Post # 16
Member
268 posts
Helper bee
My fi and I own a property with two houses on it, and we’re able to put about $500 a month in savings after ALL expenses are said and done on even the worst of months. We manage it ourselves, and eventually plan to knock them down and build on the 2.5 acres of land. The property was a steal but we weren’t ready to move yet, so we are sort-of accidental landlords!
We did, however, have turnover earlier than we hoped, and decided to do a cosmetic reno to get a bit more money out of it! 25 days, these were the results of the living room and loft of the only part of the one house that was “yicky”
Post # 17
Member
9588 posts
Buzzing Beekeeper
BothCoasts: thanks for your thoughts! We are 100% going to use a management company to let them research the plumbers haha. I wish we could know what it will sell for in 20 years magically and be able to see if dollar for dollar that money would have made more money just sitting in our investment portfolio. But obviously we can’t. We view it as a calculated risk.
forgotusername: thank you for your input. We will use a mortgage and could afford to pay it indefinitely tenant or not but obviously thats not what were shooting for. The properties were considering are cheap, just a way to get our feet wet and diversify from our stocks, mutual funds, ETFs etc. He uses a traditional manager and I use a robo (Betterment, specifically. Curious your thoughts on those) We definitely dont think about this short term, we’d like to grow a real estate portfolio and then sell closer to retirement.
We will be opening an LLC for this purpose. Honestly I don’t understand the implications of that very thoroughly- my Darling Husband works for a real estate developer managing the budgets/construction/financing/everything of large scale builds so is more familiar with this than I am and he’s insistent on the LLC. We’d like to have a handful of rentals and possibly a construction company later in life so it makes sense to get an LLC established.
punkybrewster: amen. This is precisely what were trying to get going. Good for you.
Post # 18
Member
9588 posts
Buzzing Beekeeper
ImTheBoss: wow that looks great!! Nice job!
Post # 19
Member
3307 posts
Sugar bee
Being an LLC = good. Being a landlord = not good. This is based on our experience and that of our friends who owned several properies at the Jersey shore. A problem with condos may be the HOA. And there are always unexpected costs associated with any property. My SIL found out that she has to fix the walls on her condo to the tune of several thousand $. If you really want a dwelling as an investment property, I’d go with a house.
Post # 20
Member
11141 posts
Sugar Beekeeper
MrsBuesleBee:
A bit of a cautionary tale if I might. I am a real estate broker & have been for going on 13 years now, all of it up until just recently in SoCal. Dh & I had the same plan. We were going to buy a property per year (minimum), use them as rentals & sell them off for retirement income. It seemed like a solid plan–historically, SoCal real estate has always appreciated.
And then it all crashed. We got clobbered. Fortunately, I had my own firm at the time & we were agile enough to easily shift into REOs, but we took a beating on our investment properties. We were having a hard time keeping them rented, due to the previously mentioned management companies.
It sounds as if you’re in much better shape. You are already diversified, you have a dependable property manager & probably most importantly, you can afford to be a landlord. I’m posting our story in hopes that it may save another Bee some heartache.
Had we bought gold at the time instead of real estate, we’d be rolling in cash.
Post # 21
Member
694 posts
Busy bee
MrsBuesleBee: If you’re looking for a great management company I know of a woman who handles properties in Texas and Missouri but she is probably open to business in other areas. Great lady. Let me know if you’d like her info!
Post # 22
Member
503 posts
Busy bee
My parent’s inherited 2 apartment buildings and 2 duplexes from my Grandpa when he passed. 2 of the buildings were paid off but take a lot of work to maintain. (Snow removal, landscaping, cleaning the hallways and normal wear and tear) They live in a small town so there is not a management company that they can hire out.
I agree with the PP that stated you have to be ok evicting anyone. They have had a hard time evicting some tenants but they were 3 months behind on rent. I think it depends on the location and type of renter you will get though.
Now that they are nearing retirement, they have 4 properties that they 100% own. If they were to sell they would be sitting on some serious cash. I don’t think it’s a bad idea, espeically if you get a management company to take over the grunt of the work.
Good luck! Keep us bees posted 🙂
Post # 23
Member
7434 posts
Busy Beekeeper
Many mortgage lenders will not lend for an investment/ rental condo unless very strict requirements are met. These generally include things like the condo being in a building that is more than 50% owner-occupied, with fewer than 10% of units owned by any one person/ entity, and less than 70% vacancy rate. In some areas, it is extemely difficult to find any condo that meets all of these. Meaning, you may need to buy with all cash, or look at houses.
Post # 24
Member
1401 posts
Bumble bee
I acquired my first investment property 2.5 yrs ago, and now Darling Husband and I have three.
I think a big factor in the viability of the investment is the area. Our properties generate incredible revenue for us (3x the total mortgages) because we live in a high cost of renting, high rental population, college town. I also got an incredible deal on my first purchase, which skews this value some…
Id just encourage you to prepare for the possibility that your property may sit vacant for a bit depending on the area and availability of other rentals.
That said, I love it. Passive income is great in the short term, and diversification is great in the long run! I have my eyes out for #4… 🙂
Post # 25
Member
946 posts
Busy bee
- Wedding: December 1969 - City, State
We fell into being landlords because we bought a place and ended up moving out of the country a few months later. We currently pay on the place every month (about $150) because of non resident taxes, but almost everything is taken care of by the management company. I’ve had to deal with a few issues (one was a flood so that was fun), but we have a fantastic tenant who really takes care of the place – also part of the reason why we lose a bit each month is because we’ve only raised rent once in the past four years because we’d like him to stay. Maintenance fees are continually on the rise so that’s something to watch out for. We’re happy with it as an investment for now; it’s appreciated about $50k since we bought, and in Toronto, the market isn’t slowing down. We’re looking into a duplex in a desirable area where we live now. We’ll live in one unit and rent the other out until we move again and rent both out.
I would make myself familiar with landlord-tenant laws where you’re buying, find a good network of trades people (a plumber, electrician etc), and do your best to get the best tenant you can.
Post # 26
Member
9588 posts
Buzzing Beekeeper
Bees not letting me click reply for some reason but thanks for your thoughts everyone. @horseradish I read into more of what you’re saying and were def going to talk to banks before we get in too deep and make sure we can get the mortgage. I’m pretty sure we’ll be able to for a few reasons but I guess we won’t know till we try! If it doesn’t shake out we will just wait till we can pay in cash.
@BeachBee1988 that’s great. I hope we get there too!
@sassy411 that’s rough- were you able to hold onto them?
Post # 27
Member
9588 posts
Buzzing Beekeeper
@doberman yeah the HOA fees aren’t great for our numbers but a house can be a total money suck in repairs… Especially at the price range were looking at (fine for condo/townhouse, bottom of the barrel for house).
Post # 28
Member
11141 posts
Sugar Beekeeper
MrsBuesleBee:
We got rid of our rentals. Took quite the haircut in the process but it was very liberating.
We learned that landlording is just not for us. I think the outcome may have been quite different if we’d had a competent manager.
Post # 29
Member
426 posts
Helper bee
BeachBee1988: Hi, I was curious how you guys saved the downpayment for the additional properties? Did you take out a home equity loan on your existing home?
Also, did you put more than 10% down?
Post # 30
Member
1401 posts
Bumble bee
financegal87: DH and I both work (for now), so we live off a portion of his salary, save the majority of my base salary, and invest my bonuses. I’m in pharmaceutical sales, so a very big chunk of our compensation (40%ish?) is in bonus form.
There are really two ways to manage the income from the properties… You can either pay only the monthly mortgage amount OR put all (or the majority) of the rent amount toward paying down the principal every month. Which of those you choose (in my opinion) is really related to what your goal is.
For us, we hope to replace my annual salary with rental income so I can stay home and raise our future children. Because my salary is on the larger end (over the six figure threshold), we will need 5-8 properties to get to that clearance.
Because we will need more properties, instead if paying them down faster, we are taking the $$ in excess of the mortgage amounts, and putting it into a new down payment fund. After we have paid each mortgage every month, we put part aside into a repair/maintenance fund, and then save the rest to invest again.
TLDR: Rental income plus my bonuses build down payment funds pretty quickly. I personally wouldn’t take out a loan against our home to acquire additional properties.
We’ve put down as little as 5% on a property with a no PMI mortgage.
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