Do you own a rental property?

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Sunshine2Me
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Do you own a rental property?

Postby Sunshine2Me » Mon Aug 28, 2017 7:29 pm

Curious if anyone here owns a rental property? How long have you owned it, and does it make you money? How did you come to own it, and how did you learn to manage it? Geographically, is it close to you or far from you?

boots-aregard
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Re: Do you own a rental property?

Postby boots-aregard » Mon Aug 28, 2017 8:00 pm

Yes. We have mortgages on all our rentals, because some resulted from a 1031 exchange from the house we owned and moved out of (right in the teeth of the recession) from southern to northern California. Couldn't sell it for what we owed, so rather than walk away, we rented it until it recovered (8 years) then sold it and rolled that money and mortgage liability into other properties. In the mean time, we'd acquired a few more (using inheritance money from my mother.)

So, with mortgages, we don't make a lot of money off them, but our plan is (1) appreciation on the California properties (owned for about 5 years now, so bought low in the recession and all have gone up in value. Plus, I have low interest loans). (2) pay down mortgages from the business we built here until my DH retires in a few years and (3) diversification with a few out-of-state rentals.

I manage the in-state rentals, and have property managers for the out of state ones. I like managing the rentals -- NOT EVERYBODY DOES. And not everybody has the right mindset for it. My real estate agent has bought 3 rentals, and they drive him crazy because he just doesn't have the right mindset. My best friend in the area goes bonkers anytime I tell her about a hiccup in the houses, because she absolutely couldn't stand to be a landlord.

I also like fixing things, and knowing about what's fixed and how fixes are done right versus wrong. We bought fixer houses and completely renovated two of them before renting. It was fun, and I very much enjoyed taking a broken house and making it work again. But that's my weird quirk. You can't panic, and you have to have enough cash or credit available to float when the property is broken or not producing. It's not the kind of thing you want to do on a shoestring. (Which is how I did it, so I'm a hypocrite. But it's FAR EASIER to manage them now, when I'm not on a shoestring!)

We are beginning to think the out-of-state rentals were a mistake. The idea of diversification might have been a good one, but we've had problems with property managers viewing us a deep pockets. I flew out to the OK properties twice this summer to do the turn over between renters. The PM wanted $2500 to do the turn, stating that the evicted renter left the place a shambles. Well, she hadn't. She left this 3-years-new property in perfectly fine shape except for a couple pieces of furniture left behind and a few areas that needed paint touch up and carpet shampooing. I turned it for less than 35% of the PM's bid, and that counted my flight cost and car rental! I don't actually do all the painting and shampooing and I certainly didn't do fence fix, dump run and mowing. I hired all that out, but still saved money. So I fired the property manager, hired someone else.

Then the Chicago PMs bid $875 for 3 issues at a property there -- 3 separate tickets with separate call costs included, even though two were simple carpentry issues (screwing cabinet doors back on). I had that work done for under $500. Fired them, hired someone else. Now, the difference between $875 and it's done versus $500 and I have to make a bunch of phone calls is just irritation factor, but since I know how much things cost, it really gripes my soul that they're out taking advantage, and I don't want to work with people like that.

So I'm the rara avis who would prefer to be my own manager rather than rely on property managers, but even with the vacancies and the hiccups noted, I think we're still in the black on the out-of-state properties, and we're certainly in the black on the in-state ones. The out-of-staters should produce more actual cash-flow than the in-staters according to my spreadsheet, but we've just had this messy run of luck with turnovers all in one year.

You also 'make money' on the depreciation, which wipes out any tax on your rental income (small though it might be in the first couple years). Paying off the mortgages entirely may not be wise, given that interest is still the cheapest money you will see, but that depends on your long term game plan.

Good insurance is critical. Find a good attorney before you need one. (Someone in your area will specialize in evictions, and has a program you can sign up for). Do your proper background checking on tenants. Follow your state laws very carefully so you reduce your liability exposure.

Funny thing to note: a banker friend told me that banks won't lend again to a new landlord after the first two rentals for a period of time (18 months? 2 years? I forget.) Because the bank wants to wait and see if you can take being a landlord, or if you wind up just dumping the properties. HAHA! I don't know if she was pulling my leg or not, but I thought that was funny.

piedmontfields
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Re: Do you own a rental property?

Postby piedmontfields » Mon Aug 28, 2017 8:08 pm

You have the right attitude for being a landlord, aregard. Personally, I find there are much easier ways to make money. The people I know who think being a landlord is worth the trouble all live in California. Coincidence? I think not! :-)

boots-aregard
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Re: Do you own a rental property?

Postby boots-aregard » Mon Aug 28, 2017 8:35 pm

piedmontfields - would love to hear the easier ways! I have to say I do not have the temperament for the stock market. Even when I studied finance, my eyes would glaze over and it was an important topic. I just don't connect to how money grows in a back room somewhere, so I steer clear of that. But, hey, other ideas?

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Re: Do you own a rental property?

Postby Xanthoria » Mon Aug 28, 2017 8:42 pm

We have just become landlords, renting out our home in San Francisco for what seems like an extortionate amount but is actually very normal for the area. Our mortgage on that place stays the same, and the rent covers the mortgage on our new place which we are living in while fixing up. So basically we got another house for the same monthly payment which, when you put it in those somewhat naive terms, works great! :mrgreen:

Ditto everything aregard says. After extensive background checks we rented specifying no pets. Our old neighbors tell us tenants have a dog. I'm just :roll: every time I think about it, but hubby is blase. If we kick them out we're back to square one looking for tenants and there's loss of rental income. If they ruin the place they will pay!!!

I'm not sure I'm cut out for landlording since I really like our SF home and feel protective of it, but financially it is working out.

Also ditto on wanting to know if the easier ways to make money? :mrgreen:

silk
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Re: Do you own a rental property?

Postby silk » Mon Aug 28, 2017 8:53 pm

I bought a little place late last year, right after I got a new job and moved out of the area (couldn't afford to buy where I was moving to, hated watching the market move faster than I could save). I got some flatmates. They're still there, even though they were temporary, hah. I need to find another person, there's an empty room ("mine").

It's ticking along. I pay a guy to do the lawns and weeds; I could do it but I am time poor and it's not worth my time/stress/energy for an hour or two of work. I'd rather pay him. I had to get some of the plumbing sorted. Other than that, good solid little house that only needs maintenance, so I've got a list of jobs to tick off slowly.
I recently got a rental appraisal which was much lower than I hoped so I've not changed to them, even though I'm incredibly time poor and really wanted to farm the property management out and ease my workload for a bit.

I'm hoping I can swing another property in the near future. Windfall from family trust, and a loan to mum, will be coming to me in about 6 months so I should have *just* enough, when combined with equity in the current property. I have thought about getting a place I can live in, but realistically it might be better to get a 'beater' rental that pays it's own way, than an overpriced tiny shoebox that costs me three times as much to live in as renting/flatting.

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Re: Do you own a rental property?

Postby heddylamar » Tue Aug 29, 2017 1:24 am

Used to. Sold it ~10 yrs ago. It was .25 mile from the current house, about 1/2 the size. We had a property management company.

We'll be entering into the landlord world again soon, once the farm is built. Current house will have a different market than the previous, more family oriented, and will require lawn maintenance. I've already decided to include a lawn care service in the rent (nominal over 12 months), but am undecided about a management company. Either way, I kept notes of the problems with the previous one, and will discuss before entering into any contract.

We did not make any money off the rental, nor will we plan to off the future one. If we incur a loss (or, possibly, if I recall correctly, break even), we will benefit on our taxes. I *think* that's federal, not state, taxes.

piedmontfields
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Re: Do you own a rental property?

Postby piedmontfields » Tue Aug 29, 2017 1:44 am

Xanthoria wrote: Also ditto on wanting to know if the easier ways to make money? :mrgreen:


Uh, way stupid and simple but W O R K I N G (at a well paid job) and I N V E S T I N G (in a patient way, say 10-30 year horizons) and S A V I N G (and living below your income).Voila. Pretty low stress. No evictions.
Last edited by piedmontfields on Wed Aug 30, 2017 5:59 pm, edited 1 time in total.

silk
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Re: Do you own a rental property?

Postby silk » Tue Aug 29, 2017 2:04 am

piedmontfields wrote:
Xanthoria wrote: Also ditto on wanting to know if the easier ways to make money? :mrgreen:


Uh, way stupid and simple but W O R K I N G (at a well paid job) and I N V E S T I N G (in a patient way, say 10-30 year horizons) and S A V I N G (and living below your income).Voila. Pretty low stress. No evictions.


My property is part of my longer term investment plan/strategy. Call it retirement funds, if you will (I am 30, so 35+ years until I can collect my pension). But I also have the desire to do more than just sit and wait.

piedmontfields
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Re: Do you own a rental property?

Postby piedmontfields » Tue Aug 29, 2017 2:14 am

Silk, I find that my returns in 5-7 years of investing are significant and include no human behavior hassles (on an intimate level). However, at this point, I need the US market to tank! It is way too high and I am making too much money (for plan/reason). I'd also like to be doing more investment at discount these days. Oddly enough, I feel this is not too far away :-D So probably my tactics are not that terrible.

Others prefer the more "tangible" effort of rental real estate. I understand , but am not interested! Aregard obviously enjoys the routine work of rentals, so that is a good fit for her. I would not---especially where I live (I don't think off-location rentals are a good idea, for reasons aregard described in her experience---which are not uncommon experiences across the US).

Maybe it is just people in beautiful parts of the world (California, Hamilton NZ) who love rental real estate. It can be pretty ugly in other parts of the world--and yes, there are easier ways to make money.

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Re: Do you own a rental property?

Postby Tabby » Wed Sep 06, 2017 11:15 pm

We are accidental landlords. Back when the 2008 crash was in progress, I was selling my house to move in with my then BF, now DH. The plan was to subsequently sell his townhouse condo and buy our own place. Well, not only did prices crash but there was also a $5K/unit special assessment levied against owners for emergency repairs to the parking garage in the condo. Several people put their units up for sale at less than what BF/DH owed. But house prices were also cheap so we bought a place with the intent to rent for a year to let the market (and condo corp) settle. We rented to the local CFL team for 6 months and it worked out great. The market didn't change immediately so we used the money to do a much-needed bathroom reno and then rented it long term. We've had it as a rental ever since.

I don't know what the tax situation is in the US but in Canada you can claim all the expenses for a rental, so we've been able to gradually fix it up. It has earned us a bit of money but it has also provided us a place for deductions. Someday we will realize the equity but for the time being, it's just one other thing.

piedmontfields
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Re: Do you own a rental property?

Postby piedmontfields » Thu Sep 07, 2017 1:25 am

As my DH likes to point out to me, being a landlord CAN work out quite well for the property owner. It just doesn't always work out well. Sorry to be a naysayer--I admire those who can do it, as obviously many people need to rent, not buy.

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Re: Do you own a rental property?

Postby Kyra's Mom » Fri Sep 08, 2017 4:43 am

I don't and never will.

Right now I am cleaning up my uncle's estate. He was renting a small house from an acquaintance of his. I guess before him, her brother stiffed her on the rent. She got him out and rented to my uncle. He committed suicide in the house :cry: . It wasn't a big mess but just ugh. I think she is putting the house up for sale and saying goodbye to being a landlord. I guess if you like adventure...

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Xanthoria
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Re: Do you own a rental property?

Postby Xanthoria » Wed Sep 13, 2017 11:51 pm

silk wrote:
piedmontfields wrote:
Xanthoria wrote: Also ditto on wanting to know if the easier ways to make money? :mrgreen:


Uh, way stupid and simple but W O R K I N G (at a well paid job) and I N V E S T I N G (in a patient way, say 10-30 year horizons) and S A V I N G (and living below your income).Voila. Pretty low stress. No evictions.


My property is part of my longer term investment plan/strategy. Call it retirement funds, if you will (I am 30, so 35+ years until I can collect my pension). But I also have the desire to do more than just sit and wait.


Yeah OK! :lol: I work full time, invest in 401k etc and like silk have invested in real estate too. Living in CA, unless either property falls down in an earthquake, you're more or less making $. I thought you meant something easy! (My job is stressful)

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Re: Do you own a rental property?

Postby StraightForward » Thu Sep 14, 2017 3:28 am

BTDT, never again (I hope). We bought our current house during the housing crisis, or whatever it's called, and couldn't drop the price on our old one fast enough to match the falling market. Over I think 4 years, we had 3 sets of renters: 1) broke their lease after ~5 months but moved out without a hassle. Broke the glass top of the range and had their washer hooked up incorrectly, so it dripped into the wall and caused damage requiring the sheetrock and subflooring to be replaced, and new flooring put in the kitchen and laundry room. 2) tenants from hell that we had to hire a lawyer and pay the sheriff to serve notices and set a court date before they finally GTFO. Abandoned 3 large dogs in the back yard and left the place a total stye, complete with racial epithets graffitied on the walls in the garage 3) lovely, responsible people who saved up a down payment to buy and moved out after a year. Luckily, when the third tenants moved out, the market had come up enough that we were able to sell. Closing day was one of the happiest days I can remember. Like Xan, I had emotional attachment to the property as we'd done a lot of work to it, and I took all the damage very personally (tenants #2 tore out my lovely rock garden and turned it into a fire pit). It would have been easier to take if it had been an investment property only, and not our home.
The UDBB member known as AQHA Hunter

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Re: Do you own a rental property?

Postby Angfreda » Thu Sep 14, 2017 4:28 pm

Because we live in NY, and the rest of the family left the area, DH and I were the managers [for the most part] of MILs rental here.
It is not something I would ever do again.
I think to make any money at it, you have to have the skills to fix/manage things yourself or the rent has to be high enough that a manager who does that maintenance/repairs doesn't eat all your profits. We had neither of those. :?

Had we known more sooner, we would have had billboards up on the property, which sits where a state and county HWY meet. The income there matched the rent... with a whole lot less hassle [read peeling buggers and other gross, unidentified materials off the ceiling, walls, etc]. And the smell.... *gag*

silk
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Re: Do you own a rental property?

Postby silk » Thu Sep 14, 2017 9:58 pm

Xanthoria wrote:
silk wrote:
piedmontfields wrote:
Uh, way stupid and simple but W O R K I N G (at a well paid job) and I N V E S T I N G (in a patient way, say 10-30 year horizons) and S A V I N G (and living below your income).Voila. Pretty low stress. No evictions.


My property is part of my longer term investment plan/strategy. Call it retirement funds, if you will (I am 30, so 35+ years until I can collect my pension). But I also have the desire to do more than just sit and wait.


Yeah OK! :lol: I work full time, invest in 401k etc and like silk have invested in real estate too. Living in CA, unless either property falls down in an earthquake, you're more or less making $. I thought you meant something easy! (My job is stressful)


I work, and am paid well for what I do. I work a second job, because I enjoy it. I have a tiny bit of money in shares, contribute to superannuation, have cash in the bank, etc, and a property. My net worth was higher before buying the house (because the amount I owe on it is about equal to my equity and cancels it out) but that will change soon enough. If I find I can swing another property purchase my net worth will plummet (high 6-figures of debt, eek), but it's a calculated gamble. I currently have good renters/flatmates in my house, I am dithering about making slightly more money off the place by kicking them out (ie completely rent would cover the mortgage payments, rather than only mostly cover them), because they are good value and the only complaint is they could do with using the vacuum a little more frequently. The market has stalled but will not crash, it'll rise again, I'm in a good place.


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