As title says thinking about buying some small homes to use as rental properties. I have the time, and the experience for minor repairs. Just wondering if anyone here with experience can tell me more of what I may be getting into.

It depends.....I have 1 rental condo and a 4 plex....... condo is definately easier.....really only need to worry about broken appliances...... It really depends.....one problem child tenant can be more work and aggrivation than all 4 other ones.....sometimes everything goes great, sometimes everything goes wrong. It is pretty much a job that you're buying.

Here's how I figure it.....If I don't make a 15% return when figuring 10 months rent-12 months monthly expenses, I don't even bother.....I'd consider 10% ROI if there was some other intrinsic value.......the 2 months I account for when figuring my ROI accounts for vacancy and large long term repairs.

Being a landlord can be tricky, not so much with fixing things but judging people, making sure your paperwork is proper and complete, being able to avoid troublemakers or deal with the ones you haven't avoided.

Some people have the personality, experience and judgment to do it more or less successfully. Others are driven nuts.

I have managed apartments, owned rental houses and multi family properties, managed a commercial office building and a number of leased commercial properties, and represented landlords in those situations as well. It is seldom easy. Evaluating prospective tenants is critical, and I think is a talent some have, others less so.

Most areas have apartment owners associations and similar with training, or seminars to help with the various legal, financial and mechanical issues you will encounter. Maybe you can try your hand at property management for someone else before putting your own dollars at risk.

One of the smartest things I have done is sell every property we had except our home and buy shares of Realty Income. I wish I had done that before 2005! It pays a dividend monthly, from rents it collects from thousands of single tenant triple net commercial properties. All the return of renting properties wih no telephone calls, bad checks, skips, ruined carpet, vacancies, evaluating prospective tenant forms, etc. You aren't working or worrying.

I did that with my mom's funds. She lived on the dividends, and when she passed away, she had 9 times what we started with ~13 years before. I doubt the next 13 years will be that lucrative, but I don't doubt the rents will be collected and paid out as before.

Raised in the business and it's work but the best way I know of for a poor boy to climb the ladder. My dad owned a 140 unit trailer park back in the 60s. Hell of a place. $40 a week $40 deposit furnished utilities included. Buying 12 x 40 mobile homes for $3000 delivered. It was a money machine but it was a battle to get the money.

I've concentrated on single unit and commercial. Look for for sale by owner with low down payment. Screen your tenants to the nth degree. If you get a bad one they can really string you out. In the old days the trailer courts were under hotel/motel law and we could move a deadbeat out when they got 3 days behind and then charge storage for their belongings. Now it can take 90 days if you get a con that is intent on beating the system.

I'm 66 now and have scaled back but I've sold a few on contract and nothing beats money by mail on property that's long time paid for. I've got one corner that brings me 25k triple net rent and I got it by putting 10k down and assuming a loan back in 1981. I paid it off in 1992, ran a fruit mkt out of the lot until 97 and have been drawing same rent since still as a fruit mkt. That's how a poor boy makes money.

We live in the mountain west (Idaho/Utah) and inherited a house in KC Mo. We're renting it out and it's a major pain due to distance. We're going to sell the house and possibly buy one for a rental closer to home. I'll be paying attention to this thread!

You can learn a lot about human nature by being a landlord.

Hell no. You can make a better return with MUCH less heartburn investing. I recommend a good broker. Stay away from rental properties.

Some good advice so far.

We're in the process of forming a corporation for our family which will be investing our cooperative money into real estate. We're developing a portfolio approach which will begin in rental/income properties. We're starting with a condo, and have our eye on some local 4-plexes. We're not ruling out the possibility of some SFR as well, as its a super good time to pick them up in our local area. It's unlikely we'd hold any of the SFRs more than 3-5 years. The initial 1, possibly 2 property purchases are cash deals.

Before you do any buying make sure you read your state's landlord tenant act. You want to understand the rights you and your tenants have in a rental agreement that are mandated by law.

When you are looking at properties in a good location make sure you go back when it is night, raining, snowing, etc. The house may not look the same or give rise to problems you did not imagine in good light/weather. I had a house under consideration that when I went to look at it in the rain found a waterfall flowing into the living room from the ceiling. That changed our offer a lot.

Actually the way landlord tenant laws are, if you can buy warehouses in your area, a lot of small ones in a single building, that is the way to go.....easy to evict......gate it with an electronic gatecard for access.....when rent isn't paid you can instantly shut off the gate card access to them......easy maintenance, etc.

^^^
I thought my area was saturated 10 years ago with storage units and they keep building them. That's a damn good way to go if you can swing it.

+1 on advice on checking tenant rights. In PA, at least where I am, if you get a family with infant child/children they cannot be evicted in the winter for whatever reason. This means those playing the system stop paying rent about October or November and are on a free ride until Spring. Meanwhile they trash the place.

Additionally, when interviewing for tenants, have the WHOLE family there. One memorable disaster avoided involved a mother and children. Mom looked at the apt., liked it and was ready to sign. I insisted on meeting the kids. 3 spoiled brats that would have torn the place apart.
Leaving the place empty is expensive, but better that than the nightmare of a bad tenant signed up for a year.

All this sounds pretty negative. Read it as a lesson on how important it is to find the RIGHT tenant.

Personally, a rental property would be my worst nightmare. Right after I retired from the Navy I had three properties owned by Navy buddies that I managed when they got transferred. Hated every second of it, couldn't wait for them to get back or sell the place. Not enough money on the planet to get me into that business.

Of course, I'm a grouchy old misanthrope that doesn't really like people and I HATE being responsible for other people's stupidity.

Depends on the state and the local vacancy rate.

I have made and lost lots of money over the last 40 years doing it.

I would not buy residential in a pro tenant sate.

Too much aggravation.

It can be a good way to make money if you can buy right.

Thanks for all the replies. The units I'm looking at already have renters with leases. Just had new roofs put on and other minor repairs. Housing in the area is already in short supply and another factory for about 1000 jobs is being built. If an occasional bad tenant or hard work is the only issue I believe I can handle it.

Make sure your cash flow scenario incorporates a minimum reserve of 10-15% to gross potential rents. You'll need it.

I have a rental property, a 850 sq foot condo, only because we are not in a position to sell it right now.

I have to tell you...it sucks. I FINALLY found a good tenant that isn't a constant headache and he's the third one now going into year 4 of being a landlord. As soon as I'm not upside down with this mortgage in a few more years, I'm getting the hell out.

The ONLY good thing I see about this situation is that I can write off a lot on my taxes but that's about it. I'm not making any money on the rental, basically covering my mortgage and costs like HOA.

I know a guy that has a dozen rental properties in Baltimore City. He buys cheap, fixes up himself, and rents to section 8. I believe section 8 gives him a guaranteed 1200 a month, and the tenant gives him an extra 200. I was considering trying to get into this business myself, but I have heard horror stories as well. Like one guy got sued for lead paint (even after having a lead paint inspection done) and lost big time. But there's money to be had, because the Section 8 program is strict and the tenants are scared to lose their vouchers, so often times they are better renters than other people in low income areas. So you are making a lot in rent on a house you bought for 20 grand and put 10 into.

quote:

Originally posted by jezsuiz:
Thanks for all the replies. The units I'm looking at already have renters with leases. Just had new roofs put on and other minor repairs. Housing in the area is already in short supply and another factory for about 1000 jobs is being built. If an occasional bad tenant or hard work is the only issue I believe I can handle it.

One really bad tenant can cost you 5 years of profit if they trash the kitchen and bathrooms. I screen my tenants really well. The shortest tenant I have has lived there 2.5 years and the longest 8 years so far.

There are all kinds of tricks you can play. A buddy of mine owns pawn shops so he's used to dealing with deadbeats all day long. He also owned a rental building and was evicting these tenants for lack of payment, was going to have to take it to court etc. (2 month process), he went over there on a Friday at 3pm and took off their front door and dropped it off at a painting company to get painted and left them with NO front door over the weekend, they moved out before Monday. LOLOLOLOL

quote:

Originally posted by jimmy123x:

There are all kinds of tricks you can play. A buddy of mine owns pawn shops so he's used to dealing with deadbeats all day long. He also owned a rental building and was evicting these tenants for lack of payment, was going to have to take it to court etc. (2 month process), he went over there on a Friday at 3pm and took off their front door and dropped it off at a painting company to get painted and left them with NO front door over the weekend, they moved out before Monday. LOLOLOLOL

Even in the landlord friendly state of Utah, doing something like this could land you in a world of trouble. All the tenant has to do is get free legal aid, file an injunction, and you'd be screwed until the judge decides you've learned your lesson. The courts everywhere are very jealous of their right to evict, and have no sympathy for landlords who attempt to bypass the system.