Lets chat about the wonderful world of owning rental property

The Something Awful Forums > Discussion > Ask/Tell > Business, Finance, and Careers > Lets chat about the wonderful world of owning rental property

SiGmA_X: May 3, 2004; SiGmA_X

90-100k outlay for 9.6k annual income before expenses? So you're looking at a decade plus payback period? That's too long term. Control costs further and charge more rent or find another deal, IMO.

# ¿ Dec 24, 2013 00:02

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# ¿ Apr 28, 2024 20:15

SiGmA_X: May 3, 2004; SiGmA_X

Tigntink posted:

So given I have 100,000 to invest - what is a better thing to invest that money in with similar time lines and risk? I honestly don't know of an easier more convenient investment.

Vanguard S&P500 index, total market index, etc.. I should say I'm on the pro rental property side of things, based on my folks experiences a few decades ago. I just think your ROI may be a little low, but if you're going to DIY and come in at 40-60k vs 90-100k, that would surely change my opinion. I would make sure to make it connect to the main house pretty easily, locking fire door top and bottom of stairs or something. When it comes time to sell it, an accessible mother in law suite may be a plus, or guest quarters.

ThatBasqueGuy posted:

Are you accounting for the time/labor that you'll be putting in instead? Potential stress, time increases, unexpected costs from doing it yourself, etc..? Though your previous experience should help mitigate this somewhat.

Some people enjoy making things, and it fills both months of hobby time and adds income and equity, possibly. My hands-on hobbies just cost me money, and guarantee to take more money as they work better vs make me money. And don't kid yourself about unexpected costs. You get similar to more with a contractor too.

# ¿ Dec 24, 2013 05:01

SiGmA_X: May 3, 2004; SiGmA_X

Zero VGS posted:

Hey, you know what's stupid? When my building has lead paint, but the condo association does not want to pay to remove it from the common areas. So even if I remove it from my apartments, I still legally can't rent to people with children or visiting children. Plus, I can't legally tell them they can't rent either! I like how I asked the property manager and the state lead paint program and the EPA what the gently caress I'm supposed to do and they all shrugged and went WELP!

Apparently the unofficial answer I'm seeing from online lawyers is that no one has ever actually been sued for refusing to rent to families in a situation like this, so while it's a grey area I should just avoid advertising to them since safety trumps discrimination.

Wait, what?! I fully believe you that the govt could do this, but how the hell! You can't tell a renter with kids that the state doesn't allow you to expose them to harmful lead paint? I don't get that at all!

This is why do never buy condos I think - crappy HOA's. Man that blows.

# ¿ Mar 25, 2014 17:02

SiGmA_X: May 3, 2004; SiGmA_X

Zero VGS posted:

I can (and would) tell a family there is lead paint, I'm required to disclose that. But then the govt says they can't legally be there, but I can't legally refuse to let them be there or even hint for them to look elsewhere. It's a wacky conflict that has never been reconciled.

What stops you from printing the code section that says they can't be there, and giving it to them as the top page of the rental app?

# ¿ Mar 25, 2014 17:52

SiGmA_X: May 3, 2004; SiGmA_X

poopinmymouth posted:

Update time.

The apartment was originally listed for 173,200 USD.

We put in a bid for 162k

She counters asking for 170k (Which is fine, 8k is a big difference)

We counter counter with 165,5k (these numbers are much rounder in ISK) AND told the realtor, her father-in-law that this was the max we could get approved for.

So what does she do? Counter counter COUNTER offer for 168k, a 2,500 USD difference.

I know it's just business but drat this makes me dislike this woman. The only good thing is she is located abroad so I will never have to see her, and after this transaction she is out of the picture forever.

Her offer letter, if we sign it before the 24 hours runs out, becomes legally binding for her to sell at that price and us to buy (barring the inspector finding anything).

I am leaning toward no, just because she is being so petty, but it's still a reasonable deal, and we have some upcoming life changes that will make our credit worse in the eyes of the bank, so now is a pretty good time to do it.

You're from a non-US nation, and you think a 4 part negotiation is weird?? I guess that is a sign of the times. It use to be very common. I do it basically always when buying used things, and I'm in the US.

I would counter again at 165.5k.

# ¿ Jul 31, 2014 17:30

SiGmA_X: May 3, 2004; SiGmA_X

Dragyn posted:

In some states you are not allowed to charge a premium for pets, not sure what the rules are there though.

And there are also HUD restrictions that can come into play. My pitbull is a coveted animal due to medical needs, so breed restrictions never apply to her.

# ¿ Mar 27, 2015 18:13

SiGmA_X: May 3, 2004; SiGmA_X

BEHOLD: MY CAPE posted:

Yep, you are basically obligated to accept a service animal without a fee. Unfortunately there is little or no regulation of what constitutes a service animal and there exists a certain clientele who abuse this fact to bring their pet into rentals.

:waves: I am such an abuser, but honestly my/gf's quality of life is much better with our comfort companions. I won't rent at a non-pet-accepting rental, I see that as going too far and I really don't want an upset landlord.

Rhandhali posted:

I don't think there are a large number of service animals being used by the resident/medical student population. Most of the ones I know don't have time for pets, either, (though I was an exception for about a year taking care of my parent's dog) but it's something I'll look into. Louisiana laws are very different than what I'm used to.

Is it possible to require a separate cleaning deposit, and just have a fixed but fully refundable except for damages incurred deposit?

1) I think every single resident I know has a cat!

2) I believe that varies by state but is allowed in many states.

# ¿ Mar 27, 2015 21:07

SiGmA_X: May 3, 2004; SiGmA_X

EB Nulshit posted:

Tell me what's wrong with this plan:

1. Get mortgage on a rental property with 10% down.
2. Hire a property management service to manage it, even this means you only break even on the mortgage + tax + fees + repairs + insurance.
3. Own the entire property after 30 years (assuming 30-year, fixed rate mortgage)

Repeat steps 1 and 2 every year forever.

I read about this in a book and the author said it worked great until he found out he was only allowed to have four mortgages or something. I'm assuming there must be a ton of gotchas and little ways this can go wrong. Seems like it would even let you get around the "don't own rentals far, far away from where you live" rule, since you wouldn't be managing it yourself.

You found the problem! "you only break even on the mortgage + tax + fees + repairs + insurance." You're going to have vacancies, and the fees will eat up your profit.

# ¿ Apr 16, 2015 06:16

SiGmA_X: May 3, 2004; SiGmA_X

Henrik Zetterberg posted:

Hello thread. I currently own a condo in California. I will be moving into a larger rental house with my girlfriend later this summer (while we save to possibly buy) and I am trying to figure out what to do with my current home.

Some details:
Purchase date: 2008. I used the first time home buyers credit. The stupid one where you have to pay it back over the next 15 years at tax time. I have been making the $AMOUNT / 15 payments on my taxes each year. From what I gather, if this home is no longer my primary residence, I have to pay the balance back in full, which is around $3k or something at this point.
Purchase price: $283k
Current value estimate on Zillow: $280k
Loan type: FHA

I re-financed in 2011 to go from 5.75% down to 4% for a 30-year. Not knowing much about mortgages and poo poo, I re-fied into another FHA, which increased my PMI and also reset the 5-year timer on it.

Current outstanding balance: $230k
Breakdown of current payments (~$1750):
- Principal: $425
- Interest: $765
- Escrow ($560) breakdown:
-- Homeowners insurance: $48 (~$570 yearly)
-- PMI: $212 (will drop off in ~18 months)
-- Property taxes: $300 (~$3600 yearly)

I currently pay weekly, so there's a few months a year where I am paying ~$2400, but that extra payment goes towards principal. Over the year, it averages out to a little over $1900/month.

My HOA is $230/month (there's a pool and poo poo), so my average monthly expenses are $1900 + $230 = $2130.

I've put next to $0 in maintenance since I've lived here since it was built in 2004. Nothing huge has blown up and the roof is covered with my HOA payment. The only thing I could see crapping out anytime soon is the HVAC. It runs just fine now, but that's the first thing I could see going.

According to Zillow, they estimate I could get ~$1600/month if I rent it out. Of course those are just wild estimates, but one thing I'm not positive on, is if estimates like that are including the HOA? If that figure is supposed to cover HOA, then I'm obviously running a pretty large net monthly loss. Still running one even if it doesn't. Even more-so since I'd probably want to hire a management company. We have 3 kids, so my spare time is already pretty limited.

The only reason I'd like to hang onto this property is to build equity. I originally bought the home as the price was falling (original owner bought it for $330k) and only in the past year it has recovered. If I sold now, I'd be breaking even with my buy price.

Is it dumb to rent this place? My income is high enough to where I could easily absorb eating a couple hundred/month.

If I rent it out, my mortgage guy told me that it would be advisable to refi into a conventional loan beforehand since doing it after converting it to a rental property has other rules and implications. That's if I wanted to at all. But since I'm already at 4%, I don't think it would be worth it, not to mention my PMI will be dropping off next year.

What's your equity at? If you refi and have at least 20% equity, you could save PMI.

When renting a condo out, the landlord pays HOA. And you price accordingly. What are other units actually renting at?

You may consider selling it now and eating the loss all at once vs monthly.

# ¿ Jun 17, 2015 00:18

SiGmA_X: May 3, 2004; SiGmA_X

AbsenceVsThinAir posted:

So my brother in law and his wife are planning on buying a new house and renting their old house to the wife's mom. Said mom does not have enough money (due to being retired and not good at saving) to afford a market rate on the house, so they are going to be renting to her for below market rates. I just found out yesterday that in addition, they plan on having her "gift" them rent every month, to avoid the rent being extra income. Overall it seems like a bad idea to me, but I don't know why specifically gifting rent suddenly makes it not income. Is that sort of arrangement legal? How would the IRS find out, and what are the chances they would, and if they did what would the consequence be? I'd like to convince him that it's a bad idea, but I'd need specifics if I was going to have a decent shot at doing so.

Wrong thread for IRS questions, but there are some CPA landlords.

They each (husband + wife) can gift the wife's mom 14k a year. I don't see how this is a problem if they can comfortably afford it. Maybe it would be a better use of their money for her to get a smaller apartment that she can afford, but charity isn't a bad thing per say.

# ¿ Jul 8, 2015 14:19

SiGmA_X: May 3, 2004; SiGmA_X

In Oregon, the law specifies a 'reasonable rate'. No direct amount, just that it must be reasonable. Repairs do not have to be done to be collected from the tenant either (eg they screw up your drywall but you knock the wall out and do a remodel vs replace drywall, you still can recover costs.)

I'd get a handyman/contractor quote and use that if you DIY.

n8r posted:

No offense TraderStav - it seems like you've decided you want to keep their deposit and are now coming up with justifications for it. I'm glad I've never had a landlord try to gently caress me over, but just think if you were in the reverse situation.

Sounds like he is due a bunch of money, too.

My landlord tried to hold back the entire deposit for the prior tenant (a friend) because the porcelain in the tub needed refinishing. News flash, it's fiberglass and it's in mint (never used, just cleaned) shape. They dropped that once the prior tenant disputed it and she received 100% of her deposit back. I think the landlord felt they deserved the money just because. I know some do that.

SiGmA_X fucked around with this message at 20:48 on Aug 6, 2015

# ¿ Aug 6, 2015 20:44

SiGmA_X: May 3, 2004; SiGmA_X

You look to be pretty justified there. Being you're actually going to do the work, I see no problem with charging everything out. Maybe get a neighbors landscape person to swing by and write a quick estimate when they're cutting the neighbors grass? I bet your self-labor costs are low but IDK.

# ¿ Aug 6, 2015 21:35

SiGmA_X: May 3, 2004; SiGmA_X

Saint Fu posted:

Is the tenant typically responsible for the landscaping? I've never heard of this; it seems like a recipe for a dead lawn. I see that it was in your lease but has anyone ever had a tenant ever keep the lawn and garden looking nice? Other than that, everything seems reasonable to me, the layman.

I have to maintain landscaping to the condition it was when I moved in. It was dead when I moved in. I just have to mow the weeds - the grass doesn't grow

I'll be fixing this next spring, I hate it.

Trader - I think they owe for landscaping and that deck railing looks okay but needs stain. Minus the one that broke. Probably their fault, maybe not. Hard to say.

# ¿ Aug 7, 2015 17:55

SiGmA_X: May 3, 2004; SiGmA_X

You may consider dremeling your dogs nails more in the future, also. My folks had hardwoods (with a very, very hard Swedish wax finish?) and my 75lbs lab did no damage, nor did their Westie who while small, would lose traction and paw rapidly which should damage the wood. Same at my rental. You can see the damage from previous tenants dogs, but no new damage from my larger dog.

If they're clicking, they're too long! Dremel Ftw.

I also think there probably is some sort of prorate thing to do here. Floors were last done X years ago, should last Y years, you pay Z. And I'd get multiple quotes. My friends house had ~1,500sqft (maybe 2k, and a set of stairs which were spendy!) refinished with substantial damage and some wood replaced and quotes ranged from $1,500-4k. They went with the cheapest, who was very highly referred and we looked at sample work before they agreed to him, and it turned out perfect.

# ¿ Aug 31, 2015 17:44

SiGmA_X: May 3, 2004; SiGmA_X

FlashBewin posted:

Hell, i'm not qualified to answer that question either. It's how my sister had it set up, and it's how the lawyer recommended to set it up.

My understanding, both from the lawyer and other third parties (but not this most recent CPA, he didn't explain WHY--that would have needed a longer consultation) is that each condo is in it's own business, Condo# for corporate veil protections.

I have Condo1,Condo2,Condo3,Condo4,Condo5. They are all owned by the same INC. I own/am CEO of the INC.

I think that it's a layered defense. If someone gets hurt/condo goes boom/something horrible happens, "They"---whoever They might be--can only go after the assets involved with Condo#, Which at any given time is $Deposit(if there is one involved) + $Rent, if i leave any in the account, plus the actual ownership of the Condo.

This protects me because they wouldn't/shouldn't be able to go after the assets involved in Condo#'s or the INC. If nothing else, it protects me---the physical person with a SSN--from being sued for everything i own. This is how it was explained to me. Two layers of defense, the Condo# is one layer, they have to pierce the corporate veil to find out who owns condo# (The INC), and then they have to justify (i guess that's the right word?) to the judge in order to pierce the second layer of corporate veil, the INC, to find out who i really am so that i could potentially be sued.

FYI, in most states (every one from what I've heard, but maybe not?) its public info who owns LLC's and INC's. Search google for "your state business registry" and then look up your LLC/INC's.

# ¿ Sep 6, 2015 07:45

SiGmA_X: May 3, 2004; SiGmA_X

Shrimpy posted:

In general, what's the best way to recover keys when terminating an agreement with a rental agent? My rental property is in NC, but I'm in CA so picking up the keys myself isn't an option. I can send someone to get them, however is it unreasonable to ask them send me the keys back via certified mail/trackable package?

Someone suggested sending a SASE with the certified letter terminating the agreement, however that seems impractical since it can't be tracked. Would I be best served by just pre-printing a shipping label/envelope with tracking and including it?

Have whoever is doing the move out walk through pickup the keys at the same time?? Simple enough.

# ¿ Sep 16, 2015 20:20

SiGmA_X: May 3, 2004; SiGmA_X

It's common in commercial leases to have renewal terms in the initial lease. It could be a raise to market rate rent with 60 day notice, it could be 3%, it could be a CAM reassessment (if you don't do annual), etc. Lots of options.

# ¿ Nov 5, 2015 18:05

SiGmA_X: May 3, 2004; SiGmA_X

Hashtag Banterzone posted:

Didn't see a renting thread so I figured I would post here. We bought a house and let our landlords know 11/4. And then on 12/4 we told them would be out by 1/15. The lease we signed goes through March.

We took really nice photos of the house and sent them to our landlords for them to put on craigslist. And we left the property in really good condition on 1/15. Landlord said he will be sending us our deposit. The landlord decided he wanted to have a small amount work done on the house in between tenants, but didn't get around to getting a contractor in to work on the place until 2/22. Our state says that a landlord has to make a good faith effort to fill the vacant property. The property still isn't on craigslist.

Is it reasonable for me to inform our landlord that February was our last payment?

You probably should post the state and what your lease break terms are in the lease.

# ¿ Mar 1, 2016 06:51

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# ¿ Apr 28, 2024 20:15

SiGmA_X: May 3, 2004; SiGmA_X

Nocheez posted:

6 months in and my tenants managed to destroy the garage door! They noticed a roller had come off track, but didn't call to have me come look at it and fix it. Then the counterbalance metal wire got tangled in the shaft and they tried to fix it themselves. After loving it all up, they finally call me. There was nothing I could do but cut the wire and get the door mostly shut. There goes $1400 for a door and a new opener, whee!

Your lease probably states something about they can't do repairs and must report things immediately, right? If so, what protections does that actually afford you?

# ¿ May 5, 2016 21:40

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