How many of you have rentals (i.e. you're a landlord)? Are they worth it?
How many of you have rentals (i.e. you're a landlord)? Are they worth it?
How many of you have rentals (i.e. you're a landlord)? Are they worth it?
Once we pay off our mortgage it's something I've been mulling over doing. I know and feel I shouldn't just jump into something without a lot of research. We didn't even buy our house for 12-18 months of me searching for houses at least on a bi-monthly basis.
We are at least a few years away and another promotion away from doing anything serious with rentals.
I've been tempted to cash out one of our mutual funds (through Fidelity and not a retirement account) and just pay off the house but have resisted temptation. It was worth 35k in 2009-2010 and it's worth near 87k now. We have a net worth of about 320k now and no debt except the mortgage. We only owe less than 90k at 4.625% interest now on our mortgage. I know it's the right call to keep the money investment in the long-term... right? But still. Tempting.
This is the main reason I joined this board. Love what I see so far! What books or websites should I be reading? What other questions should I be asking?
Thanks in advance.
*Edited #1: To add net worth and mortgage interest rate.
**Edited #2: To clarify mutual funds are from Fidelity and not an investment account.
Once we pay off our mortgage it's something I've been mulling over doing. I know and feel I shouldn't just jump into something without a lot of research. We didn't even buy our house for 12-18 months of me searching for houses at least on a bi-monthly basis.
We are at least a few years away and another promotion away from doing anything serious with rentals.
I've been tempted to cash out one of our mutual funds (through Fidelity and not a retirement account) and just pay off the house but have resisted temptation. It was worth 35k in 2009-2010 and it's worth near 87k now. We have a net worth of about 320k now and no debt except the mortgage. We only owe less than 90k at 4.625% interest now on our mortgage. I know it's the right call to keep the money investment in the long-term... right? But still. Tempting.
This is the main reason I joined this board. Love what I see so far! What books or websites should I be reading? What other questions should I be asking?
Thanks in advance.
*Edited #1: To add net worth and mortgage interest rate.
**Edited #2: To clarify mutual funds are from Fidelity and not an investment account.
Last edited by Eagle on Thu Jun 15, 2017 8:04 am, edited 4 times in total.
Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
Well, I had to laugh because most (nearly all) people who are actually landlords will say it is worth it. Otherwise they would not do it. So the pool of people who answer this question may be skewed.
I'm not a landlord and will never be again. It's a pain in the you know where. I did it once (accidental landlord because I didn't want to sell the house I was moving out of) and was happy to get out a few years later without losing money. But I didn't make any money either.
I think being a landlord is wonderful for people who actually like it. Be sure you are not just doing it for money because that would probably NOT be worth it.
I'm not a landlord and will never be again. It's a pain in the you know where. I did it once (accidental landlord because I didn't want to sell the house I was moving out of) and was happy to get out a few years later without losing money. But I didn't make any money either.
I think being a landlord is wonderful for people who actually like it. Be sure you are not just doing it for money because that would probably NOT be worth it.
Link to Asking Portfolio Questions
Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
I have one now and have up to four at different times. There has been countless discussions on this topic so I would encourage a search of the archives. Short version, one needs to learn the system for making money on rentals, how to analyze possible acquisitions, and realize that it is a part-time job. There are rentals that work out well and those that don't, lots of anecdotes for each situation.
You are correct that most people in most situations would probably not tell you to cash out retirement savings to pay off the mortgage on your primary residence. There are variables such as interest rate that you are paying that would be required to provide more specific suggestions but in general...
You are correct that most people in most situations would probably not tell you to cash out retirement savings to pay off the mortgage on your primary residence. There are variables such as interest rate that you are paying that would be required to provide more specific suggestions but in general...
I own the next hot stock- VTSAX
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Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
Whether it's worth it has a lot to do with the housing market in your area.
I think the people who hate rentals here usually managed the rentals themselves and had to deal with the problems that can lead to. I've had good experiences using property management but would not buy rentals if I had to do maintenance myself.
You have a few years to learn, so go over to biggerpockets and start reading there. Obviously the site will paint a really rosey picture of real estate but you can learn all you need to know, and from that see if you want to still do it or not.
I think the people who hate rentals here usually managed the rentals themselves and had to deal with the problems that can lead to. I've had good experiences using property management but would not buy rentals if I had to do maintenance myself.
You have a few years to learn, so go over to biggerpockets and start reading there. Obviously the site will paint a really rosey picture of real estate but you can learn all you need to know, and from that see if you want to still do it or not.
Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
The day we sold our rental was a happy day.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
That's a pretty high mortgage rate. Cash out and pay it off yesterday!
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Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
Eagle wrote:How many of you have rentals (i.e. you're a landlord)? Are they worth it?
I had multiple rentals but no more than 3 at one time. You can make money but you must do many things correct. And yes they can be a pain in the neck with the wrong renter. I had my share of good and bad. Sold all of them a few years back because I no longer wanted to be a landloard. Also, my full time career gave me lots off time of because of the schedul. This made it a lot easier to deal with problems.
Once we pay off our mortgage it's something I've been mulling over doing. I know and feel I shouldn't just jump into something without a lot of research. We didn't even buy our house for 12-18 months of me searching for houses at least on a bi-monthly basis. Only if you are ready for a part time job on top of you full time job. I did it and enjoyed doing it but that was me. One mistake like renter living there for free could destroy you. Can you cover the mortgage for months while you try to remover the renter.
We are at least a few years away and another promotion away from doing anything serious with rentals. Take your time and save and study now.
I've been tempted to cash out one of our mutual funds and just pay off the house but have resisted temptation. It was worth 35k in 2009-2010 and it's worth near 87k now. We have a net worth of about 320k now and no debt except the mortgage. We only owe less than 90k at 4.625% interest now on our mortgage. I know it's the right call to keep the money investment in the long-term... right? But still. Tempting. No, No No, I am a fan of paying off the mortgage but not with investment funds. That would be a mistake. Use extra savings to pay off mortgage.
This is the main reason I joined this board. Love what I see so far! What books or websites should I be reading? What other questions should I be asking? Read books you can check out at the Library and search online. Be careful with all the real estate GURU's that are trying to sell you their books and seminars to make themselves money by taking yours.
Thanks in advance.
*Edited: To add net worth and mortgage interest rate.
Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
If your mutual fund is not in a retirement account, I would definitely consider cashing it out and paying off your mortgage. A 4.625% guaranteed rate of return is not something you are going to find in the stock market, especially after a 9 year bull run! How will you feel when - not if, but when - your mutual funds dip in value by 10-20%? If you will be kicking yourself for not paying off your mortgage instead, then do it while you still can!
Reasons for my advice here even though it's not for everybody -
--Your loan is so small that a refinance will not be a good option. Mortgages under $100K are higher risk and therefore more expensive because many investors won't buy them.
--You are likely filing taxes with the standard deduction, so you aren't benefitting from a mortgage interest tax deduction
--The cash flow of having zero debt will be meaningful for you. It will free up money each month that you can use to rebuild stock investments
As for a landlord, yeah I am one. "Worth it" is relative. I've made some money on all of my properties (mostly via leverage and appreciation - only recently with some decent cash flow after owning them for 8 years plus or minus). In a few cases I could have made more just keeping that down payment money in the stock market though. The tax benefits are nice, but the stress is not. I have a property manager manage all but one now, but I still have to manage the manager and file the insurance claims and figure out the taxes and decide which kind of repairs to make, etc. I am glad I have multiple rentals so when there is one vacancy or issue there is still some cash coming in and I have diversity of locations when there is a hail storm, etc. But it's a take it or leave it kind of thing for me. Definitely not something I think everybody should do.
Reasons for my advice here even though it's not for everybody -
--Your loan is so small that a refinance will not be a good option. Mortgages under $100K are higher risk and therefore more expensive because many investors won't buy them.
--You are likely filing taxes with the standard deduction, so you aren't benefitting from a mortgage interest tax deduction
--The cash flow of having zero debt will be meaningful for you. It will free up money each month that you can use to rebuild stock investments
As for a landlord, yeah I am one. "Worth it" is relative. I've made some money on all of my properties (mostly via leverage and appreciation - only recently with some decent cash flow after owning them for 8 years plus or minus). In a few cases I could have made more just keeping that down payment money in the stock market though. The tax benefits are nice, but the stress is not. I have a property manager manage all but one now, but I still have to manage the manager and file the insurance claims and figure out the taxes and decide which kind of repairs to make, etc. I am glad I have multiple rentals so when there is one vacancy or issue there is still some cash coming in and I have diversity of locations when there is a hail storm, etc. But it's a take it or leave it kind of thing for me. Definitely not something I think everybody should do.
"An investment in knowledge pays the best interest." - Benjamin Franklin
Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
I was a landlord many years ago. I owned a triplex and lived in one unit and rented out the other units. When I was living in the building, I actually enjoyed it. Since I was there to handle any of the issues that came up, it was not too much of a hassle.
But, once I got married, moved to the suburbs and had kids, I had zero interest in continuing with the landlord path. I got to a point in life where having free time to spend with my family was more important than the positive cash flow or real estate appreciation.
My most memorable negative story to tell of being a landlord was when a tenant called in the dead of winter on a weeknight to tell me that there was water coming from his bedroom ceiling. I drove the 10 miles to the property and ended up climbing out on the roof to unclog a gutter which was filled with leaves and melting snow.
The day I sold the property (after 11 years) was a very joyous occasion.
But, once I got married, moved to the suburbs and had kids, I had zero interest in continuing with the landlord path. I got to a point in life where having free time to spend with my family was more important than the positive cash flow or real estate appreciation.
My most memorable negative story to tell of being a landlord was when a tenant called in the dead of winter on a weeknight to tell me that there was water coming from his bedroom ceiling. I drove the 10 miles to the property and ended up climbing out on the roof to unclog a gutter which was filled with leaves and melting snow.
The day I sold the property (after 11 years) was a very joyous occasion.
Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
I've been a landlord for 40 years. It's been good to me. But I've said this 100 times..............................if you do not have the personality to evict your "mother" on Christmas eve...............forget it. Secondly, its all about location (surprise). Holding period averaged 20 years in San Diego.
The Joker
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- unclescrooge
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Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
I still own two rental properties.
They are 2,200 miles away in a state I've never visited.
I have property management take care of them, and they're still a bit if a hassle.
They are profitable, but I bought well. Bought them from a bank for slightly below market.
It was fine 12 years ago when I had more free time. But I wouldn't venture into it today.
They are 2,200 miles away in a state I've never visited.
I have property management take care of them, and they're still a bit if a hassle.
They are profitable, but I bought well. Bought them from a bank for slightly below market.
It was fine 12 years ago when I had more free time. But I wouldn't venture into it today.
Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
I've owned as many as two dozen at one time. Currently own two. You will earn every nickel you make in real estate investments. It is not easy money.
Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
We rent out the townhouse we used to live in. Not worth it and we're looking to get out.
Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
We had 3, managed at times and had a property manager at other times, both bring issues. We are happy to be out of landlording.
Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
I inherited two small apartments so am an unwilling landlord and hate it. I don't like my investments to have such a personal, human factor. I also think real estate has too many unpredictable expenses and is too much work in general. I am trying to sell them now.
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Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
Small time landlord here about to get out (2 more weeks). It's been really worth it for me. Owned a 2-unit. Lived in half for 2 years, rented other half out. Currently rent both units. In 4.5 years, the annualized CAGR has been 47.5% (including taxes and expenses/repairs, but excluding the value of living there 2 years). The S&P500 CAGR over the same period was 14.87%. Most of the ROI was due to heavy leverage in a gentrifying HCOL market and little bit of sweat equity, cash-flow, and the scheduled mortgage pay down. The rental's ROI outpaced my savings rate (which is pretty high) and the cash-flow was diverted into a megabackdoor ROTH.
All this occur while my spouse was home with the little one. The time required to LL doesn't hold a candle to having two fully employed adult in the family. Much, much less stress on the family. So to answer your question, yeah, I loved being a LL. It was a very freeing experience.
This is key: if you're trying to add LL to full time work, it will be stressful at times. If it's a replacement, the stress will be less than working. To get to the full replacement level takes a long time for most people.
That being said, rentals results vary greatly and can't be said to be superior or inferior to other investments. The fundamentals (e.g. rent:price), market prices, and cost of leverage (i.e. interest rates and lending requirements) shift all the time. At this moment, I feel most markets are too richly valued. I'm ready to exit the RE in the midst of this bull market, but will be looking to LL again next cycle.
Resources:
My go-to fiscal resource for RE is "What Every Real Estate Investor Needs to Know About Cash Flow... And 36 Other Key Financial Measures" Frank Gallinelli. This book will help you draw your own conclusions about renting:selling. My go-to legal and tax resources is NOLO: Every Landlord's Tax Deduction Guide. There are also state specific legal guides. NOLO does a good job of making complex topics understandable.
All this occur while my spouse was home with the little one. The time required to LL doesn't hold a candle to having two fully employed adult in the family. Much, much less stress on the family. So to answer your question, yeah, I loved being a LL. It was a very freeing experience.
This is key: if you're trying to add LL to full time work, it will be stressful at times. If it's a replacement, the stress will be less than working. To get to the full replacement level takes a long time for most people.
That being said, rentals results vary greatly and can't be said to be superior or inferior to other investments. The fundamentals (e.g. rent:price), market prices, and cost of leverage (i.e. interest rates and lending requirements) shift all the time. At this moment, I feel most markets are too richly valued. I'm ready to exit the RE in the midst of this bull market, but will be looking to LL again next cycle.
Resources:
My go-to fiscal resource for RE is "What Every Real Estate Investor Needs to Know About Cash Flow... And 36 Other Key Financial Measures" Frank Gallinelli. This book will help you draw your own conclusions about renting:selling. My go-to legal and tax resources is NOLO: Every Landlord's Tax Deduction Guide. There are also state specific legal guides. NOLO does a good job of making complex topics understandable.
Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
This thread is now in the Personal Finance (Not Investing) forum (landlord).
Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
I once had a tenant fire a shotgun through the wall of his unit and into the bedroom of the adjacent one, where the pellets lodged in the ceiling. He then intimidated the other tenant into not telling me what had happened.Hockey10 wrote:I was a landlord many years ago...
My most memorable negative story to tell of being a landlord was when a tenant called in the dead of winter on a weeknight to tell me that there was water coming from his bedroom ceiling. I drove the 10 miles to the property and ended up climbing out on the roof to unclog a gutter which was filled with leaves and melting snow...
When I found out I went over there, wrapped my hands around his neck and shook him violently while I explained that when he fired a gun inside my building that guaranteed he was going to hit something that belonged to me. He understood and moved out promptly.
* * * * * * * * * * * * *
But, that was a once in 40 years situation. The advice I keep hearing is that landlording is like having a part time job, and we should not do it. But the other advice I hear is that a part time job is a good way to stretch one's income in retirement. Am I the only one who sees the disconnect?
It is like a part time job, and that keeps my spendable income up in retirement.
The concept of a property management company is alien to me. Bogleheads grouse about actively managed mutual funds that take 1.5% off the top, but a property manager takes either 10% or 5% of the rent off the top. Then charges top dollar for every last little thing they do. Change a light bulb? 1 hour minimum @ $40 labor charge, plus a fuel surcharge and the cost of the lightbulb at some boutique shop, definitely not Home Depot.
Charges for painting, lawn mowing, re-keying locks, etc. Then they have the nerve to send me a 1099 for an owner draw, instead of properly done income. Dump those worthless drones and do it yourself.
I am very satisfied with the result of our rentals.
Answering a question is easy -- asking the right question is the hard part.
Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
I've got two rental properties and looking to add a third. I fixed the one true rental up pretty nice by putting in new pex plumbing, a new water heater and new floors. By doing this, you eliminate potential problems. My other rental is the three bedroom brick home I lived in until last fall. Practically everything in that house is fairly up to date.
My theory is simple, don't rent to idiots and don't be a slum lord. If you buy a rental, just make sure the plumbing, electrical, roof and windows are decent. If you buy a dump, plan on spending 10k-30k fixing it up before you rent it.
Rental properties aren't for everyone, BUT to the right person, it's not a bad racket.
My theory is simple, don't rent to idiots and don't be a slum lord. If you buy a rental, just make sure the plumbing, electrical, roof and windows are decent. If you buy a dump, plan on spending 10k-30k fixing it up before you rent it.
Rental properties aren't for everyone, BUT to the right person, it's not a bad racket.
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Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
Head over to Bigger Pockets where you will get more information. There is a better way of land lording that can make you money but as others have said, it is a part-time job. It is not as passive many think. You have to work hard from beginning to ensure that you buy the right property, rent to potentially good tenants (screen carefully) and manage your properties right. I can't emphasize enough to go to BiggerPockets for additional information.
Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
Are you good at fixing things? If not, be prepared to have a budget for paying someone for the constant barrage of breaks.
My tenant called me on a Christmas morning saying there was no heat in the apartment. Called HVAC tech, which was $95 per hour that day (almost 20 years ago), come in and spend 4 hours messing around in the basement just to tell me I needed a new furnace, at a cost of $6K.
Tenants were miserable because they had no heat. My wife was miserable because of the inconvenience and I was miserable at the cost. 2 years later I sold the place.
My tenant called me on a Christmas morning saying there was no heat in the apartment. Called HVAC tech, which was $95 per hour that day (almost 20 years ago), come in and spend 4 hours messing around in the basement just to tell me I needed a new furnace, at a cost of $6K.
Tenants were miserable because they had no heat. My wife was miserable because of the inconvenience and I was miserable at the cost. 2 years later I sold the place.
Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
Why so many Bogleheads have rental properties? If anyone suggests buying a single stock (which may, for example, be a REIT with thousands of properties), Bogleheads would recommend a REIT fund (or a total market fund) instead. How is a single rental property better than a REIT or a REIT fund?
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Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
Oh sorry I thought it was more of an investment question. Thanks!LadyGeek wrote:This thread is now in the Personal Finance (Not Investing) forum (landlord).
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Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
It can be worth it under the following conditions:
Buy with cash so no mortgage interest expense
Do most minor maintenance yourself
Live within walking distance to your rental so you can do showings easily
Once you start having to pay people to manage your property you can say goodbye to all your meager profits. Also pay attention to these important sayings:
It's better to have no tenant than a bad tenant
A good tenant is worth their weight in gold
With that in mind, ask below market rate so you can attract more people. Then only pick people professionals with 720+ credit . Make sure they are respectful and patient types.
Buy with cash so no mortgage interest expense
Do most minor maintenance yourself
Live within walking distance to your rental so you can do showings easily
Once you start having to pay people to manage your property you can say goodbye to all your meager profits. Also pay attention to these important sayings:
It's better to have no tenant than a bad tenant
A good tenant is worth their weight in gold
With that in mind, ask below market rate so you can attract more people. Then only pick people professionals with 720+ credit . Make sure they are respectful and patient types.
Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
You need to be a sturdy person and handle the speed bumps ....
I don't care to own real estate and never have, even though during my high earning years it would have been great to have the depreciation deductions.
It's not so much financial, as it is not wanting the landlord hassles. I'd like to own some for diversification, and perhaps that will happen because my wife and one of our adult children are considering buying some real estate (I'll just cheer them on).
My dad owns a nice commercial building, my sister in law owns a dozen residences and a commercial building, my nephew owns residential real estate ..... all are doing well, and all have had some pretty dicey financial moments during the times of ownership (as in one commercial building is a single tenant property that sat empty for a year = $100k+ annual debt/taxes/insurance service with no income). All course need to handle tenant calls/building problems (or pay a hefty fee to a property manager).
I don't care to own real estate and never have, even though during my high earning years it would have been great to have the depreciation deductions.
It's not so much financial, as it is not wanting the landlord hassles. I'd like to own some for diversification, and perhaps that will happen because my wife and one of our adult children are considering buying some real estate (I'll just cheer them on).
My dad owns a nice commercial building, my sister in law owns a dozen residences and a commercial building, my nephew owns residential real estate ..... all are doing well, and all have had some pretty dicey financial moments during the times of ownership (as in one commercial building is a single tenant property that sat empty for a year = $100k+ annual debt/taxes/insurance service with no income). All course need to handle tenant calls/building problems (or pay a hefty fee to a property manager).
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Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
There are too many variables to say "yes" or "no".Eagle wrote:How many of you have rentals (i.e. you're a landlord)? Are they worth it? . . .
However, a "successful" rental is a great diversification financial investment.
(I will skip the "emotional investment" part.)
Firstly, you should know and understand "Cap Rate". Know it forward and backward.
And check out the forum on biggerpockets . com
One could write an essay in response to your question here.
- Kitty Telltales
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Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
I owned a duplex for about 20 years with no mortgage for many of those years. I sold my half to my ex last year and invested the proceeds in Vanguard Total Stock Market and now I collect dividends instead of worrying about receiving the rent checks. Generally the rent checks were more, except for the periods where bad tenants stopped paying and we had to spend too much time and expense threatening eviction, which is never a pleasant process and readying the place for the next tenant.
Some rules I had for myself as a landlord:
Single moms "generally" do tend to make sure their rent is paid so that there's a roof over their children's heads.
Really follow your gut about potential tenants. If they aggrivate you or you feel uneasy in any way during the selection process, they will agitate you even more as a tenant.
And if your spouse has a better feeling for people, let them do the interviewing.
One of my worst experiences was with a tenant that I actually didn't accept due to my gut feeling. The Christmas Eve after I turned her down, I saw her crying on the TV news because of a Christmas tree fire. Have to say that it put a damper on my Christmas as well thinking about the what if's.
Another crazy tale was when we found out the tenants were letting the next door neighbors fill their pool all summer by running a hose from our building (well water).
And still another tale was when the nice hard working single mom tenant moved out because she had let her heroine addicted brother move in and she couldn't take it anymore. His name wasn't on the lease, which was one requirement in the lease that all adults must sign the lease. Nevertheless the rent wasn't paid so we had to start the process of evicting someone who had no lease. He moved out in the middle of the night finally, but all the appliances had been removed that were actually listed on the lease.
Worrying about the stock market is perhaps not as troubling. A landlord doesn't just collect rent but also deals with all of life's dramas.
Some rules I had for myself as a landlord:
Single moms "generally" do tend to make sure their rent is paid so that there's a roof over their children's heads.
Really follow your gut about potential tenants. If they aggrivate you or you feel uneasy in any way during the selection process, they will agitate you even more as a tenant.
And if your spouse has a better feeling for people, let them do the interviewing.
One of my worst experiences was with a tenant that I actually didn't accept due to my gut feeling. The Christmas Eve after I turned her down, I saw her crying on the TV news because of a Christmas tree fire. Have to say that it put a damper on my Christmas as well thinking about the what if's.
Another crazy tale was when we found out the tenants were letting the next door neighbors fill their pool all summer by running a hose from our building (well water).
And still another tale was when the nice hard working single mom tenant moved out because she had let her heroine addicted brother move in and she couldn't take it anymore. His name wasn't on the lease, which was one requirement in the lease that all adults must sign the lease. Nevertheless the rent wasn't paid so we had to start the process of evicting someone who had no lease. He moved out in the middle of the night finally, but all the appliances had been removed that were actually listed on the lease.
Worrying about the stock market is perhaps not as troubling. A landlord doesn't just collect rent but also deals with all of life's dramas.
- Smorgasbord
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Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
Two differences I see between stocks and individual rentals are that A) with a rental you know more about the asset than anyone else. Essentially, you have insider information and are able to take advantage of that. If it were legal, stock picking with insider information would likely outperform a broadly diversified portfolio. Next, B) with individual rentals you have the option of trading your time for higher returns. The most common is handling the property management yourself, but for even higher returns you can handle most of the maintenance as well. REITs don't offer that option.TIAX wrote:Why so many Bogleheads have rental properties? If anyone suggests buying a single stock (which may, for example, be a REIT with thousands of properties), Bogleheads would recommend a REIT fund (or a total market fund) instead. How is a single rental property better than a REIT or a REIT fund?
Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
I hated managing a rental, even when my tenant was great. (was even worse when my previous tenant didn't pay for 3 months and moved out without notice while trashing the place)
It just wasn't worth the hassle and was very happy when we sold.
It just wasn't worth the hassle and was very happy when we sold.
Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
I will never forget the rental owned by my parents. They inherited the property (house on farm land they farm on) and decided to rent it out. Horrible experience. Many bad renters. Late payments, no payments, dirty, etc. In the end the final renters apparently used pennies in the breaker and burned the house down. No more rental.
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Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
I rent out a condo that I bought right after I finished school. I don't cash flow it very much but I am really glad that I kept it. When I bought the house I live in now the housing market in my area was still somewhat down. The condo has increased in value considerably since I moved out of it (my house hasn't done much OTOH)... so it was a gamble that seems like it has paid off. I would actually like to sell it now but I really don't know what I am going to do with it.
EDIT: I should add that I really lucked out with my tenant. She's been there for about three years and says she plans to be there for a while so the lack of turnover has helped. She always pays on time (sometimes she adds a month to it to be early for the next month) and the only time she calls to complain it has been really legitimate issues (I had to replace the fridge right after she moved in and the A/C had issues last summer).
EDIT: I should add that I really lucked out with my tenant. She's been there for about three years and says she plans to be there for a while so the lack of turnover has helped. She always pays on time (sometimes she adds a month to it to be early for the next month) and the only time she calls to complain it has been really legitimate issues (I had to replace the fridge right after she moved in and the A/C had issues last summer).
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Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
It's not worth it for the average person. The advocates are using unrealistic Zestimates to falsely inflate their net worth while minimizing the headaches and pitfalls of landlord responsibilities.
Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
I work for a small business owner who owns a house and adjacent business. Rents out the house and business pays rent. His biggest advantage is he is right there to monitor rental, and now that he is retiring has two income streams.
Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
Can you provide an example of "inside" information about a piece of real estate?Smorgasbord wrote:Two differences I see between stocks and individual rentals are that A) with a rental you know more about the asset than anyone else. Essentially, you have insider information and are able to take advantage of that. If it were legal, stock picking with insider information would likely outperform a broadly diversified portfolio.TIAX wrote:Why so many Bogleheads have rental properties? If anyone suggests buying a single stock (which may, for example, be a REIT with thousands of properties), Bogleheads would recommend a REIT fund (or a total market fund) instead. How is a single rental property better than a REIT or a REIT fund?
This is a good point. But wouldn't it be more efficient to take a side gig being a property manager and/or handyman? Or, at the very least, one should recognize that one is not getting a return on his or her investment but merely being compensated for doing odd jobs.Smorgasbord wrote: Next, B) with individual rentals you have the option of trading your time for higher returns. The most common is handling the property management yourself, but for even higher returns you can handle most of the maintenance as well. REITs don't offer that option.
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Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
+1. That's why I don't like using agents . They reduce everyone to black and white numbers. The face-face gut element is completely missing.Kitty Telltales wrote: Really follow your gut about potential tenants. If they aggrivate you or you feel uneasy in any way during the selection process, they will agitate you even more as a tenant.
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Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
Sure, I know the neighbors who live adjacent to my rental property. I know they will call me if they see something wrong, and I also know they have a teenage son who will cut the grass for a fraction of what a commercial service would cost.TIAX wrote:Can you provide an example of "inside" information about a piece of real estate?
I know the traffic patterns around the house, and why showing the house weekdays at 6:50pm is a bad idea.
Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
I'd like to supplement and even possibly replace my income with this? Not sure if that's too grand a goal... What else besides financial would be a motivation?retiredjg wrote:Well, I had to laugh because most (nearly all) people who are actually landlords will say it is worth it. Otherwise they would not do it. So the pool of people who answer this question may be skewed.
I'm not a landlord and will never be again. It's a pain in the you know where. I did it once (accidental landlord because I didn't want to sell the house I was moving out of) and was happy to get out a few years later without losing money. But I didn't make any money either.
I think being a landlord is wonderful for people who actually like it. Be sure you are not just doing it for money because that would probably NOT be worth it.
Last edited by Eagle on Thu Jun 15, 2017 1:25 pm, edited 1 time in total.
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Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
I would much rather save $100 on rental expenses by fixing something myself than to spend the same amount of time generating $100 of W2/payroll income. Also, it is a lot faster to fire your property manager than to get a side gig as property manager if you get into a pinch where you need the money. However, when doing the initial calculations when considering buying a rental property, you should absolutely factor in the cost of property management.TIAX wrote:This is a good point. But wouldn't it be more efficient to take a side gig being a property manager and/or handyman? Or, at the very least, one should recognize that one is not getting a return on his or her investment but merely being compensated for doing odd jobs.
Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
I edited the OP above: We have a net worth of about 320k now and no debt except the mortgage. We only owe less than 90k at 4.625% interest now on our mortgageWhyNotUs wrote:I have one now and have up to four at different times. There has been countless discussions on this topic so I would encourage a search of the archives. Short version, one needs to learn the system for making money on rentals, how to analyze possible acquisitions, and realize that it is a part-time job. There are rentals that work out well and those that don't, lots of anecdotes for each situation.
You are correct that most people in most situations would probably not tell you to cash out retirement savings to pay off the mortgage on your primary residence. There are variables such as interest rate that you are paying that would be required to provide more specific suggestions but in general...
We owe $89,511.04 on the mortgage and the Fidelity investment is today at $87,264.16. I'm seriously considering paying off the mortgage.
I wonder what the tax implications would be? I guess that's something to consider.
Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
Was it a bad deal and experience?jebmke wrote:The day we sold our rental was a happy day.
What's your reasoning for this? I'm very tempted to do so.Danzangdc wrote:That's a pretty high mortgage rate. Cash out and pay it off yesterday!
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Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
Just depends on how hands on you like to be. One rental makes 500 per month after all costs and maintaince aND basically takes me 1 to 3 hours a month in terms of time. It's also only 10 yeas old so not to much to do yet. I expect the profit on that one to go to 800/month in 1 year.
The second has 3 units and more deferred maintaince at times it takes significant energy buy my hourly rate is still huge profit wise. I couldn't have that one without my dad and husband though bec of the maintenance issues though I do all the day to day managing.
The second has 3 units and more deferred maintaince at times it takes significant energy buy my hourly rate is still huge profit wise. I couldn't have that one without my dad and husband though bec of the maintenance issues though I do all the day to day managing.
Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
The flip side is that landlording (I am one) is like a 24/7 part-time job that you can't shirk or quit. You can hire a full-service property manager but they won't necessarily do everything or at least not cost-effectively enough for it to work financially. If you want flexible part-time work, you can be an Uber driver and work exactly when you want, or a handyman that picks and chooses gigs. Heck even a regular job, you can up and quit with few if any consequences. If you have tenants you can't do that without major hit to your investment. My take is that if one's circumstances are such that this level of commitment is OK then landlording can be lucrative. Otherwise, it should be avoided.Smorgasbord wrote:I would much rather save $100 on rental expenses by fixing something myself than to spend the same amount of time generating $100 of W2/payroll income. Also, it is a lot faster to fire your property manager than to get a side gig as property manager if you get into a pinch where you need the money. However, when doing the initial calculations when considering buying a rental property, you should absolutely factor in the cost of property management.TIAX wrote:This is a good point. But wouldn't it be more efficient to take a side gig being a property manager and/or handyman? Or, at the very least, one should recognize that one is not getting a return on his or her investment but merely being compensated for doing odd jobs.
Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
My rental is being sold next week, luckily I had 6 years without any major issues. Regardless, I will be very happy next week.
cheers ... -Mark |
"Our life is frittered away with detail. Simplify. Simplify." -Henry David Thoreau |
[VTI, VXUS, BND, VTEB, SV fund]
Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
I have owned rental properties for over 40 years. Even though I live in a economically depressed area, I have done pretty well with them. Yes, there is some work and headaches involved, but not anything like a full time job. I have never found anything that was profitable that didn't require some work. Everything is a tradeoff.
Slow and steady wins the race.
Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
That about sums it up!TheJoker wrote:I've been a landlord for 40 years. It's been good to me. But I've said this 100 times..............................if you do not have the personality to evict your "mother" on Christmas eve...............forget it. Secondly, its all about location (surprise). Holding period averaged 20 years in San Diego.
The Joker
Taking care of tomorrow while enjoying today.
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Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
So far OK.
Your question is too broad.
Our cap rate is approaching 7%, the depreciation adds another percent, son does the management and maintenance, in Seattle near Udub, AMZN, GOOG.
Your question is too broad.
Our cap rate is approaching 7%, the depreciation adds another percent, son does the management and maintenance, in Seattle near Udub, AMZN, GOOG.
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo
Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
I'm considering paying off our mortgage and renting out our current house. Why do you think it's not worth it? Note: Our house could probably rent for $800-1200 a month.Kosmo wrote:We rent out the townhouse we used to live in. Not worth it and we're looking to get out.
Can you speak to the idea that it is not easy money? Did you have a management company or do that portion of the work yourself?jtravisdavid wrote:I've owned as many as two dozen at one time. Currently own two. You will earn every nickel you make in real estate investments. It is not easy money.
What issues come with managing your own property? What issues come with hiring a property management company? What are you doing instead?UncleBen wrote:We had 3, managed at times and had a property manager at other times, both bring issues. We are happy to be out of landlording.
Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
Can you speak to some of your experiences with the wrong renter? My schedule at work is flexible but I still have an office job.indexonlyplease wrote:Eagle wrote:How many of you have rentals (i.e. you're a landlord)? Are they worth it?
I had multiple rentals but no more than 3 at one time. You can make money but you must do many things correct. And yes they can be a pain in the neck with the wrong renter. I had my share of good and bad. Sold all of them a few years back because I no longer wanted to be a landloard. Also, my full time career gave me lots off time of because of the schedul. This made it a lot easier to deal with problems.
Once we pay off our mortgage it's something I've been mulling over doing. I know and feel I shouldn't just jump into something without a lot of research. We didn't even buy our house for 12-18 months of me searching for houses at least on a bi-monthly basis. Only if you are ready for a part time job on top of you full time job. I did it and enjoyed doing it but that was me. One mistake like renter living there for free could destroy you. Can you cover the mortgage for months while you try to remover the renter.
We are at least a few years away and another promotion away from doing anything serious with rentals. Take your time and save and study now.
I've been tempted to cash out one of our mutual funds and just pay off the house but have resisted temptation. It was worth 35k in 2009-2010 and it's worth near 87k now. We have a net worth of about 320k now and no debt except the mortgage. We only owe less than 90k at 4.625% interest now on our mortgage. I know it's the right call to keep the money investment in the long-term... right? But still. Tempting. No, No No, I am a fan of paying off the mortgage but not with investment funds. That would be a mistake. Use extra savings to pay off mortgage.
This is the main reason I joined this board. Love what I see so far! What books or websites should I be reading? What other questions should I be asking? Read books you can check out at the Library and search online. Be careful with all the real estate GURU's that are trying to sell you their books and seminars to make themselves money by taking yours.
Thanks in advance.
*Edited: To add net worth and mortgage interest rate.
How could a renter live for free? Like squatting?
These are investment funds that are not retirement funds. It's just money we've invested. We had the option to pay more on our down payment but it seemed foolish to put an extra 35k on the house when we were betting the stock market would do better. Since the Fidelity mutual fund is worth over 87k it was a good gamble on the stock market. However, as another poster mentioned this growth we've experienced since 2009 is not sustainable. Right?
Any particular books you'd recommend? What sites would you recommend? Yeah, I don't want to just follow blindly one guru or one person's advice.
Re: How many of you have rentals (i.e. you're a landlord)? Are they worth it?
How do I make my question more focused? What questions should I be asking instead?itstoomuch wrote:So far OK.
Your question is too broad.
Our cap rate is approaching 7%, the depreciation adds another percent, son does the management and maintenance, in Seattle near Udub, AMZN, GOOG.