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Who here owns rental property(s)?

Discussion in 'The Lounge' started by BurlyShirley, Jun 16, 2008.

  1. BurlyShirley

    BurlyShirley Rex Grossman Will Rise Again

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    I'm looking for either firsthand info, or some resources regarding this topic. Currently I own only one house, but in less than 3 years we'll be ready to move and purchase another. When I got this place, my initial thought was to fix'er up and sell for profit when I was ready to move...using the profit for a downpayment on the next place.
    Well, lately since home values are dropping and people being foreclosed upon at record pace are needing places to rent...I've been kicking around the idea of keeping this current place and renting it out... using the equity to secure the loan on my next home. It seems to me I'd make alot more money selling this place in 30 years (most likely) than I would in 3... the house being something of a nest egg in that case.
    The mortgage is low enough that I can afford payments on the place whether someone was renting it or not, but Im wondering about the other type of hassles involved in being a landlord. I assume there is another insurance to carry? Are there agencies which handle paperwork...writing leases, running credit checks, etc. so I don't have to deal with all that myself? What are some other pitfalls?
     

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  2. stevew

    stevew unique white person

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    Do you see the neighborhood improving in the next 5 years, let alone 30 years?
     
  3. stoney

    stoney Part of the unwashed, middle-American horde

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    One thing to be acutely aware of when renting a house, if the person was foreclosed on, they are obviously not good with money and do not care about their belongings. IF they do not care about their belongings (ie house) enough to do something about it and keep it, how will they treat your rental?
    Read up on ALL legal information regarding being a landlord in your state and city. You can even go to a rental advocate and pose as a renter trying to get information as to what is and isn't legal of a landlord. especially information regarding evictions and damages/deposits. How much will it cost you to evict someone worst case? How much of a deposit can you take? Can your tenant be held liable for damages beyond the amount of the deposit?

    We had some bad tenants in one of my Dad's properties that we fought tooth and nail to get evicted. We eventually sold the house out from under them so they legally had to leave. Once we were clear, we had about $5000 in damages caused by them, to fix and their deposit went to last two months rent, because they stopped paying. That was profit off the top that definitely effected our profit margin.
     
  4. BurlyShirley

    BurlyShirley Rex Grossman Will Rise Again

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    Yes. The town I live in is growing quite a bit, to the point that new subdivisions are popping up all down the road from me, and the school in this town is expected to keep growing for the forseeable future.
     
  5. BurlyShirley

    BurlyShirley Rex Grossman Will Rise Again

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    Hmm. That's a good point. I know bad renters can be a PITA, but I hadn't thought of what it takes to get rid of them. Ideally, I wouldn't be dealing with people with poor credit, but the world being the way it is, especially in the region I live in, it could come to that.
     
  6. stoney

    stoney Part of the unwashed, middle-American horde

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    With a functional deck, and the work you've put in, I'd guess you could get an easy 100k for the place. How much could you rent it for? Start figuring out costs vs benefits. That will tell you more that anything. That being said, I feel housing has not hit a bottom yet. The majority of the houses sold as 3/27 and 5/25 ARMS were sold in 2006. That means we have another two rounds of resets coming still. And they are larger in number than the last two years...
     
  7. stosh

    stosh Darth Bailer

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    3more years you might be able to sell for the profit you were hoping to.... maybe...?.?
     
  8. stoney

    stoney Part of the unwashed, middle-American horde

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    Also, don;t forget the tax benefits/costs of renting. It might be worth seeing an accountant about it too.
     
  9. BurlyShirley

    BurlyShirley Rex Grossman Will Rise Again

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    Deck is going in late this summer actually, and the rest of the place is coming along just fine. By the time Im ready to go, I assume it'll be worth $120k (ish) judging by what other homes have gone for on my street, but again if home values tank...

    Anyway, my mortgage payment is very manageable, and honestly, all I'd be looking for in rent money would be covering the mortgage payment and general maintenance costs of the home... that way it continues to gain value over the long haul, and in the meantime gets paid off by someone else. Or if it turns out I can charge more in rent, apply any extra I get immediately to the principle.

    So yeah, it seems like the next few years will be a great time to buy a place, but not sell one...Im hoping to take advantage of that.
     
  10. BurlyShirley

    BurlyShirley Rex Grossman Will Rise Again

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    WTF are you trying to say here :confused:
     
  11. stosh

    stosh Darth Bailer

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    I'm saying 3 years is a lot of time and by then the market could be doing well. Seems a little premature to be trying to figure out if you should sell or rent it.
     
  12. BurlyShirley

    BurlyShirley Rex Grossman Will Rise Again

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    Yeah sometimes I get really stupid and start considering options for my future.
     
  13. DirtMcGirk

    DirtMcGirk <b>WAY</b> Dumber than N8 (to the power of ten alm

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    We used to have a rental house. We thought the rent was high enough for the area that it would work as the great economic dividing line, thus keeping the crap out.

    Turns out that if they just muster a group that ****ty renters can afford just about anything.

    When we evicted them they did fun things like put cement down the toilets...

    We sold it for what we bought it for, and our insurance covered the damages and then sued these kids into the red for a good long time.

    However, for all the headaches and bull****, I wouldn't do it again.
     
  14. jimmydean

    jimmydean The Official Meat of Ridemonkey

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    You can also have someone manage it. I know a place I rented a few years ago was through a company. I never knew or dealt with the actual owner of the property, just the management company.

    No idea what that costs the owner, but I am guessing the management company take a cut and you get a check without having to worry about who is renting or dealing with the place.
     
  15. stosh

    stosh Darth Bailer

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    I had a long response typed up then the image of the special olympics kids running across the finish line crossed my mind.

    Good luck with renting and planning your future.
    :thumb::thumb::thumb::thumb::thumb:
     
  16. BurlyShirley

    BurlyShirley Rex Grossman Will Rise Again

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    Yeah, I've rented like that as well... I just wonder what their monthly charges are. I should prolly check into that too. Sounds hassle free.
     
  17. stoney

    stoney Part of the unwashed, middle-American horde

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    Most of San Francisco is rented this way. It's pretty efficient, and mgmt companies are good at getting apts filled.
     
  18. BurlyShirley

    BurlyShirley Rex Grossman Will Rise Again

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    Would be especially great if they included stuff like lawn care contracts, plumbers, etc.
     
  19. Heidi

    Heidi Der hund ist laut und braun

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    We have a rental...it's out of state so a property mgmt company takes care of most things. We just have to deposit rent checks :)
     
  20. jimmydean

    jimmydean The Official Meat of Ridemonkey

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    I know ours did. I didn't have to mow or anything and when we had issues with the house, they sent someone out. I'm sure they had sub-contractors that take care of that crap, or at least ours did.
     
  21. V-Dub GTI

    V-Dub GTI Monkey

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    My parents have 2 rental storefronts, 3 rental houses, and 1 rental appartment. The 2 storefronts (seeing as they are on the main street of my town) Almost always have good renters. Only once can I remember going down to fix something cause by them there. And it was only like 2 or 3 small holes in the wall were the shelves were at. No big deal. 2 of the 3 houses have always had good renters, I've probally only been in them once or twice because we usually have long term renters. They are usually employes of the Hospital because its straight across the corner from these two houses. The 1 house has never had real good renters, I'm constantly in there between renters repainting or cleaning carpets, one time we had to take the renters to small claims court for the money owed for repairs (of coarse that time I was charging $75 an hour...). The Appartments always have decient renters. Who usualy leave with only a few things broken or messed up. The downstairs was trashed once and we had to forcefully through them out. Eviction notice posted (3 or 5days?) before and they didnt leave... so their front room furnature and all their crap was on the kerb and they were too.

    But its all luck of the draw. technically you cant "Sterotype" and deny them rental of your property, but who's going to notice? Just saw you've got someone else lined up for it.

    ~Matt
     
  22. pixelninja

    pixelninja Turbo Monkey

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    We currently have 9 rental properties (2 are duplex's so we have a total of 11 units). Hiring a property manager was the smartest thing could have done. He take 7% of the rent and takes care of filling the units (including background and credit checks), collecting rent, general maintenance, scheduling repairs and if necessary, handling evictions. We are on the hook for the cost of maintenance and repairs, but evictions are handled 100% by the manager. My wife was handling all this for a while, but after dealing with our last psycho tenant who we had to evict for failure to pay, she'd had enough.

    When you own rental property, the 2 smartest things you can do are 1) get advice from a lawyer, not the internet and 2) hire a property manager.
     
  23. dante

    dante Unabomber

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    Excellent advice from some of the people here, but the only thing I'd question would be the pulling some equity out of the increased value for a down payment... Can you save for the next 3 years and pull together 20% for a down payment? That way you'd be assured positive cash flow from the rental property, regardless of what happens with the new place. Just nervous from all the crap that's been going on (and will keep going on) in the housing market. Also, keep in mind that as long as subdivisions keep "popping up down the road from you" your house isn't going to appreciate that much in value. On the flip side, it's probably been relatively immune to the housing crisis so far, since places with room to grow (middle america) didn't go through the roof in the last housing boom.

    Also, as The Joker said, weigh out the positives / negatives, and also contemplate what you could do with an extra cash that you could get by selling it: pay off debt, bigger downpayment, invest in the market, etc. If your new house's mortgage is 8% (rates have shot up recently, and might end up going a lot higher in another couple years if the gov't starts raising rates?), or you have CC debt at 10, 12 or 15%, the old house would have to be appreciating in value and/or bringing in that much rent to make it worthwhile.

    Overall though, I think it's an excellent idea, and I absolutely love the idea of building wealth through things like this.