Becoming a Landlord: My Experiences

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rascott
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Re: Becoming a Landlord: My Experiences

Post by rascott » Thu Jul 30, 2020 9:35 am

I've been landlording for 16 years and counting. I agree 1000% with everything in the OP... and is basically the identical way I operate my rental business.

It's not easy to be successful.... but I will say that my overall returns have blown away my returns in equity index funds over the same period. I bumped my head many times over the years, but now am very comfortable with the business. Roughly half my net worth is in RE.. other half in index funds.

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gwe67
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Re: Becoming a Landlord: My Experiences

Post by gwe67 » Thu Jul 30, 2020 11:17 am

Iorek wrote:
Mon Sep 04, 2017 8:27 am
Thanks for this post.

On a purely numbers-basis the worst financial decision I ever made was probably to sell my first home and not rent it out because it basically doubled in value in about 10 years, but it would have stretched us financially and we weren't interested in or prepared to be landlords, so this makes me feel better about that decision.
An investment doubles in ten years at 7.2% annually. Deducting costs, you would have netted much less than 7.2%. How is this better than an index fund?

It's more likely that your (and my) worst financial decision was not to buy bitcoin at $300, then missing the opportunity to sell at $19,000 a little over two years later.
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barberakb
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Re: Becoming a Landlord: My Experiences

Post by barberakb » Thu Jul 30, 2020 9:25 pm

gwe67 wrote:
Thu Jul 30, 2020 11:17 am
Iorek wrote:
Mon Sep 04, 2017 8:27 am
Thanks for this post.

On a purely numbers-basis the worst financial decision I ever made was probably to sell my first home and not rent it out because it basically doubled in value in about 10 years, but it would have stretched us financially and we weren't interested in or prepared to be landlords, so this makes me feel better about that decision.
An investment doubles in ten years at 7.2% annually. Deducting costs, you would have netted much less than 7.2%. How is this better than an index fund?

It's more likely that your (and my) worst financial decision was not to buy bitcoin at $300, then missing the opportunity to sell at $19,000 a little over two years later.
I usually make at least 9% every year on my rentals AFTER COSTS. And that doesn't include appreciation, tax breaks, or the fact that the tenant is paying off my mortgage.

Cycle
Posts: 1671
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Location: Minneapolis

Re: Becoming a Landlord: My Experiences

Post by Cycle » Thu Jul 30, 2020 9:36 pm

my two cents, being a landlord on site is easy. When we moved away, ie an absentee landlord, it became too much work. Just not worth it. I'm selling and closing on the property that had $3200/mo in rent for $500k in a few weeks.

I felt like i either needed to scale up or drop it. just doing 1 property absentee didn't seem worth the headache.
Never look back unless you are planning to go that way

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gwe67
Posts: 271
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Re: Becoming a Landlord: My Experiences

Post by gwe67 » Fri Jul 31, 2020 8:50 pm

barberakb wrote:
Thu Jul 30, 2020 9:25 pm
gwe67 wrote:
Thu Jul 30, 2020 11:17 am
Iorek wrote:
Mon Sep 04, 2017 8:27 am
Thanks for this post.

On a purely numbers-basis the worst financial decision I ever made was probably to sell my first home and not rent it out because it basically doubled in value in about 10 years, but it would have stretched us financially and we weren't interested in or prepared to be landlords, so this makes me feel better about that decision.
An investment doubles in ten years at 7.2% annually. Deducting costs, you would have netted much less than 7.2%. How is this better than an index fund?

It's more likely that your (and my) worst financial decision was not to buy bitcoin at $300, then missing the opportunity to sell at $19,000 a little over two years later.
I usually make at least 9% every year on my rentals AFTER COSTS. And that doesn't include appreciation, tax breaks, or the fact that the tenant is paying off my mortgage.
Doubt it. Proof?
Support this site with a purchase thru Amazon: | http://www.amazon.com/s/?search-alias=aps&tag=bogleheads.org-20&field-keywords=Bogleheads

barberakb
Posts: 254
Joined: Fri Apr 21, 2017 11:14 pm

Re: Becoming a Landlord: My Experiences

Post by barberakb » Sat Aug 01, 2020 6:27 pm

gwe67 wrote:
Fri Jul 31, 2020 8:50 pm
barberakb wrote:
Thu Jul 30, 2020 9:25 pm
gwe67 wrote:
Thu Jul 30, 2020 11:17 am
Iorek wrote:
Mon Sep 04, 2017 8:27 am
Thanks for this post.

On a purely numbers-basis the worst financial decision I ever made was probably to sell my first home and not rent it out because it basically doubled in value in about 10 years, but it would have stretched us financially and we weren't interested in or prepared to be landlords, so this makes me feel better about that decision.
An investment doubles in ten years at 7.2% annually. Deducting costs, you would have netted much less than 7.2%. How is this better than an index fund?

It's more likely that your (and my) worst financial decision was not to buy bitcoin at $300, then missing the opportunity to sell at $19,000 a little over two years later.
I usually make at least 9% every year on my rentals AFTER COSTS. And that doesn't include appreciation, tax breaks, or the fact that the tenant is paying off my mortgage.
Doubt it. Proof?
What exactly do you want to see??? I'm not showing you lease agreements etc... but if you just want me to show you the basic math of one of my rentals I have no problem doing that. I have no reason to lie. If it wasn't more profitable than the stock market I would just put it all in the market. That is easier...

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gwe67
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Re: Becoming a Landlord: My Experiences

Post by gwe67 » Sat Aug 01, 2020 9:05 pm

Income and expenses for all categories over a meaningful period of time.
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dachshunddad
Posts: 152
Joined: Mon Sep 03, 2018 8:22 pm

Re: Becoming a Landlord: My Experiences

Post by dachshunddad » Sat Aug 01, 2020 9:14 pm

gwe67 wrote:
Fri Jul 31, 2020 8:50 pm
barberakb wrote:
Thu Jul 30, 2020 9:25 pm
gwe67 wrote:
Thu Jul 30, 2020 11:17 am
Iorek wrote:
Mon Sep 04, 2017 8:27 am
Thanks for this post.

On a purely numbers-basis the worst financial decision I ever made was probably to sell my first home and not rent it out because it basically doubled in value in about 10 years, but it would have stretched us financially and we weren't interested in or prepared to be landlords, so this makes me feel better about that decision.
An investment doubles in ten years at 7.2% annually. Deducting costs, you would have netted much less than 7.2%. How is this better than an index fund?

It's more likely that your (and my) worst financial decision was not to buy bitcoin at $300, then missing the opportunity to sell at $19,000 a little over two years later.
I usually make at least 9% every year on my rentals AFTER COSTS. And that doesn't include appreciation, tax breaks, or the fact that the tenant is paying off my mortgage.
Doubt it. Proof?
I know several folks who have made good returns for a stretch. But those that make that are working to get it. It isn’t the same as buying an index fund on your couch in two seconds and letting it compound with never touching it again. The folks I know making that are doing research, renovating old properties, managing tenants, etc, etc. So getting 10% in the market while you sleep vs higher return on rentals isn’t the same in my opinion. It’s active vs passive.

flaccidsteele
Posts: 611
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Location: Canada

Re: Becoming a Landlord: My Experiences

Post by flaccidsteele » Sat Aug 01, 2020 9:40 pm

dachshunddad wrote:
Sat Aug 01, 2020 9:14 pm
gwe67 wrote:
Fri Jul 31, 2020 8:50 pm
barberakb wrote:
Thu Jul 30, 2020 9:25 pm
gwe67 wrote:
Thu Jul 30, 2020 11:17 am
Iorek wrote:
Mon Sep 04, 2017 8:27 am
Thanks for this post.

On a purely numbers-basis the worst financial decision I ever made was probably to sell my first home and not rent it out because it basically doubled in value in about 10 years, but it would have stretched us financially and we weren't interested in or prepared to be landlords, so this makes me feel better about that decision.
An investment doubles in ten years at 7.2% annually. Deducting costs, you would have netted much less than 7.2%. How is this better than an index fund?

It's more likely that your (and my) worst financial decision was not to buy bitcoin at $300, then missing the opportunity to sell at $19,000 a little over two years later.
I usually make at least 9% every year on my rentals AFTER COSTS. And that doesn't include appreciation, tax breaks, or the fact that the tenant is paying off my mortgage.
Doubt it. Proof?
I know several folks who have made good returns for a stretch. But those that make that are working to get it. It isn’t the same as buying an index fund on your couch in two seconds and letting it compound with never touching it again. The folks I know making that are doing research, renovating old properties, managing tenants, etc, etc. So getting 10% in the market while you sleep vs higher return on rentals isn’t the same in my opinion. It’s active vs passive.
Or they bought rentals during the Great Recession like I did

And that’s as easy as buying an index fund on my couch

I would know because I do both and neither are that much work tbh
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat

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gwe67
Posts: 271
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Re: Becoming a Landlord: My Experiences

Post by gwe67 » Sun Aug 02, 2020 10:31 am

Good for you. Let's see some numbers. Lots of people make this claim but I have yet to see proof.
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barberakb
Posts: 254
Joined: Fri Apr 21, 2017 11:14 pm

Re: Becoming a Landlord: My Experiences

Post by barberakb » Sun Aug 02, 2020 12:02 pm

gwe67 wrote:
Sun Aug 02, 2020 10:31 am
Good for you. Let's see some numbers. Lots of people make this claim but I have yet to see proof.
I will try to post some #s tomorrow. I have to dig up my closing costs info.

Fractalleaf
Posts: 29
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Re: Becoming a Landlord: My Experiences

Post by Fractalleaf » Sun Aug 02, 2020 2:36 pm

Great post, and glad to see the discussion continuing 3 years later. I've scanned most of the comments but don't see this addressed: How do you select tenants without running afoul of anti-discrimination laws? For example, I own a rental condo (California) in a complex of 10 that are all occupied by retirees. In order to avoid conflict with the existing residents I would like to find a tenant who is likely to be a good fit for the community. If a family of 5 with small children applies, can they sue me if I select an elderly couple instead?

tomtoms
Posts: 267
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Re: Becoming a Landlord: My Experiences

Post by tomtoms » Sun Aug 02, 2020 3:02 pm

gwe67 wrote:
Fri Jul 31, 2020 8:50 pm
barberakb wrote:
Thu Jul 30, 2020 9:25 pm
gwe67 wrote:
Thu Jul 30, 2020 11:17 am
Iorek wrote:
Mon Sep 04, 2017 8:27 am
Thanks for this post.

On a purely numbers-basis the worst financial decision I ever made was probably to sell my first home and not rent it out because it basically doubled in value in about 10 years, but it would have stretched us financially and we weren't interested in or prepared to be landlords, so this makes me feel better about that decision.
An investment doubles in ten years at 7.2% annually. Deducting costs, you would have netted much less than 7.2%. How is this better than an index fund?

It's more likely that your (and my) worst financial decision was not to buy bitcoin at $300, then missing the opportunity to sell at $19,000 a little over two years later.
I usually make at least 9% every year on my rentals AFTER COSTS. And that doesn't include appreciation, tax breaks, or the fact that the tenant is paying off my mortgage.
Doubt it. Proof?
What kind of proof do you want? What incentive is there for someone to lie on an anonymous forum?

I don’t know any landlords that keep a spreadsheet. That is not necessary. I just calculate: rent - 20% rent for future long term repairs/vacancy - cost (statement from my property manager) - mortgage/property tax/home insurance = profit. You don’t need to be a rocket scientist to do basic math.
Last edited by tomtoms on Sun Aug 02, 2020 3:43 pm, edited 2 times in total.

tomtoms
Posts: 267
Joined: Wed Mar 06, 2013 11:56 pm

Re: Becoming a Landlord: My Experiences

Post by tomtoms » Sun Aug 02, 2020 3:08 pm

Home prices went up 4.5% in May:

https://www.google.com/amp/s/www.cnbc.c ... iller.html

If you had put down 20% for a rental and your tenants’ rent covers all expenses including your property manager, long term repairs and future vacancy, you just made 5 x 4.5% = 22.5% return just on the appreciation during a pandemic.

I am not including mortgage pay down by my tenants, extra rent money (rent > expenses), buying it below market, tax benefits.

This is why real estate is so profitable if you are willing to put in the time to learn how to buy good rental properties.

That being said, not everyone can buy rental properties and not everywhere is a good rental market. You have to do your homework.

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gwe67
Posts: 271
Joined: Mon Dec 23, 2013 9:52 pm

Re: Becoming a Landlord: My Experiences

Post by gwe67 » Sun Aug 02, 2020 6:25 pm

tomtoms wrote:
Sun Aug 02, 2020 3:02 pm
gwe67 wrote:
Fri Jul 31, 2020 8:50 pm
barberakb wrote:
Thu Jul 30, 2020 9:25 pm
gwe67 wrote:
Thu Jul 30, 2020 11:17 am
Iorek wrote:
Mon Sep 04, 2017 8:27 am
Thanks for this post.

On a purely numbers-basis the worst financial decision I ever made was probably to sell my first home and not rent it out because it basically doubled in value in about 10 years, but it would have stretched us financially and we weren't interested in or prepared to be landlords, so this makes me feel better about that decision.
An investment doubles in ten years at 7.2% annually. Deducting costs, you would have netted much less than 7.2%. How is this better than an index fund?

It's more likely that your (and my) worst financial decision was not to buy bitcoin at $300, then missing the opportunity to sell at $19,000 a little over two years later.
I usually make at least 9% every year on my rentals AFTER COSTS. And that doesn't include appreciation, tax breaks, or the fact that the tenant is paying off my mortgage.
Doubt it. Proof?
What kind of proof do you want? What incentive is there for someone to lie on an anonymous forum?

I don’t know any landlords that keep a spreadsheet. That is not necessary. I just calculate: rent - 20% rent for future long term repairs/vacancy - cost (statement from my property manager) - mortgage/property tax/home insurance = profit. You don’t need to be a rocket scientist to do basic math.
I suspect that people who claim to be beating the market with rental properties are kidding themselves because they have not done a full analysis, as proven by your simplistic calculation.
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tomtoms
Posts: 267
Joined: Wed Mar 06, 2013 11:56 pm

Re: Becoming a Landlord: My Experiences

Post by tomtoms » Sun Aug 02, 2020 7:13 pm

gwe67 wrote:
Sun Aug 02, 2020 6:25 pm
tomtoms wrote:
Sun Aug 02, 2020 3:02 pm
gwe67 wrote:
Fri Jul 31, 2020 8:50 pm
barberakb wrote:
Thu Jul 30, 2020 9:25 pm
gwe67 wrote:
Thu Jul 30, 2020 11:17 am


An investment doubles in ten years at 7.2% annually. Deducting costs, you would have netted much less than 7.2%. How is this better than an index fund?

It's more likely that your (and my) worst financial decision was not to buy bitcoin at $300, then missing the opportunity to sell at $19,000 a little over two years later.
I usually make at least 9% every year on my rentals AFTER COSTS. And that doesn't include appreciation, tax breaks, or the fact that the tenant is paying off my mortgage.
Doubt it. Proof?
What kind of proof do you want? What incentive is there for someone to lie on an anonymous forum?

I don’t know any landlords that keep a spreadsheet. That is not necessary. I just calculate: rent - 20% rent for future long term repairs/vacancy - cost (statement from my property manager) - mortgage/property tax/home insurance = profit. You don’t need to be a rocket scientist to do basic math.
I suspect that people who claim to be beating the market with rental properties are kidding themselves because they have not done a full analysis, as proven by your simplistic calculation.
Things don’t have to be complicated.

I have a 6 figure career, own a business, stocks and rental properties. By far, real estate is the best investment IF you are OK with putting in the work. If RE doesn’t give you a better return then why would anyone choose RE over stocks? Why not just sit on your hands, do nothing and get better return with stocks?

Generally speaking, RE investors are pretty savvy. You need high income and low debt in order to get into this type of business. Maybe we know something you don’t know?

manatee2005
Posts: 805
Joined: Wed Dec 18, 2019 9:17 pm

Re: Becoming a Landlord: My Experiences

Post by manatee2005 » Sun Aug 02, 2020 7:21 pm

Cycle wrote:
Thu Jul 30, 2020 9:36 pm
my two cents, being a landlord on site is easy. When we moved away, ie an absentee landlord, it became too much work. Just not worth it. I'm selling and closing on the property that had $3200/mo in rent for $500k in a few weeks.

I felt like i either needed to scale up or drop it. just doing 1 property absentee didn't seem worth the headache.
What were the things that made it a headache? Did you have a property manager?

tomtoms
Posts: 267
Joined: Wed Mar 06, 2013 11:56 pm

Re: Becoming a Landlord: My Experiences

Post by tomtoms » Sun Aug 02, 2020 7:35 pm

I love BH. Buying the index is great way to generate wealth over the long run. It works for most people but if you are young, have a very high salary (+ low debt), and you don’t mind getting your hands dirty then RE investing offers way better return than stocks.

I don’t understand why some BHs are dismissive about getting a better return in RE. You can be a BH and also be a RE investor. They are not mutually exclusive.

Even Warren Buffett said: “Appearing live on CNBC's Squawk Box, Buffett tells Becky Quick he'd buy up "a couple hundred thousand" single family homes if it were practical to do so. If held for a long period of time and purchased at low rates, Buffett says houses are even better than stocks.”

https://www.google.com/amp/s/www.cnbc.c ... could.html
Last edited by tomtoms on Mon Aug 03, 2020 9:59 am, edited 1 time in total.

Cycle
Posts: 1671
Joined: Sun May 28, 2017 7:57 pm
Location: Minneapolis

Re: Becoming a Landlord: My Experiences

Post by Cycle » Sun Aug 02, 2020 9:37 pm

manatee2005 wrote:
Sun Aug 02, 2020 7:21 pm
Cycle wrote:
Thu Jul 30, 2020 9:36 pm
my two cents, being a landlord on site is easy. When we moved away, ie an absentee landlord, it became too much work. Just not worth it. I'm selling and closing on the property that had $3200/mo in rent for $500k in a few weeks.

I felt like i either needed to scale up or drop it. just doing 1 property absentee didn't seem worth the headache.
What were the things that made it a headache? Did you have a property manager?
No, property managers are expensive. Living 20 minutes away, it was doable for me to take care of things.

Most of the things would take as much time to hire out as to do myself, so I would DIY little fixes... broken window pane on one of the 42 90 year old windows, gfci reset, replace batteries on tenants garage remote after tenant reports garage door broken, unclog AC drain, lock not working (tenant was turning key wrong direction), tenant doesn't move car so snow service doesn't clear snow so I have to clear snow, tree branch pops hole in garage roof, drain clogged and tenant unable to use drain cleaner provided by landlord, clothes washer breaks and needs repair, repair doesn't work and washer need replacing, water heater blows out, replacement water heater has leak, outdoor wooden step breaks, boiler develops leak, tenant paid to mow lawn forgets and so i go to mow it, water in basement during big rainfall when ground outside is frozen, etc.

each of those calls would require a trip from the management company and so it really adds up.

We have two jobs in our house, a 3rd job (Landlording) isn't necessary and is a time suck compared to passive investments. i should be clear though i never used leverage in real estate, bc it was our primary residence as well and i always want to have shelter free and clear. I did look into getting a loan on the property when we moved out, but the rates were high since we were investors and not owner occupiers. A good strategy would be to owner occupy with loan, move to another rinse-and-repeat until you have like 10 properties (20 units), assuming you want to be a landlord. ideally all within a few blocks.
Never look back unless you are planning to go that way

tomtoms
Posts: 267
Joined: Wed Mar 06, 2013 11:56 pm

Re: Becoming a Landlord: My Experiences

Post by tomtoms » Sun Aug 02, 2020 9:46 pm

Cycle wrote:
Sun Aug 02, 2020 9:37 pm
manatee2005 wrote:
Sun Aug 02, 2020 7:21 pm
Cycle wrote:
Thu Jul 30, 2020 9:36 pm
my two cents, being a landlord on site is easy. When we moved away, ie an absentee landlord, it became too much work. Just not worth it. I'm selling and closing on the property that had $3200/mo in rent for $500k in a few weeks.

I felt like i either needed to scale up or drop it. just doing 1 property absentee didn't seem worth the headache.
What were the things that made it a headache? Did you have a property manager?
No, property managers are expensive. Living 20 minutes away, it was doable for me to take care of things.

Most of the things would take as much time to hire out as to do myself, so I would DIY little fixes... broken window pane on one of the 42 90 year old windows, gfci reset, replace batteries on tenants garage remote after tenant reports garage door broken, unclog AC drain, lock not working (tenant was turning key wrong direction), tenant doesn't move car so snow service doesn't clear snow so I have to clear snow, tree branch pops hole in garage roof, drain clogged and tenant unable to use drain cleaner provided by landlord, clothes washer breaks and needs repair, repair doesn't work and washer need replacing, water heater blows out, replacement water heater has leak, outdoor wooden step breaks, boiler develops leak, tenant paid to mow lawn forgets and so i go to mow it, water in basement during big rainfall when ground outside is frozen, etc.

each of those calls would require a trip from the management company and so it really adds up.

We have two jobs in our house, a 3rd job (Landlording) isn't necessary and is a time suck compared to passive investments. i should be clear though i never used leverage in real estate, bc it was our primary residence as well and i always want to have shelter free and clear. I did look into getting a loan on the property when we moved out, but the rates were high since we were investors and not owner occupiers. A good strategy would be to owner occupy with loan, move to another rinse-and-repeat until you have like 10 properties (20 units), assuming you want to be a landlord. ideally all within a few blocks.
Are you a accidental landlord? Did you convert your previous primary residence into a rental property?

I always recommend a property manager unless you enjoy the maintenance work. I also don’t recommend buying a rental property that doesn’t not cash flow....rent > expenses including long term maintenance cost, future vacancy and property manager.

A good way to find a reliable property manager is to find a big RE investor in your neighborhood and then use his/her property manager. Ask the investor to put in a good word for you with the property manager.

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Sandtrap
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Re: Becoming a Landlord: My Experiences

Post by Sandtrap » Sun Aug 02, 2020 10:16 pm

Fractalleaf wrote:
Sun Aug 02, 2020 2:36 pm
Great post, and glad to see the discussion continuing 3 years later. I've scanned most of the comments but don't see this addressed: How do you select tenants without running afoul of anti-discrimination laws? For example, I own a rental condo (California) in a complex of 10 that are all occupied by retirees. In order to avoid conflict with the existing residents I would like to find a tenant who is likely to be a good fit for the community. If a family of 5 with small children applies, can they sue me if I select an elderly couple instead?
In General:

1. Know the local landlord-tenant code in detail and commit it to memory.
2. Know the local laws and practices for landlords, realtors, etc.
3. Know at least a broad spectrum of what is legal and what is not and what happens in tenant - landlord litgations.
4. Have a professional step by step application and rental process with professional forms and so forth drawn up by legal counsel. This includes your: rental applications, inventory check in / out sheets, notices for late rent, 5 day notices, discontinuation of lease, etc, etc, etc, and more.
5. Have your advertising reviewed for legality, pictures, text, language, what is inferred, and so forth. If you advertise wrong and say the wrong thing, you can incur fines or be under lawsuit.
6. Watch what you say when you talk to prospective tenants, applicants, existing tenants, etc. Don't make promises. Don't talk loosely. You can get a lawsuit! Tenants and applicants are not your friends.

Follow a procedure:
1. Advertise for rent.
2. Take phone calls.
3. Make appointments to show the unit. Take applications. Don't promise anything. Dont' rent to anyone, just take applications.
Keep a stack of applications in your clipboard case. If someone asks if there are other applicants, show them the stack of the one's you took in the past week or more. Not that they can read them for privacy reasons, but so they know they are not the only applicant which is true.
4. Verify and vett each application that is close to your criteria. If income or other is not in range, then no need to verify.
5. Select your applicant to rent to. Call them. Meet at the unit. Take deposit, sign lease, sign inventory check in sheet, give bed bug and health and ADA notices, give move out instructions, give notice not to renew lease and move out, give house rules, hoa and ccr notices, etc, etc. Give list of contacts, you, maintenance man, resident manager, etc, etc, etc.
6. Take your advertising off line.
7. If anyone calls to ask, you respond that the unit has already been rented, or is no longer for rent. Good luck in their search.
8. You do not "deny an application for any reason". You were taking backup applications at some point in the process.
9. There are some that will try to force you to rent to them for whatever reason. Not good. If you get in a tough spot, take the unit off the market. It is no longer for rent and under renovation.
10. Repeat. You must know and follow #1-6 above. In today's litigious climate, as a landlord and property owner, it is your responsibility to treat people correctly and legally, and also to know everything about your business to protect yourself.

Do you have legal counsel on "speed dial" and on first name terms? (a must).

*****As to your specific question: seek legal counsel, don't get in trouble.

The above applies if there is one condo rental, a 12 unit apartment building, or a 50 unit rental high rise.

Keeping a distance:
*In daily practice. Even if owning a substantial number of rentals and buildings and a property management company. Never be "the owner" or "in charge". Always be the "rental agent", "resident manager", "maintenance man", "toilet unplugger upper", etc. Never be where the "buck stops". Don't put a target on your back.
j :happy
Wiki Bogleheads Wiki: Everything You Need to Know

tioscrooge
Posts: 52
Joined: Wed May 25, 2016 10:01 pm
Location: Pacific NW

Re: Becoming a Landlord: My Experiences

Post by tioscrooge » Mon Aug 03, 2020 12:24 am

Sandtrap wrote:
Sun Aug 02, 2020 10:16 pm
Fractalleaf wrote:
Sun Aug 02, 2020 2:36 pm
Great post, and glad to see the discussion continuing 3 years later. I've scanned most of the comments but don't see this addressed: How do you select tenants without running afoul of anti-discrimination laws? For example, I own a rental condo (California) in a complex of 10 that are all occupied by retirees. In order to avoid conflict with the existing residents I would like to find a tenant who is likely to be a good fit for the community. If a family of 5 with small children applies, can they sue me if I select an elderly couple instead?
In General:

1. Know the local landlord-tenant code in detail and commit it to memory.
2. Know the local laws and practices for landlords, realtors, etc.
3. Know at least a broad spectrum of what is legal and what is not and what happens in tenant - landlord litgations.
4. Have a professional step by step application and rental process with professional forms and so forth drawn up by legal counsel. This includes your: rental applications, inventory check in / out sheets, notices for late rent, 5 day notices, discontinuation of lease, etc, etc, etc, and more.
5. Have your advertising reviewed for legality, pictures, text, language, what is inferred, and so forth. If you advertise wrong and say the wrong thing, you can incur fines or be under lawsuit.
6. Watch what you say when you talk to prospective tenants, applicants, existing tenants, etc. Don't make promises. Don't talk loosely. You can get a lawsuit! Tenants and applicants are not your friends.

Follow a procedure:
1. Advertise for rent.
2. Take phone calls.
3. Make appointments to show the unit. Take applications. Don't promise anything. Dont' rent to anyone, just take applications.
Keep a stack of applications in your clipboard case. If someone asks if there are other applicants, show them the stack of the one's you took in the past week or more. Not that they can read them for privacy reasons, but so they know they are not the only applicant which is true.
4. Verify and vett each application that is close to your criteria. If income or other is not in range, then no need to verify.
5. Select your applicant to rent to. Call them. Meet at the unit. Take deposit, sign lease, sign inventory check in sheet, give bed bug and health and ADA notices, give move out instructions, give notice not to renew lease and move out, give house rules, hoa and ccr notices, etc, etc. Give list of contacts, you, maintenance man, resident manager, etc, etc, etc.
6. Take your advertising off line.
7. If anyone calls to ask, you respond that the unit has already been rented, or is no longer for rent. Good luck in their search.
8. You do not "deny an application for any reason". You were taking backup applications at some point in the process.
9. There are some that will try to force you to rent to them for whatever reason. Not good. If you get in a tough spot, take the unit off the market. It is no longer for rent and under renovation.
10. Repeat. You must know and follow #1-6 above. In today's litigious climate, as a landlord and property owner, it is your responsibility to treat people correctly and legally, and also to know everything about your business to protect yourself.

Do you have legal counsel on "speed dial" and on first name terms? (a must).

*****As to your specific question: seek legal counsel, don't get in trouble.

The above applies if there is one condo rental, a 12 unit apartment building, or a 50 unit rental high rise.

Keeping a distance:
*In daily practice. Even if owning a substantial number of rentals and buildings and a property management company. Never be "the owner" or "in charge". Always be the "rental agent", "resident manager", "maintenance man", "toilet unplugger upper", etc. Never be where the "buck stops". Don't put a target on your back.
j :happy
I don’t have any rental properties and will never have outside of REIT / VNQ that I own.

I just wanted to say I enjoyed reading this post and the details you summarized, likely based on your experiences.

You probably have stories about each point - where either you or someone you know learned each point the hard way.
Whether you think you can or you can not, you will be correct.

flaccidsteele
Posts: 611
Joined: Sun Jul 28, 2019 9:42 pm
Location: Canada

Re: Becoming a Landlord: My Experiences

Post by flaccidsteele » Mon Aug 03, 2020 12:25 am

tomtoms wrote:
Sun Aug 02, 2020 9:46 pm
Cycle wrote:
Sun Aug 02, 2020 9:37 pm
manatee2005 wrote:
Sun Aug 02, 2020 7:21 pm
Cycle wrote:
Thu Jul 30, 2020 9:36 pm
my two cents, being a landlord on site is easy. When we moved away, ie an absentee landlord, it became too much work. Just not worth it. I'm selling and closing on the property that had $3200/mo in rent for $500k in a few weeks.

I felt like i either needed to scale up or drop it. just doing 1 property absentee didn't seem worth the headache.
What were the things that made it a headache? Did you have a property manager?
No, property managers are expensive. Living 20 minutes away, it was doable for me to take care of things.

Most of the things would take as much time to hire out as to do myself, so I would DIY little fixes... broken window pane on one of the 42 90 year old windows, gfci reset, replace batteries on tenants garage remote after tenant reports garage door broken, unclog AC drain, lock not working (tenant was turning key wrong direction), tenant doesn't move car so snow service doesn't clear snow so I have to clear snow, tree branch pops hole in garage roof, drain clogged and tenant unable to use drain cleaner provided by landlord, clothes washer breaks and needs repair, repair doesn't work and washer need replacing, water heater blows out, replacement water heater has leak, outdoor wooden step breaks, boiler develops leak, tenant paid to mow lawn forgets and so i go to mow it, water in basement during big rainfall when ground outside is frozen, etc.

each of those calls would require a trip from the management company and so it really adds up.

We have two jobs in our house, a 3rd job (Landlording) isn't necessary and is a time suck compared to passive investments. i should be clear though i never used leverage in real estate, bc it was our primary residence as well and i always want to have shelter free and clear. I did look into getting a loan on the property when we moved out, but the rates were high since we were investors and not owner occupiers. A good strategy would be to owner occupy with loan, move to another rinse-and-repeat until you have like 10 properties (20 units), assuming you want to be a landlord. ideally all within a few blocks.
Are you a accidental landlord? Did you convert your previous primary residence into a rental property?

I always recommend a property manager unless you enjoy the maintenance work. I also don’t recommend buying a rental property that doesn’t not cash flow....rent > expenses including long term maintenance cost, future vacancy and property manager.

A good way to find a reliable property manager is to find a big RE investor in your neighborhood and then use his/her property manager. Ask the investor to put in a good word for you with the property manager.
+1 this

No landlord should be selecting their own tenants unless they want trouble or have nothing better to do

If you learned a lot of lessons, you made a lot of mistakes
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat

User avatar
Sandtrap
Posts: 11340
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii No Ka Oi , N. Arizona

Re: Becoming a Landlord: My Experiences

Post by Sandtrap » Mon Aug 03, 2020 8:13 am

tomtoms wrote:
Sun Aug 02, 2020 3:08 pm
Home prices went up 4.5% in May:

https://www.google.com/amp/s/www.cnbc.c ... iller.html

If you had put down 20% for a rental and your tenants’ rent covers all expenses including your property manager, long term repairs and future vacancy, you just made 5 x 4.5% = 22.5% return just on the appreciation during a pandemic.

I am not including mortgage pay down by my tenants, extra rent money (rent > expenses), buying it below market, tax benefits.

This is why real estate is so profitable if you are willing to put in the time to learn how to buy good rental properties.

That being said, not everyone can buy rental properties and not everywhere is a good rental market. You have to do your homework.
+1
Good points.
Well said!

Yes.
R/E Residential Income Property Ownership is a business. And, for those that are interested and able to own a business.
Many of the foundation concepts to physically held R/E Investment and Management apply to:
Owning a chain of mufler shops
Running a Pizza Franchise (watch out for weight gain!)
Operating a neighborhood bakery (weight gain!)
Etc.

j :happy
Wiki Bogleheads Wiki: Everything You Need to Know

tomtoms
Posts: 267
Joined: Wed Mar 06, 2013 11:56 pm

Re: Becoming a Landlord: My Experiences

Post by tomtoms » Mon Aug 03, 2020 11:42 am

You should separate buying a rental property from managing it. As a RE investor, you want to focus on finding a quality rental and making sure the numbers make sense. That is where you should spend the bulk of your time. Let the professionals manage the rental.

barberakb
Posts: 254
Joined: Fri Apr 21, 2017 11:14 pm

Re: Becoming a Landlord: My Experiences

Post by barberakb » Mon Aug 03, 2020 1:24 pm

Gonna post some rental #'s later in another thread but here is a good article summing up why buy/hold rental properties can be
a great investment.

https://www.biggerpockets.com/blog/buy- ... nnel=28425

Fractalleaf
Posts: 29
Joined: Wed Jan 01, 2020 6:30 pm

Re: Becoming a Landlord: My Experiences

Post by Fractalleaf » Mon Aug 03, 2020 3:29 pm

Sandtrap wrote:
Sun Aug 02, 2020 10:16 pm
Fractalleaf wrote:
Sun Aug 02, 2020 2:36 pm
Great post, and glad to see the discussion continuing 3 years later. I've scanned most of the comments but don't see this addressed: How do you select tenants without running afoul of anti-discrimination laws? For example, I own a rental condo (California) in a complex of 10 that are all occupied by retirees. In order to avoid conflict with the existing residents I would like to find a tenant who is likely to be a good fit for the community. If a family of 5 with small children applies, can they sue me if I select an elderly couple instead?
In General:

1. Know the local landlord-tenant code in detail and commit it to memory.
2. Know the local laws and practices for landlords, realtors, etc.
3. Know at least a broad spectrum of what is legal and what is not and what happens in tenant - landlord litgations.
4. Have a professional step by step application and rental process with professional forms and so forth drawn up by legal counsel. This includes your: rental applications, inventory check in / out sheets, notices for late rent, 5 day notices, discontinuation of lease, etc, etc, etc, and more.
5. Have your advertising reviewed for legality, pictures, text, language, what is inferred, and so forth. If you advertise wrong and say the wrong thing, you can incur fines or be under lawsuit.
6. Watch what you say when you talk to prospective tenants, applicants, existing tenants, etc. Don't make promises. Don't talk loosely. You can get a lawsuit! Tenants and applicants are not your friends.

Follow a procedure:
1. Advertise for rent.
2. Take phone calls.
3. Make appointments to show the unit. Take applications. Don't promise anything. Dont' rent to anyone, just take applications.
Keep a stack of applications in your clipboard case. If someone asks if there are other applicants, show them the stack of the one's you took in the past week or more. Not that they can read them for privacy reasons, but so they know they are not the only applicant which is true.
4. Verify and vett each application that is close to your criteria. If income or other is not in range, then no need to verify.
5. Select your applicant to rent to. Call them. Meet at the unit. Take deposit, sign lease, sign inventory check in sheet, give bed bug and health and ADA notices, give move out instructions, give notice not to renew lease and move out, give house rules, hoa and ccr notices, etc, etc. Give list of contacts, you, maintenance man, resident manager, etc, etc, etc.
6. Take your advertising off line.
7. If anyone calls to ask, you respond that the unit has already been rented, or is no longer for rent. Good luck in their search.
8. You do not "deny an application for any reason". You were taking backup applications at some point in the process.
9. There are some that will try to force you to rent to them for whatever reason. Not good. If you get in a tough spot, take the unit off the market. It is no longer for rent and under renovation.
10. Repeat. You must know and follow #1-6 above. In today's litigious climate, as a landlord and property owner, it is your responsibility to treat people correctly and legally, and also to know everything about your business to protect yourself.

Do you have legal counsel on "speed dial" and on first name terms? (a must).

*****As to your specific question: seek legal counsel, don't get in trouble.

The above applies if there is one condo rental, a 12 unit apartment building, or a 50 unit rental high rise.

Keeping a distance:
*In daily practice. Even if owning a substantial number of rentals and buildings and a property management company. Never be "the owner" or "in charge". Always be the "rental agent", "resident manager", "maintenance man", "toilet unplugger upper", etc. Never be where the "buck stops". Don't put a target on your back.
j :happy
Thank you @sandtrap, just the information I needed. I have hired a property manager so hopefully she follows these recommendations. I plan to list slightly below market to generate a larger stack of applications.

barberakb
Posts: 254
Joined: Fri Apr 21, 2017 11:14 pm

Re: Becoming a Landlord: My Experiences

Post by barberakb » Mon Aug 03, 2020 7:41 pm

gwe67 wrote:
Sun Aug 02, 2020 10:31 am
Good for you. Let's see some numbers. Lots of people make this claim but I have yet to see proof.
I have posted the info you requested here

viewtopic.php?f=2&t=321937&p=5411804#p5411804

flaccidsteele
Posts: 611
Joined: Sun Jul 28, 2019 9:42 pm
Location: Canada

Re: Becoming a Landlord: My Experiences

Post by flaccidsteele » Mon Aug 03, 2020 7:53 pm

tomtoms wrote:
Mon Aug 03, 2020 11:42 am
You should separate buying a rental property from managing it. As a RE investor, you want to focus on finding a quality rental and making sure the numbers make sense. That is where you should spend the bulk of your time. Let the professionals manage the rental.
+1 this
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat

Cycle
Posts: 1671
Joined: Sun May 28, 2017 7:57 pm
Location: Minneapolis

Re: Becoming a Landlord: My Experiences

Post by Cycle » Mon Aug 03, 2020 9:44 pm

tomtoms wrote:
Sun Aug 02, 2020 9:46 pm
Cycle wrote:
Sun Aug 02, 2020 9:37 pm
manatee2005 wrote:
Sun Aug 02, 2020 7:21 pm
Cycle wrote:
Thu Jul 30, 2020 9:36 pm
my two cents, being a landlord on site is easy. When we moved away, ie an absentee landlord, it became too much work. Just not worth it. I'm selling and closing on the property that had $3200/mo in rent for $500k in a few weeks.

I felt like i either needed to scale up or drop it. just doing 1 property absentee didn't seem worth the headache.
What were the things that made it a headache? Did you have a property manager?
No, property managers are expensive. Living 20 minutes away, it was doable for me to take care of things.

Most of the things would take as much time to hire out as to do myself, so I would DIY little fixes... broken window pane on one of the 42 90 year old windows, gfci reset, replace batteries on tenants garage remote after tenant reports garage door broken, unclog AC drain, lock not working (tenant was turning key wrong direction), tenant doesn't move car so snow service doesn't clear snow so I have to clear snow, tree branch pops hole in garage roof, drain clogged and tenant unable to use drain cleaner provided by landlord, clothes washer breaks and needs repair, repair doesn't work and washer need replacing, water heater blows out, replacement water heater has leak, outdoor wooden step breaks, boiler develops leak, tenant paid to mow lawn forgets and so i go to mow it, water in basement during big rainfall when ground outside is frozen, etc.

each of those calls would require a trip from the management company and so it really adds up.

We have two jobs in our house, a 3rd job (Landlording) isn't necessary and is a time suck compared to passive investments. i should be clear though i never used leverage in real estate, bc it was our primary residence as well and i always want to have shelter free and clear. I did look into getting a loan on the property when we moved out, but the rates were high since we were investors and not owner occupiers. A good strategy would be to owner occupy with loan, move to another rinse-and-repeat until you have like 10 properties (20 units), assuming you want to be a landlord. ideally all within a few blocks.
Are you a accidental landlord? Did you convert your previous primary residence into a rental property?

I always recommend a property manager unless you enjoy the maintenance work. I also don’t recommend buying a rental property that doesn’t not cash flow....rent > expenses including long term maintenance cost, future vacancy and property manager.

A good way to find a reliable property manager is to find a big RE investor in your neighborhood and then use his/her property manager. Ask the investor to put in a good word for you with the property manager.
owner occupied duplex. Many people do that here. But then we moved since that neighborhood wasn't very walkable with a stroller in winter, and were accidental absentee landlords.

The landlords i knew on that street all DIY'd, and the other homes were owner occupied.
Never look back unless you are planning to go that way

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