OT Renting houses
 

With all of the members.... someone has to have first hand experience, if not 20.

Thinking of renting out houses.

Found a neighborhood down the road, houses selling in the 180's to 190's, built, no owner. That would be approx 1000$ a month payment. Taxes were just raised to 300 a month (approx).

Houses are being leased out around here for 16-1800$ a month. So say over a 5 year term, 30k in $ from the house PLUS the appreciation.

Growing area, last time I checked, we were 8th fastest growing in the nation, 1st in Ohio.

So, from those who have done this..... Headaches? Not worth doing? Anyone have any tips? Have a close friend of the family who is a realtor, who is able to list it for a very very good price.

Anyone?

Ps, Dads idea, not mine, will be in his name.

Screen your tenants very well. If you are dilligent about selecting your tenants, it could be a profitable venture. If you don't, it will be a nightmare. I represent residential, retail, and commercial landlords for a living, doing lease enforcement actions. I do not know the landlord & tenant laws in Ohio so I cannot speak to that issue but you should speak to a local L&T attorney to know what it takes procedurally and what it costs to remove a tenant. In DC it could take me a year to get rid of a tenant. Can you afford to float the mortgage for that long??

Don't you just love how laws that were meant to protect the tenant can be used to shaft the owner.... :hothead:

we have had several of them best bet is a 3 bed 2 bath ranch. go with either brick or vinyl siding so you dont have to paint and run credit check on all tennants and check references as well.

We can thank the F------ lawyers! :hothead:

Actually, you can thank the phucking legislature, they draft and pass the laws. The phknlwyrs merely manipulate the laws.

Didn't most, if not all, legislators start (low)life as phucking lawyers to begin with? duhh! :p

Maybe this is my twisted way of looking at things in life, or maybe it's just my redneck view of things from the "real" world.

Who the hell considers $180k plus homes rental property?

You can buy 2 new homes at that price where I come from. Decent homes at that.

I'll catch hell for this, but had to say it.


Buck

Here 180k is a 3-4 br 2 1/2 bath house, nice neighborhood, 2 car garage.

Or should we look for auction 50k houses?

I have 8 rental properties, some commercial and some residential, and it's a good investment if you have the up front monies. Alot of banks want one third down on property you are not going to live in. You think you have good tenents and have done your homework on them, and when they move out you find they were a little rough on the place, ie. it's not mine what do I care. But I have some that think the place is theirs and take very good care of it. My personal theory is I want someone that is going to live here not stay here.
Also taxes are higher because it is commercial property, not just residental but comm. res. property. Insurance is about the cheapest thing.
Mike

Don't forget about vacancy loss between tenants, repairs and maintenance, capital improvements, possible legal fees to collect rent. You can eat a years profit very quickly, especially in vacancy loss. If/when you sell will you use a broker? Remember that when thinking about appreciation.

Georges, instead of speculating, why don't you test your theory, starting with the Florida legislature. I'm sure you can figure out how many in that body are lawyers. But even if the lawyers are a minority, I am sure that they have nothing to do with maintaining laws that protect your right to bear arms in Florida, your right to freedom of speech and the like. No, the lawyers in the Legislature merely pass stupid laws to screw honest landlords out of their hard earned money.

You hate me until you really need me, then you love me. That's a fact.

I've rented several out.

Here's what I've learned.

1) You either get a solid house with good usable storage (stairs to floored attic) that is in the lower price range in a modest neighborhood. Proximity to shopping, the business district, and excellent schools is a must for this house.
OR
You get a higher priced house in a reputable neighborhood that is in a rapidly developing upscale side of town. It will also need better than average storage and a 2 car garage.

The first house is for the young family with small children. The school situation is a big deal, as is the storage. You will not be able to raise your rent price over the norm for the range and size, but your storage and school and such will let you attract "better" renters.

The second house is for the newly relocated executive or the guy who is building a new house and has to sell the old one before the new one is finished. Turnover will be 6 to 9 months on that house, but you will have excellent clients to choose from.

Big high dollar rental property only makes sense to me if you can have enough equity in the house to make your 15-yr mortgage payments end up being around 35% of the expected rent.

As you own the property, you will be able to depreciate it on a 40 year straight line.

Remember, though, that if you plan to sell it, you will have to recover the depreciated amount at whatever the recapture rate is at that time (currently it is up to 25%, although there is a chance that it will eventually be reduced to the capital gains rates depending on who gets elected).

I agree that 180k sounds like a stout number for a rental, unless it is "perfect" for relocators and orphaned folks building homes. It will need to be in the "right" neighborhood and you will need connections with a realtor who knows that market.

good luck.

If I were you, I would be aiming at a $90k house.
Concrete drive. Detached garage.
Copper pipes (they give best service).
Plastic drains (Dran-o won't hurt them).
Double water pressure regulators.
Laundry area with drain to the outside.
Brick or vinyl siding.
Vinyl windows.
Good level yard with no drain problems.
City sewer (your renters can screw up your septic system so bad that it will cost you $15k to fix).

m

There are 2 ways to make money in the rental biz.

1. When you buy a unit and it's paid for (i.e. no loan) and it's rented.

2. When you sell a rental and realize your capital gains. (and if you depreciated it, you'll have to pay tax on that amount depreciated)

Otherwise lost rent, repairs, attorney fees, your time spent to rent, or 10% paid to a firm to manage it for you, etc etc will take up what little you make if you have a loan.

It's great to be in it if you're in it for the long haul. And that will be probably 10 + years for most folks.

If you would like some advice i will be glad to talk to you.I own 43 houses right now and flip up 65 houses a yr, the money is great,pretty much retired already at 37.I have a full time crew that work for me and take all my phone calls from tenants. All i do is write checks once a week.There is to much to go over on the computer so give me a call if you want.I can definetely help you out with all your questions,i have been doing this now for about 11 yrs.
815-968-8087 HOME
815 243-8087 CELL

Todd

Unless you plan on renting to celebrities or the Partridge Family, I would stick with 3 bedroom and no more than 2 bath. Anything bigger and you're getting out of your target income IMO.

Buck

damn.... 43 houses! and you FLIP 65? A friend of mine flips about 20-25 a year and he is doing REAL well. Are you buying and renovating the houses you flip, or just buying distressed property to help out a homeowner that is about to lose it anyway?

Chris,
i do a little of both,some get rehabbed and sold,some are just wholesaled to other investors,some are rented and sold as turn key operations,every house is different,depends where i can make the most money.The most important thing is a very creative tax person,i would have to say i have one of the best in the country,she worked for the I.R.S. for 20 some yrs as a auditor and is now is on our side.

:D :D :D $180K is a down payment!!! Here in SoCal there are ****hole properties (houses) that rent for $1800 a month, and range up to the top-dog stuff at $25K a month.

Yeah, Nort, but we're talking about the USA, not Mexifornia.

We all realize that a 1400sf house goes for $700,000 out there.

Wow...looks like phknlwyr and I do the same thing for a living. What are the odds? LOL I'm more retail than anything else though.

Hyper, I guess in my mind it truly depends on how much disposable income you have. The best/easiest way to make money would be to buy one out of foreclosure, do the minimal costmetics to it and rent it out. Let me warn you though...that in my area anyway....anybody worth a sh!t is taking advantage of the low interest rates and buying their own homes. You can combat that with location to a certain extent. It's all about minimizing risk. To get decent people in there, you could advertise on your own, or hook up with a realitor. Many large corporations rent houses for people being relocated. That would almost be your safest bet.

We were in this on a personal level for a few years now...owned a 4 apartment unit in a small town. Last summer, and I kid you not - our options for one unit included couples with a dog or cat (ummm no!), some single lady who could probably swing the monthly rental if she decided not to eat anymore, and one couple where the lady was on social services. We didn't want ANY of them, but went with the social services lady because you can set the payments up to come directly to you.

And I can't warn you enough about down time. Some of these losers literally walk away and leave all their crap in there. It takes a full 8 to 10 hour day just to get their sh!t out of the way (thrown in the trash) so you can begin repainting. You have to float that part of the income until you can re-let. Last year, JB and I ended up floating 2 houses because good tenants just weren't out there and we were trying to be picky.

Which brings me to another thing...how handy are you? If you're not, you're going to spend a TON of money on repairs.

And finally, the lease form. I can't express to you enough how important it is to have a good lease form. And don't assume it's good because it was drafted by a lawyer. I've cringed at some of the forms I see. Remember, not everybody graduated at the top of their class.

I mis-represented myself...I'm not a lawyer. I worked in our legal dept for years and now I'm in finance. Not that it matters.

Just be careful...and think long and hard. If you work full time, at times it's like having 2 full time jobs.

I rest my case counselor, you're right. :D

I don't do the business some of these guys do but i have had my share of realestate successes. let me tell you what i have learned over time. make sure you accumulate enough money in a luquid account because things can and do go wrong. a furnace could go, down here in florida an air conditioning unit could go, you may have to evict cubans that don't pay there rent or the cops could wreck the place arresting your tennents and leave you holding the bag. I will say that i never had tennent problems until now but i inherited these tennent when i bought the place, just do a good job screening your tennents, get big security deposits, larger than the rent. if i am renting a place for $1000 I will get 1500 security, this will save you alot of head ache later. if you do this they will never skip on the last months rent. another thing you want to do is find some one in the mortgage biz that would be willing to do credit checks for you. this will tell you alot about a person.

LOL...I knew this was coming from someone.

That's not something we have to worry about here Nort. No offense, but I'd like to keep it that way too.

It's all relative to income vs. cost of living. 200k a year income out there is equivalent to 50k a year here. We can still buy the same amount of stuff, just for less.

Buck

I would recommend reading "Successful Real Estate Investing, How to avoid the 75 most costly Mistakes Every Investor Makes" by Robert Shemin. It will be the best $ 16.00 you'll spend. Shemin touches on all the points that have been mentioned in the above threads.
The worst thing you could do is dump an entire "inheritance" on something you could get burned on. I'd start off with a "slum lord special", a $50-70,000 house. Learn from your mistakes on these houses, not a $190,000 house.
Good luck!

RG has it right!...i have a 200k rental(1400 a month)!...it sucks!...your better off having 3-4 homes totaling 200k..things suck when you go 3 months w/o renting...then get renters that trash it...also seems like people renting a 200k house are more apt to get in over their heads.

I THINK THE IDEA OF HAVING RENTAL UNITS IS GREAT FOR A LONG TERM INVESTMENT! I HAS 3 SINGLE HOMES THAT MAKE ME DOUBLE WHAT MY NOTE IS. I HAVE BEEN LUCKY TO HAVE AWESOME TENANTS THAT PAY 3 MONTHS IN ADVANCE, AND TAKE CARE OF THE PROPERTIES LIKE THEY OWN THEM. I HOPE THEY RENT FROM ME FOR ANOTHER 7 YEARS . AT WHICH I WILL OWN THEM. THE ONLY THING THAT WORRIES ME ABOUT RENTALS IS HAVING A RENTER FROM HELL! TOM P.S. I SEE THAT WE HAVE SOMETHING IN COMMON TO TALK ABOUT.