Interested in hearing from people who rent out property

[Mpoitrast87]

The other thread about buying or renting a house got me thinking. Ive been looking into buying a house for the last 6 months or so. I’m always looking for ways to make income and provide some kind of a long term investment. So, my thought is instead of buying a house, I could buy a multi family house. One option of course is to live in one unit while renting out the rest. But, I’d be more interested in renting out all units and staying home for another year or two and then by my own house. There are 2 decent size cities around where multi family houses are plentiful and normal. So finding a good location I don’t think would be a huge issue. For those who rent out property, do you find it to be worth it? From the research I’ve started doing it seems like once someone has one successful property they end up buying more and more. So it has my interest.

 

[lilcoop03]

I'm closing on buying my first rental property today. Wish me luck. I am buying the property for about 50% of its value so I told myself I would be stupid not to buy it. It should pay for itself in 5-6 years.

If this one goes well, Ill plan to buy another one in a couple of years and hopefully end up with several (5-10) single family homes before I retire.

Good luck!

 

[PhoenixM3]

I have a few properties, and at first it can be a PITA. Now, the income is paying for my house and two cars.... Good luck. Tenant screening, and closely examining the rental market in your area are key. They're not the only concerns, but two biggies.

 

[HillbillyHotRod]

Been doing it since 84. First one was a triplex that was a real pain in the butt. Since then I have had single family units only. You tend to get a better class of tenants in a house as opposed to multi family. Multi family tend to be more mobile while houses stay longer. Last one I had before I exchanged it was there for over 5 years. Tried self managing and it became a pain so had a management company do it all. Costs 10% and if just getting in takes a good chunk of profit but not having to hassle with checking references, evictions, etc was worth it to me. Only had two evictions in all that time. Research and then research more as it is not for everyone. Good luck.

 

[Mpoitrast87]

I'm closing on buying my first rental property today. Wish me luck. I am buying the property for about 50% of its value so I told myself I would be stupid not to buy it. It should pay for itself in 5-6 years.

If this one goes well, Ill plan to buy another one in a couple of years and hopefully end up with several (5-10) single family homes before I retire.

Good luck!

That’s awesome. Don’t think you can go wrong with that deal.

 

[Mpoitrast87]

I have a few properties, and at first it can be a PITA. Now, the income is paying for my house and two cars.... Good luck. Tenant screening, and closely examining the rental market in your area are key. They're not the only concerns, but two biggies.

Good info. Do you have single family or multi family?

 

[black4vcobra]

I owned a rental property (duplex) for 7 years and it ranged from acceptable to nightmare.

It was acceptable when I was living in half and renting the other half as I could keep a close watch on everything. Even still my tenant had been living there before I bought the place and I would not have rented to her.

It became a nightmare when I moved 80 miles away for my own work and got 2 tenants. They did not get along and the original woman got very bad about paying rent. She then moved out, didn't pay the last month's rent and left a ton of shit for me to get rid of. She is one of two people in this world that I would laugh at if I saw her get run over by a truck.

Point is you really need to make sure there are no red flags with potential renters. Don't try to be a nice guy either. Rent is due on the first and if you aren't getting it by the 5th at the latest, you serve them a notice of eviction.

 

[Klaus]

I have in the past but do not any more. I own and invest in all sorts of investments and home rental is last on my list of things I would recommend. There are all sorts of high dividend stocks that you can buy that will pay a higher income that you can sell at any moment, will not get destroyed by fire, come with property taxes, require you to chase down tenants that do not pay, require maintenance, have risk of sitting vacant, etc. etc.

I have been approached to provide money to people that want to get into this business and then look at their financial model and wondering WTF they are thinking. And all of this assumes home prices continue on the path that they have been as of late, which is sure not to be the case sense we are likely at the top of the cycle.

 

[lilcoop03]

FWIW, I don't plan to parlay one property into a new one once it pays for itself. If things go well, I'd like to keep them and the extra money keeps coming in every month while you still own the place.

Once my first is paid for, I'm going to use the income to pay off the mortgage on the house I live in, for sure. I cant wait to be out from under it, and it will save me a LOT of money instead of minimum payments for 30 years.

 

[coposrv]

You can invest in reits and become a landlord without the hassle of tenants, plowing and maintenance


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[PhoenixM3]

Good info. Do you have single family or multi family?

I currently own only single family homes. I don't have experience with multifamily units, but there's good money to be made there too.

 

[PhoenixM3]

Been doing it since 84. First one was a triplex that was a real pain in the butt. Since then I have had single family units only. You tend to get a better class of tenants in a house as opposed to multi family. Multi family tend to be more mobile while houses stay longer. Last one I had before I exchanged it was there for over 5 years. Tried self managing and it became a pain so had a management company do it all. Costs 10% and if just getting in takes a good chunk of profit but not having to hassle with checking references, evictions, etc was worth it to me. Only had two evictions in all that time. Research and then research more as it is not for everyone. Good luck.

We had good luck (and tenants) and managed properties ourselves from overseas. Some luck, more good research yeilds decent results. We've only had 1 eviction in 25 years.

 

[Mpoitrast87]

You can invest in reits and become a landlord without the hassle of tenants, plowing and maintenance


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I’d prefer to be a landlord. I can do a lot of maintenance myself. I have a plow and enjoy plowing. In theory if this worked out in my favor I’d prefer to buy more property and eventually have a nice flow of passive income.

 

[Klaus]

nice flow of passive income.

This is not passive income, you have to work and maintain it. A bond provides passive income.

What is the yield that you expect on property once you account for maintenance, property taxes, tenant turnover, tenant acquisition costs, insurance, vacancies etc. Model it out if you have not already.

 

[Stanley]

There are all sorts of high dividend stocks that you can buy that will pay a higher income that you can sell at any moment, will not get destroyed by fire, come with property taxes, require you to chase down tenants that do not pay, require maintenance, have risk of sitting vacant, etc. etc.

Which ones can you recommend?

 

[PhoenixM3]

This is not passive income, you have to work and maintain it. A bond provides passive income.

What is the yield that you expect on property once you account for maintenance, property taxes, tenant turnover, tenant acquisition costs, insurance, vacancies etc. Model it out if you have not already.

I might have to work 20 hrs/house every 3 years. Not exactly taxing......

 

[Klaus]

Which ones can you recommend?

I REALLY like BSM at the moment. They own mineral rights throughout the US. They get paid whenever an operating partner drills but do not lose possession if no drilling occurs. Yields ~8%. Is very safe, very well covered. There is likely volatility around the price because it is oil related and people do not understand it, but the distribution is bullet proof. Also is a K-1 which scares people away.

Generally, I like prefs and closed end funds for this purpose. I own MLP closed end funds, the KMI pref, the Annaly pref and a couple of others.

 

[Mpoitrast87]

This is not passive income, you have to work and maintain it. A bond provides passive income.

What is the yield that you expect on property once you account for maintenance, property taxes, tenant turnover, tenant acquisition costs, insurance, vacancies etc. Model it out if you have not already.

I have looked into it. After taxes, vacancies, maintenance and other factors average profit per unit should ideally be 300-600 a month. Let’s say we are talking about duplexes. 2 units and let’s say 400 a month. So that’s 800 expected profit from one duplex. Times that by 3 or 4 properties then you start to have something.

 

[MG0h3]

300-600 a month? Where’d you get that?

If you clear 100 per door you’re good. Add in the tax benefit and principal reduction and you’ll be in that range.

For those suggesting reits, I like them, but you miss a huge tax benefit renting.

I sold two properties and plan to get a couple more so that I’m at the max deduction of 25k a year.

Then get some reits. Need to get some in my IRA sooner than later


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[Klaus]

I have looked into it. After taxes, vacancies, maintenance and other factors average profit per unit should ideally be 300-600 a month. Let’s say we are talking about duplexes. 2 units and let’s say 400 a month. So that’s 800 expected profit from one duplex. Times that by 3 or 4 properties then you start to have something.

As a percent of investment? (Monthly income - financing cost - all other cost/taxes) x 12)/your investment. I would be surprised if it much more than 7% and that assumes that you accurately modeled all the hidden cost, your time in maintaining it, step ups in property tax rates, etc. etc.

Not trying to shit all over your idea, just want to make sure you put appropriate level of thought into it. Alternative is to simply buy a stock or bond that pays you this income without the headache and you can sell for $6.99 with a mouseclick if you ever need the money. Vs. 7% realtor fee and a few months on the market (if you are lucky) if you ever want to sell your rental house.

The best hope on home rentals is break even on monthly income over entire hold period and make money when you sell it. That assumes that you are buying right which may be tough to argue in current market.