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I assume you're talking about 1-4 family houses and not larger multifamily which is a whole 'nother ball game. When it comes to income properties, cash flow is king. You need to find properties that will generate enough in rent to pay the mortgage, taxes, insurance, estimated maintenance, and still have some left over. You need to assume a reasonable vacancy rate for your area (hint: not 100%) and you need to factor in tenant acquisition costs. Will you manage it yourself or hire a property management company? The latter is easier, of course, but they'll typically want 5-10% of the rent plus actual expenses. 2nd is tenant selection. You need to find and keep good tenants. What qualifies as "good" is going to depend on the type of rentals you have available. Obviously very different types of people are going to be interested in a $500 studio vs a $2500 single-family home. You want people who will not just not trash the place, but stick around for a while, too. Your tenant acquisition costs and turnover vacancy is going to depend on how frequently your tenants leave. How do you plan to find and handle prospective tenants? Craigslist? Full service broker? Basic tenant screening is pretty easy thanks to background check services on the internet, but that's still no guarantee you won't get a bad apple. You'll need to have a good financial cushion - not only are loan terms not as generous for investment properties as for primary residences (higher down payments, higher interest rates), but you're the one taking all of the financial risk. A bad tenant or a bad run of high maintenance expenses can wipe out years worth of profit. Rental income is schedule E income on your federal taxes. The rules and accounting are somewhat different from primary residence items on schedule A. You'll want to be familiar with all of that to be sure you're square with the IRS and getting all of the tax benefits you are due. You'll also need to know the law in your locale regarding rental houses. What are your obligations as a landlord? Do you need any special permits? (not common, but woe to you if you need one and get caught without it) How hard is it to evict a non-paying tenant? Some jurisdictions can have a deadbeat out in 30 days, some will allow a knowledgeable tenant a year or more to fight an eviction while living at your expense. Small-time landlording can indeed be profitable, but it's not a sit back and watch the money roll in kind of investment.
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May 8, 2013 17:50
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dreesemonkey posted:apparently if the place is your primary residence for however many years (3? 4?) when you sell you don't have to pay capital gains. In this case he's not selling, just building a slew of rental properties, though. Homes are exempt from cap gains tax if you lived in it for any two of the last 5 years at the time of the sale. In other words, you have to sell the place within 3 years of moving out of it to get the exemption. Your coworker's strategy lets him finance the properties with normal primary residence loans, which are cheaper and easier to get than loans for investment properties. SlapActionJackson fucked around with this message at 14:55 on May 13, 2013 |
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May 13, 2013 14:52
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TouchyMcFeely posted:My monthly payment, as it stands now is $666 So after the property management company takes their 10%, you will have a whopping $9 in monthly positive cash flow... so long as the property is never vacant, never needs maintenance, and never needs you to pay to acquire a new tenant. And that's before you consider the taxes - the quick summary there is that unless your monthly depreciation expense (0.3% of the structure's value - excluding land) exceeds the principal portion of your mortgage payment, you will have net taxable income and owe tax at your marginal rate. Your $9 won't cover that, so you'll have to pay it out of your other income, too. No way is this worth it in your situation. Be happy you're not underwater and sell the place.
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Dec 7, 2013 06:04
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TouchyMcFeely posted:The numbers are bad, no doubt about it. The bigger problem is that I'm not sure I can sell the place. Within 2 blocks in any direction are 5 or 6 empty foreclosures some of which have been for sale for over a year. I owe $108,000 and think I might be able to pull $125,000 with the way the neighborhood market looks. If I weren't surrounded by foreclosures I think I could pull closer to $140,000 due to the unusually large lot size and improvements made. You can list it both for sale and for lease at the same time, see which generates more interest. If you can sell for $125K now, that seems a much better deal than renting it in the hopes the market improves in a year.
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Dec 10, 2013 16:39
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Dazzleberries posted:This means, no deduction for the interest, property taxes, expenses related to it etc. Just want to add that you can always deduct these expenses to fully offset the income from all of your rental property, but may be limited to the extent that you can deduct these expenses against your other income. If you are limited in what deductions you can take, you get to carry forward any unused deduction for use in future years to offset rental income, depreciation recapture, or capital gains on rental property. Overall I agree with Dazzleberies assessment - this does not seem like a good income producing opportunity, but possibly a lower-cost way to acquire this house or speculate on its value.
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Jan 3, 2014 03:52
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moana posted:Hmm. What do you think should be my primary goal as a 30-yr old hoping to maximize lifetime wealth? My thinking is to take on as much risk as possible early on so that if anything bad happens I can bounce back. I don't need extra income right now, and I don't want to spend lots of time managing a property, which is why I'm shying away from the traditional n-plexes that people seem to like to invest in. I guess I just don't want to be stuck with a rental that I don't want to live in, you know? I'm not sure how silly that is given that I want to hold onto my first home as well. First, a point of clarification (sorry if this comes across as pedantic): you don't want to take on as much risk as possible, you want high risk-adjusted expected returns and are OK to invest in risky investments to get them because of your time line. They aren't the same thing. "Investing" your retirement savings in lotto tickets would be extremely risky, but it's a terrible idea because the expected returns are so low. So what should you invest in given your high risk capacity (you're financially able to take risks because of your youth and income) and high risk tolerance (you're mentally OK with the idea of risky investments in pursuit of higher returns)? Or more to the point of the question here, is it appropriate to invest in this house given your situation? Learning more and being able to do more in depth analysis is definitely a good start. If you're interested in these because you think the value of the property will go up, recognize that what you really want is to speculate on land values, and that requires a different analysis than the usual cash-flow renal property mindset.
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Jan 5, 2014 17:59
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Cranbe posted:[*]Would only purchase a house that I could afford without any tenants As long as you do that one, none of the others really matter. In theory, you should apportion the house between rented areas and personal use areas to allocate expenses and treat the rental income as schedule E income. In practice, most people with a roommate or two simply wouldn't bother.
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Jan 6, 2014 05:27
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Scrapez posted:Sorry if this has been covered and I missed it. For those of you that own detached single family houses, do you do the yard work on them or do you have the tenants do it? I made my first tenant responsible for the lawn, but I got tired of sending emails saying the front lawn looked like wild prairie (and this was someone who was keeping the house itself in decent shape). Now I hire a service to do it regularly and it's part of the rent. It's just easier for everyone that way and with he general rising rents in the area, I had no trouble working it in to the monthly cash flow for all the subsequent tenants.
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Oct 29, 2014 02:32
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Ribsauce posted:30 days? Realistically how long can someone not pay before you can legally get them out? In Massachusetts, all evictions require a court order. A simple eviction takes about 3 months. If the tenant knows how to fight is and is willing to allege you broke landloring laws even if you didn't, they can drag it out a year or more.
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Sep 22, 2015 05:06
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Conversely, I'd love it if my tenants wanted a five year lease. Turnover has a fairly significant effect on returns, so locking up a long term tenant is great. Though that lease would definitely include automatic rent increases to cover rising property taxes since we have no prop 13 equivalent.
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Nov 5, 2015 16:21
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Yes, I've done that. Selling process is no different, but the tax treatment can get a bit tricky depending on your specifics.
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Dec 31, 2015 21:47
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vulturesrow posted:That's exactly what I had questions about, specifically depreciation recapture. Here are some approximate numbers: Yes, you only pay depreciation recapture tax on the depreciation you actually capture. The tax rate is your ordinary marginal rate. vulturesrow posted:Also, I am selling person to person, no agents involved. What is the best way to ensure I dont screw up the paperwork or any other part of the process?
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Dec 31, 2015 22:52
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Control Volume posted:I thought there was a difference between additional insured ("Additional insured endorsement" is the exact verbiage he's demanding) and named insured. This is also unfortunately not something I can just say "No thank you" to without breaking the lease and just moving out entirely unfortunately. There is: http://www.csac-eia.org/pdfs/NamedInsured_vs_AdditionalInsured.pdf If you've agreed through the lease to indemnify him, then listing him as an additional insured is appropriate, though I've never heard of this as part of a residential lease.
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Jan 15, 2016 03:35
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Devor posted:This goes to "reasonable" which is a squishy concept. Pretty much this. The answer depends on what the courts have interpreted "reasonable effort" to mean in your jurisdiction. Hashtag Banterzone, you'll be better off asking a tenancy lawyer or at least a legal aid clinic that knows the specifics of Ohio case law on this.
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Mar 6, 2016 23:48
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Tenants who pay on time, take care of the property, don't pester with trivial service calls, and want to stay a long time are very valuable from the landlord's perspective. I can and have slow-rolled rent increases to keep a good tenant at slightly below market rent and in my property. I agree that your opening move should be to ask for another year at your current rate.
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Dec 26, 2016 15:19
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there wolf posted:Does anyone have an experience using any of those funds transferring apps like Venmo to collect rent? I've got a friend renting out my spare room and they want to go that route. I've used Venmo. It's great from the landlord's perspective - no fees, easy to move funds to the bank. The tenants can pay for free from a bank account, or they eat the fee if they want to use a card.
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Jan 5, 2017 04:32
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an skeleton posted:Have a question as a tenant, maybe y'all lovely people can help out... For things like picture hooks / shelves / TV should be a simple patch and paint repair, which is cheap and easy. I charged whatever my handyman charged me. Typically $100-$200. But that's obviously going to vary based your local labor rates. 2 months or so before the end of the lease would be a typical time to discuss renewal, but if you're willing to sign a lease extension, they might do it now. I'm always happy to have good tenants stay longer. Your landlord probably is, too.
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Mar 8, 2017 00:24
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I've used mysmartmove; no complaints.
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Aug 24, 2018 19:28
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Wiggly Wayne DDS posted:is there a social housing thread for comparison? 
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Mar 29, 2019 18:09
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