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So a long time ago I asked the mod to start a rental/investment property megathread and got permission. But then I realized that my experience was a narrow slice of all the different types of investments (rentals, duplexes, commercial, empty lots, foreclosures, etc. etc.) so I tried to research other areas and then since I'm a lazy rear end in a top hat nothing ever came of it. So I'll just give my experience here. I got interested in rentals for a weird reason. My girlfriend had an old fridge she wanted to get rid of, so she put it on Craigslist for free (it was pretty rude looking). Some guy showed up a couple hours later with a beat up pickup truck and said "great, I'll put it in one of my units". The gears in my brain started turning and I thought to myself 'beat up pickup truck, low Philly property taxes, free appliances, this guy must be making huge profit margins'. I'm usually a very negative and pessimistic person that thinks a business idea will never work, but I began scouring Craigslist, Zillow, a handful of other sites, and just driving around Trenton in general looking for a good, cheap property to buy. Long story short I bought a three bedroom townhouse with the tenant in place for $35,000. The rent is $900/month. It's probably the best deal I've ever made in my life. That being said, there have been some challenges. The tenants speak almost no English, I speak almost no Spanish. Even though the house is in pretty good shape, it seems like they need to bother me about something every month to feel like they're getting something in return for their rent (beyond just the use of the property). They've complained about all the mice in the house and I've told them repeatedly that they need to put all their food away and there's nothing I can do about it if there's food all over the house. They complained about condensation in the refrigerator, I got the name of an appliance guy from the seller and he fixed it for $50. They complained about the stove smelling like gas, I went out there several times and had a plumber go out and we couldn't smell anything. Eventually I replaced the stove because it was old as hell anyway. The one thing I feel REALLY bad about is that the tenant called me once because the heat wasn't working. I didn't understand her on the phone so I just told her I'd get over there when I could. This is back in January and it was pretty cold. She called me the next day and was almost yelling at me (she's never does that). So I got over there and realized what was going on and called the plumber to come look at it. Thank god it was a quick fix, turns out they had been turning the thermostat back and forth between 50 and 90 to turn the heat on and off and that caused an arc in the furnace. The plumber replaced a jumper on the control board of the furnace and it was fine. I really felt like a dick for leaving them in that cold house overnight, even though it wasn't on purpose. I'm very aware that based on the property value and the area people assume I'm a slumlord, and I do my best not to be one. About three months ago I bought another property from the same seller for almost the same numbers. I figure if I can get 10-15 properties and own them outright, that will be a nice little side business that can keep me afloat between jobs and make for a really nice living otherwise. As for advice for people considering it... I say do as much research as you possibly can. Talk to a real estate lawyer in your area (they'll do a free consultation) and ask them about stuff like "how hard is it to evict tenants?" and "what kind of landlord tenant laws do I need to be aware of?" ask them if they know of any good RE agents. Just talk to people in the business as much as you can. I personally will not purchase an investment property if the rent is less than 2% of the purchase price. If you do the math, I did substantially better than that on my properties, more like 2.5%. It leaves some financial wiggle room, and as a new landlord, you'll probably need it. Finally, don't let people discourage you with horror stories. Yeah, stuff happens, but you'll deal with it. I still remember the first time I rolled up to my property for the first time and collected rent. Knock on the door, tenant opens it up, hands me a wad of bills. I count it, say "thanks", and drive away with a poo poo eating grin on my face.
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Jun 3, 2013 02:23
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DNova posted:A $35,000 3-bedroom rental infested with mice makes you a slumlord, I'm sorry. I'm not judging by any means though. There's a lot more profit margin in owning places like that than nicer places. What am I supposed to do about the mice? I've been to the house a half dozen times setting traps. If they leave food out of containers, they will get pests, it's that simple.
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Jun 4, 2013 01:04
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Four Finger Wu posted:EDIT: I see Blackjack2000, above, actually has property with an even higher cash flow than the 2% rule... that's great - what part of the country are you in? I live in Bucks County, PA. The properties I own are in Trenton, NJ. If you read the fat-wallet thread it seems like the prices I paid and the rent I receive are in line with what other landlords are getting in economically depressed areas. EDIT: For example, I could buy a lot of houses in North Philly that would have similar returns, same with Camden. I imagine at some point I'll be renting to section 8 and I've done a lot of reading on that. /EDIT One thing I will say is that I was REALLY patient in looking for the right deal. I drove around Trenton looking for for sale signs on houses, I scoured Craiglist, Realtor.com, Zillow, Trulia, all the sites. I didn't end up checking out foreclosures beyond looking at REO listings and other internet stuff because I didn't feel comfortable with that game, there are all kinds of ways you can get screwed with liens and unexpected damage, and you can't inspect. I walked away from a house that originally listed for $60k but the seller's agent said they would do $20k, the tenant was paying $800/month in rent. That's FOUR PERCENT. But I met the tenant and didn't get a good vibe. I walked away from houses that were in poor shape but in nicer areas of Trenton because I couldn't be sure that I would have the resources or energy to rehab them. I only did the deals I did because I became convinced that I almost couldn't lose. I met the tenants, I had a lawyer, I had both properties inspected and appraised, I had CO's from the city, I protected myself in every way I could imagine. I'm still uneasy because of my lack of experience. I've still never had to fill a vacancy or deal with major maintenance issues. Blackjack2000 fucked around with this message at 04:04 on Jun 10, 2013 |
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Jun 10, 2013 03:53
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TouchyMcFeely posted:As I've done more reading I'm starting to get a better idea of what to look for when it comes to actually purchasing my first property. What I'm not having much luck tracking down are good tools for putting hard numbers together. I've come across a few excel spreadsheets for sale (yeah right) that claim to do this for you but that's about it with one exception. What kind of number crunching are you trying to do? I only estimated PITI (you can make your own spreadsheet for that) and compared that to anticipated rent (you can estimate vacancy and maintenance if you want, I didn't, I just tried to make sure the margins were fat enough to absorb that stuff.) rejecting any property with rent < 2% of purchase price or a bad Rent minus PITI result (Trenton has high property taxes so it kills a lot of otherwise good deals.) The properties that survived that test I investigated directly.
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Jun 10, 2013 04:02
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TouchyMcFeely posted:Maybe I'm just trying to make it more complicated than it really is. The properties I was looking at work out to be less than 2% so they wouldn't be a good starter anyway. You don't necessarily need to reject any house that doesn't hit 2%. I did because there were so many houses available it helped narrow my options. Let me point out that my property taxes on the first property are $3k/year. So I'm paying almost 10% of the cost of the house every year in property taxes. If you're in an area with lower rates, your "1.8%" property might be as profitable as my "2.5%". Financing these properties is always tricky. There's a hundred different ways to go. I work for a bank so I got a mortgage through their Associate (employee) Lending department. I would just start calling banks and seeing what they tell you. Ask them how small a loan you can get, what products they have for rental properties, etc. Call big banks, call credit unions, and call the little local banks. Most banks aren't crazy about doing such a small deal, but if you're a good credit risk you should have some options out there. Most investment property loans require 25% down and cost around 1% more APR. Also, my bank wanted to see enough liquid assets in my accounts to cover 6 months of payments and six months of payments on my primary residence. Another way to go is seller financing. I have no experience in this, I did propose it once but the seller was not interested. Your best bet here is someone that doesn't want to be a landlord anymore but doesn't need the upfront cash. Do you have a rich uncle? I do. I thought long and hard about asking him to lend me the money. I decided against it in the end, but under the right circumstances I probably would do it. You could even go the consumer finance/credit card route. I don't have the stomach for that, but I know people that got started that way and now make a lot more money than I do. It's probably at least partly due to the frugal management style it imposes.
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Jun 11, 2013 00:53
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quote:At this point, I'm prepared to pull my offer to do month-to-month and just ask them to leave at the end of the lease. I would be able to paint and re-carpet the whole home and likely charge $100-200 more a month in rent for the property. I don't feel that I could pull that option in good faith at the moment because I had agreed to be flexible at the end of the lease previously and they've simply ASKED for a discount, but haven't been nasty about it. However, if she continues to push the case I am going to do so. I'm itching to do the work in the house, actually. You have every right to pull your offer. In fact, you don't even have to. As soon as she makes a counter offer, that implies that she has declined what you offered. Unless you REALLY need the money and can't risk vacancy, I would just tell them that you're sorry you couldn't come to an agreement, and let them know that you will begin marketing the apartment immediately. They're taking advantage of you. When I was showing my house a couple of months ago, this couple wanted to move in at reduced rent in exchange for "fixing up the place". I responded that the house was in good repair, and if they had any specific concerns, I was happy to address them. They moved on, thank god. quote:I thought you would all enjoy this little tale and update as there hasn't been much posting here recently. I also wanted to ask if anyone had any suggestions and insights about the cheapest way to do carpet/flooring. I have really old carpet and nasty linoleum in the home. It's about 1,550 square feet (of which maybe 10x15 is lino, 95% of remainder carpet, with the rest tile I won't touch) and I just want something fresh down and isn't a nasty color. What's the industry standard trick for this? I don't have time to install it myself. Good question, I'm interested in this as well. I went the Home Depot route and felt it was a poor value (though they did a decent job).
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May 24, 2014 00:00
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TraderStav posted:Thanks for the feedback. After she said she would do the month to month I said that there would be a three month maximum. She really didn't affirm or deny anything so I'm not sure where that is from a legal perspective especially since it's all verbal (well over text message). I think I may have painted myself into a three month corner unless she counters again. C'est la vie. I don't think you're in a bad position. You can fill a vacancy in the fall, it's a little bit more of a pain, but it's certainly doable. Not every prospective renter has school age kids, and even some that do will need to find another place for one reason or another.
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May 24, 2014 03:49
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TraderStav posted:Word is it is very hard to find a place right now, my neighbor is a realtor and tells me that they send over an intent to occupy before seeing the place. I live a solid sixty miles from my rental so it may not hold up to how crazy my primary homes market is going but gauging the listings nearby it's slim pickings for those moving. If they're model tenants between now and then I'd offer 1 year at $1450. But it wouldn't surprise me if better/tougher landlords giving better advice than me would suggest $1500 or even more.
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May 24, 2014 05:22
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moana posted:I don't want to do it myself, managing renters sucks rear end. I just don't want to sell until I know for sure I want to move, which is why for such a short period of time. Just was wondering if there were any common questions I should be asking. How do you know? Have you done it before? The hard part is finding good renters, which is hard any way you do it. Property management companies have no incentive to keep costs down, find good tenants, or do anything else right for that matter. I rented out my house when I moved because I had negative equity. Here's what I had to do. 1. Find tenants. This was a PITA, the house was on the market for like 2 months before I met the folks I ended up renting to, and I got stupid offers like people that wanted cheaper rent in exchange for "fixing the place up". Yeah right, keep your loving paws out of my poo poo. 2. Sign a lease, give them the keys, open an account for the security deposit. 3. 1 month in, the drain clogged. Plumper cleaned it out for $375 and told me it was from the tenants flushing baby wipes. I told the tenant he had to pay me the $375 because it was his fault. Tenant bitched but paid. 4. One of my former neighbors left a snarky post on my Facebook feed about the grass at the property getting too long. Called the tenant, he told me he had hurt himself falling down the stairs, but he would get the grass cut. Deleted the Facebook post and defriended the old neighbor. 5. Got a notice from the city that the water bill hadn't been paid, and that they were going to shut the water off. Called the tenant. He was aware and assured me that he was going to pay the water bill before it got shut off. 6. Drain clogged again. This time the plumber said it was tree roots on the sewer side of the main trap. I have to pay for this one since it's not the tenant's fault. $600. That's spread over 10 months. I don't really know how a property management company would have made any of that any easier, except I suppose that they would have been talking to the tenant instead of me.
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Oct 29, 2014 17:59
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smackfu posted:That sounds like a good renter. What if it was someone calling to complain about poo poo every other week? That would suck but it would still be worth the money I'm making.
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Nov 5, 2014 05:08
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FWIW, as a landlord, I doubt I'd ever agree to any kind of arrangement like this. I like simple arrangements and feel that in return for keeping the property in good repair and addressing issues when tenants raise them, I receive full rent each month. What do I do if I make some cockamaime deal with a tenant for $50 off rent and he does a crappy job on the tiling? With a contractor I call him up and tell him to do it again. More likely, I choose a guy with a good reputation and references and don't end up with a lovely job in the first place. But if I don't like the tiling job, and refuse to take the $50 off rent, the tenant is now pissed off and I have crappy tiling in the bathroom with no real recourse. I'm sure your intentions are good, and you may be perfectly capable of doing the work, but don't be surprised if the landlord outright refuses.
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Dec 16, 2014 04:51
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Ribsauce posted:This is your first time renting and you might learn a lesson. It might be expensive. That is fine. My first tenant played me for a while. It happens. It is part of the rental game. There is a reason not everyone does this even though the returns crush the stock market. Thanks, this is my new ethos. I've been a landlord for three years now and haven't been burned badly enough to learn yet. I'm way too permissive. Hopefully I learn before I get wrecked.
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Dec 30, 2014 06:35
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Bloody Queef posted:Depends on where in NYC. I know a guy that lives in North Jersey and train commutes who has investment properties down in Trenton Hahah, I was considering doing this exact thing. My rentals are in Trenton and I'm about to start a job in Jersey City. I'll probably unwind them. They're enough of a pain in the rear end when I live close. Don't feel like being an ninety minutes away when I have to collect rent in person and my tenants are incapable of relighting the pilot on the water heater. (Not that it should be going out in the first place. What the gently caress?)
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Jan 23, 2015 03:29
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I think his insurance is currently $400/year, and you're assuming it's $400/month. (Based on your $2,400 adjustment). $600/month for insurance would be insane.
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Feb 28, 2015 22:47
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Maybe I'm wrong for this, but I would not replace a roof that had just been repaired and is not leaking. If it starts leaking in the next 6 months to a year, that means the roof was not properly repaired and you should call the guy back to make it right. If another tree falls on it, now you know to replace the whole thing.
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Mar 18, 2015 02:26
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