(Closed) Rental/investment properties ??

posted 4 years ago in Home
Post # 2
Member
3627 posts
Sugar bee

I could write a book. But the biggest thing people miss is reviewing the association’s books and records to make sure it is financially sound. Are the owners up to date on their dues? Does the association properly enforce its rights/remedies against delinquent owners? Is the association building a proper reserve account for future repairs? Are the reserves fully funded or have they been depleted? Is there any deferred maintenance? Have there been any special assessments? Will there be any special assessments in the foreseeable future? 

Read the condominium documents (every single last page) and make sure you understand them. Also read the minutes of the last couple of years of board/association meetings. 

Post # 4
Member
11137 posts
Sugar Beekeeper
  • Wedding: City, State

Beware of management companies!  They are not all created equal.  We were screwed over badly by more than one, including a skimmer.

Be sure you find your management company via a trusted referral.  One bad tenant can destroy your investment.  Being a landlord is very risky.  We decided it wasn’t worth it & got rid of our rentals.

That’s not to say you can’t be successful.  I just urge you to be very cautious as to in whom you place your trust.

Good luck on your new venture!  I hope it’s just the beginning!

Post # 6
Member
1740 posts
Bumble bee
  • Wedding: June 2016

I did not have a good experience as a rental property owner.  I only had one house (in addition to the other house I owned / lived in), but it was not easy, and I would not do it again.

A week or two ago I was listening to a segment on NPR about financial investments, and someone called in and asked the “expert” (I can’t remember her name at this point) about rental properties.  She basically said that unless you are willing and able to evict people no matter what their circumstances (a single mother with young kids, someone who just lost their job and is sincerely trying to work, etc.), don’t do it.  I could not agree more.  

In my case, my tenants were a small family (two parents and their baby girl).  For the first year or so they were very good about paying the rent on time.  They kept the house clean.  Then the father was in a really horrible car accident, which he was at least partially fault for, and was in the hosptial for weeks.  He was a construction worker, so he couldn’t work and he didn’t have disability, or any other type of insurance (and NC is a comparable negligence state, which means he was not going to be able to sue anyone else involved in the accident, even if they were also at fault).  The mother worked, but did not make enough money to cover the rent plus everything else.  They asked me if they could delay paying rent.  I said yes because I felt really bad evicting them under those circumstances — they truly had nowhere else to go, and how could I evict a baby??  Well… one month turned into two and turned into three, at which time he was able to make partial payments, but not enough to fully cover the rent, much less catch up on the past due rent.  And then I lost my job in the recession and the shit hit the fan.  

So all I’m saying is be very sure that you’re able to truly be a hard-ass landlord if you’re going to go that route.  Otherwise, you will not do well.  

Post # 7
Member
1232 posts
Bumble bee
  • Wedding: October 2016

Blah! I typed a long response and then it disappeared.

My fi and I are considering diversifying our portfolio with some real estate.  He is looking into buying a small office building with some other small businesses.  They would rent the space to themselves and rent out the few other offices that would be left.  We each own our home and he is working on getting his on the market.  We will live in mine for another year (or two…but don’t tell him that!) and then rent it out.  It is in a nice neighborhood and places like it are renting for about $700 more/month than my PITI.  Obviously there will be some upkeep, but we should be able to build a decent maintenance cushion.  I worry a little about how other people will treat it – it’s a beautiful home with hardwood floors, granite countertops, and nice finishes.  I’m hoping that once we buy our “forever” home I will be a little less emotionally attached to this home. 

We will likely hold the office building until fi retires (we’re aiming for 20 years, but it’ll likely be 25 for both of us).  Fi is going in with some other people, all of whom are older than him and will likely retire before him.  We’ll aim to buy them out if they want out when the time comes, so hopefully we’ll hold the whole property eventually and can sell, or alternately some new (younger) people will buy in over the years.  

I can see us potentially moving back in to this house for a couple years to mitigate any taxes that would come along with selling it.  It wouldn’t be a good retirement house – no bathroom on the main floor, and bedrooms are all either up or down stairs – but it would be fine for the stage my parents are in as empty nesters who aren’t quite retired.  If you are going to start investing in real estate, I strongly suggest working with a knowledgeable CPA who can guide you in the structure of the holidngs and taxes to maximize the financial side.  

Post # 8
Member
11137 posts
Sugar Beekeeper
  • Wedding: City, State

MrsBuesleBee:  

That sounds like a great plan!

Next question:  are you positioned to carry the property for a few months if you are unable to rent it for whatever reason?

Post # 9
Member
11527 posts
Sugar Beekeeper
  • Wedding: June 2015

I didn’t enjoy being a landlord. The cost of maintaining a property and the weekend time it eats up was not cost effective when I could have been making more money by the hour at my job. Property values do not always go up, either. Things happen even in good neighborhoods that can bring down property values.

I do know people who have been successful at it and manage a lot of properties. So it can be done. It’s just a matter of your career goals and if you have time to do this and want to focus x amount of time on it every month.

Post # 10
Member
3627 posts
Sugar bee

Whirlwind03:  I would be cautious about buying an office building with other non-real estate people. PM me if you want to discuss.

Post # 12
Member
925 posts
Busy bee

My fiance and I have been saving in order to either buy a rental property, start a business, or invest it in some other way. I’m commenting to follow.

Post # 13
Member
2600 posts
Sugar bee
  • Wedding: October 2010

I think that what you’re hearing here is that being a landlord isn’t for everyone–and that’s true, although it’s hard to say until you actually do it. It helps, however, to have someone with experience who can help you when you first start out. We had that because my DH’s family has a lot of properties and we lean on their expertise a lot. We can’t afford to use a management company so we manage our own, but we’ve got a quad so we live on the premises. DH’s family uses a management company now, but they have like, 10 or so different buildings and maybe 60+ tenants? Too many for one person to manage unless that’s your FT job. 

Some things that I can say generally: 

1. I’m not a financial whiz, so take this with a grain of salt, but I think that dollar for dollar, most financial whizzes would tell you that regular investing is on principle, a better deal than real estate-better ROI and greater flexibility/liquidity. Real estate requires repeated investment that yields phantom costs and you’re also paying interest on a mortgage, plus taxes. Now, that’s dollar-for-dollar, and you DO get something for investing in real estate, at least in the sense that if it’s your own house, you get to live in it (versus not being able to live in a stock). But the question of dollar-to-dollar is a bigger deal if you’re not going to live in the property yourself, so do your homework and run the numbers and make sure it’s an investment that makes sense becuase it WILL be a lot of work. There is something to be said for the fact that some people feel better equipped to handle real estate versus investment because one is real and the other is abstract. You do control things better, you do get some tax breaks, and in the US, the government is generally pro-homeowning. But do remember that you’re kind of making a lifestyle choice here, not just an ‘investment.’ 

2. Understand that if you are a landlord, the deck is sort of stacked against you in terms of tenant vs. landlord rights. There’s a saying that the Court case is only resolved when the tenant wins and it’s kind of true. Part of that means that you have to enact a pretty pragmatic attitude as well as a really business savvy kind of sensibility–and like MelissainNC: mentions it translate to being ruthless about the fact that your relationship wtih your tenants is a business relationship. That’s easier said than done though because you know, you’re human and you’re providing another human housing. 

3. It is work. It requires constant attention and organization–most landlords I know put aside several hours per week just to make sure their ducks are in line (the number of hours correlates to the number of units). Taxes take extra time. You have to save and organize receipts. You need strong paper trails. It’s a bit like owning a business in that respect. 

4. It’s not magic or rocket science, however. Millions of people are landlords and they’re usually everyday people just like you or me–it’s not something you can get a degree in and it’s not something that people are really ‘talented’ at. I’m not a veteran landlord myself, but my sense of it is that it’s really just kind of solving problems, and some people have a better temperament for that type of thing than others; others would rather drink bleach than come home from work and find out they have to spend their evening researching plumbers.

A resource we like is this book: http://www.amazon.com/Landlording-Handymanual-Scrupulous-Landladies-Themselves/dp/0932956378

Post # 14
Member
624 posts
Busy bee
  • Wedding: September 2019

Manager at investment firm. Take what I say how you will.  passive income will always be one of the faster ways to increase your income and have your money work for you.  

Tgese are the ones I currently have: 

in the US, I hold passive income in REITs, high dividend stocks, ETFs, and commercial and rental properties.  I am also a silent partner in a couple of LLCs just recently–one is  property managing.  I provide the investment guide on those LLCs as part of my part ownership agreement.  

the one thing you have to watch out if you have property rentals is the ratio Of the income to the expense. is the property fully owned with no loans? If there are–what’s your share of the loan And how much does your tenant supplement it?  If you lost your tenant can you pay the mortgage loans?  What’s the general annual expense of maintenance and how does that affect your income? 

Also o suggest creating a business to hold the rental property instead of YOU outright.  Look into limited liability Corp.

I honestly beloeve that the property rentals that we have are out long term retirement investments, but our high risk investments made our money.  if you’re thinking short term and high yield with rental that’s not realistic.  

Post # 15
Member
733 posts
Busy bee

We have an investment property. We’ve had it for years. It’s out of our area, so it is totally managed by a company. All we do is literally sit back and collect the money they send us and pay the mortgage. That’s it. They find the tenants, do the repairs, landscaping advertising etc etc. If it isn’t rented or the tenants dont pay, they don’t get paid, so they have a vested interest in making sure it all goes smoothly. And it does. Everyone told us it was going to be a nightmare, but it’s the easiest money we’ve ever made.

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