  Most tenants stay longer than a year.  We allow pets as long as they aren't on the "dangerous dog" list from our insurance company.  We ALWAYS screen tenants with a credit check company - the one time we let that slide we did get burned... and had to evict + clean.  Having tenants that pay their bills on time saves "issues" later.  A bankruptcy can be ok pending what it was for.  Regular late payments are not ok.  As with the pp, hubby does almost all repairs himself, though we pay others to replace carpets and things when necessary.

 

Pros - if chosen correctly - great investments from having someone else pay PITI + extra for repairs and building equity.  In the end, the value is yours.

 

Cons - the occasional "bad" tenant and some time when repairs are needed.  Also, your investment $$ is not liquid if you were to need to cash out.  When the economy tanked and hubby's income really dropped we did everything we could to not need to sell the houses as we'd have had to take a loss to "fire sale" them. (Since we put a fair bit into them we wouldn't have lost 100%, but it did drop to about 50% of what we had invested if we had needed to cash out.)  Now their value is coming back up to speed... and, of course, the mortgage is being paid down monthly at no cost to us.  When investing in real estate, be SURE you are not going to need the $$ at any specific time.  It's a long term deal.  Also remember, when going to sell, there are property taxes and perhaps listing fees that you will need to pay.  They can eat a chunk of $$, so you'll want a bit in there before you want to cash out.  Save all receipts from anything for tax purposes...

[2boysmom]

kari in SC and Creekland...Questions.....

 

When you bought your first rental property, did you still have a mortgage on your own home? How does that work?

How much did you put down on a rental home? (If you don't mind my asking).

Does the bank loan you the money for a 2nd mortgage?

Do you get any tax breaks?

What price range was your original rental property for sale?

Is buying a foreclosure safe?

Would it be good (if the location is good) to buy a property in your own subdivision? near your own home? thoughts?

 

Just some questions...thanks if you can help out.

[Happy]

You might want to look at the book, 'Hold' by Gary Keller.

Very practical look at how to evaluate, acquire, and enjoy rental property.

[idnib]

We've been landlords twice. The first time we bought a house and didn't sell our condo because property values were going up and we wanted to wait. We eventually sold it.

 

Now we've purchased a duplex, both sides of which are rented out. We're planning on moving in when we need more space and connecting the two units inside. Eventually when the kids move out we'll re-rent it or we may have to out one set of parents in the other half. When we're retired we could live in half and rent the other half out, or not if we don't need the money. We really like the flexibility of renting the whole thing, half of it, living in the entire building, or moving in aging parents.

 

Try and find a local landlords' association. It's difficult to answer your questions because the general answers are enough to write a book and the specific answers vary so much by locality. I would say that in general the more desirable an area is, the more you have to deal with laws and less with tenant problems. If an area is less desirable, you might not have as many legal issues like rent boards and such, but you might have to work harder to fill properties. It really varies so much by state and desirability.

[*lifeoftheparty*]

We'll be renting out our townhouse in a few years. We live in a very sought after community- with pools, trails, playgrounds, etc. It's very near a military base and more than half of people that live here (including us) are military or government. So there are always people moving in. Most of the houses on our street are rentals and they are never empty more than 2-3 weeks. Rent is high, but military gets BAH and government gets COLA, so it's not a problem.

I have been thinking about possibly buying another condo or townhouse in this comminuty to rent out....

[Laura Corin]

We got into it by accident: we bought a flat in London then had to move away.  We decided not to sell and the value of the property has risen in the last 17 years.  There's still a small mortgage on the property, but most of the rental is income.  Currently, Husband has one of the rooms because he's in London on business most weeks.  He has two young flat mates - this works fine.

 

We expect to use the rental as retirement income, only selling if/when we need more cash for care.

 

L

[idnib]

We'll be renting out our townhouse in a few years. We live in a very sought after community- with pools, trails, playgrounds, etc. It's very near a military base and more than half of people that live here (including us) are military or government. So there are always people moving in. Most of the houses on our street are rentals and they are never empty more than 2-3 weeks. Rent is high, but military gets BAH and government gets COLA, so it's not a problem.

 

I have been thinking about possibly buying another condo or townhouse in this comminuty to rent out....

 

It sounds like you should buy another unit if you can swing it. Having a nice turnover of well-employed people, the ability to quickly fill units, and high rents removes so much of the hassle.

[*lifeoftheparty*]

It sounds like you should buy another unit if you can swing it. Having a nice turnover of well-employed people, the ability to quickly fill units, and high rents removes so much of the hassle.

We have seriously been thinking about it. My mom moved up here and rents an apartment in the next town over. I was thinking that if we bought a condo, she could be our first tenant.

[creekland]

kari in SC and Creekland...Questions.....

 

When you bought your first rental property, did you still have a mortgage on your own home? How does that work?

How much did you put down on a rental home? (If you don't mind my asking).

Does the bank loan you the money for a 2nd mortgage?

Do you get any tax breaks?

What price range was your original rental property for sale?

Is buying a foreclosure safe?

Would it be good (if the location is good) to buy a property in your own subdivision? near your own home? thoughts?

 

Just some questions...thanks if you can help out.

I tried responding to this yesterday and it got wiped out when the site wouldn't respond... :glare:

 

Anyway...

 

We still have a mortgage on our primary property and separate mortgages on our rental properties.  The one doesn't affect the others at all (other than perhaps debt ratio).  Each place is its own entity.

 

We got our rental property mortgages from our credit union.  They've since resold them, but such is life.

 

Hubby does the taxes... I know when we sold one property and bought another we did an "exchange" which exempted us from paying capital gains taxes on it (until we sell the other property).  There were still property taxes on the sales.  We also opt not to depreciate the properties as that would affect taxes when we sold them.  That's a personal choice.

 

We've put between 25% to 50% down depending upon the property and how we were buying it - all profits from exchanges have to go into the new property to avoid capital gains...  Our first downpayment was totally taken from a HE on our original property with full knowledge by the credit union - best decision we ever made, but we're not debt phobic when it comes to investments (and had a low mortgage to value on our place). Leveraging $$ can work nicely when the numbers are there.  We made a bit of money off the borrowed $$, but never dropped below water overall should everything have tanked.  YMMV.  Do the homework for your area and your finances.

 

Our current rentals are in the 140K - 175K range. It's important (for us) to stay low enough to have the rent cover the mortgage, yet high enough to get desirable properties.  Many choose to lower the quality of the properties.  That's also a personal choice. Ours have always been super easy to rent at a nice price, so we have no regrets.  The places we buy are places "I" wouldn't mind living in - that's one of my main criterias when we shop, but again, not everyone has that as one of their main "needs" pending what kind of rental they want.

 

We have not yet done a foreclosure, but I wouldn't be afraid of doing one - or auction properties.  Just do your homework carefully and don't exceed a price you feel you can work with.  Right now, we're not buying as we're paying for colleges and our economic situation is not yet back up to where it was before the downturn.  It's getting closer, but we still have colleges to send our "extra" investment $$ to for a few more years.  (I don't mind investing in my kids...)

 

We do prefer having rental properties relatively close to our house as we do not need a management company and can do many repairs ourselves.  Since we live rural, we chose to buy properties in a nearby town as most folks prefer to live in or near civilization.  It takes us 20 - 25 minutes to get to our properties.

 

Take your time when shopping for properties. It's worth it to get a real feel for prices in your area, both sale and rental prices.  Then you will also know when you see a decent bargain (be careful to check quality of the nuts and bolts in the house, etc).

[NotSoObvious]

We rented out our house when we moved because it was a hot time for rentals, but not so much for selling. We are in a very desirable community and had the perfect house for a rental. Our property manager (worth EVERY penny since we aren't in the state) lives around the corner.

 

Everything has been excellent. We've had the same renters the whole time and they just signed another two year year lease (total of four years).

 

Yes, we hope to keep it forever (it's only 8 years old). It will be paid off when our kids go to college, so hopefully we can keep it as a rental, but if not, then we can sell it.