Becoming a Landlord Experiences
Becoming a Landlord Experiences
I am entertaining the idea of becoming a landlord. Believe it would make sense financially for the area I'm looking at.
$170k - 1450 sqft house renting for about $1350/month rent, 1.5% property tax. Of course there's much more to being a land-lord
than just financials.
Those of you who have been or are landlords, what is your feelings on being a landlord? Too much work, great experience,
not worth it, great tenants, awful tenants, investing in repairs, draining,too much time, easy etc?
Thanks.
$170k - 1450 sqft house renting for about $1350/month rent, 1.5% property tax. Of course there's much more to being a land-lord
than just financials.
Those of you who have been or are landlords, what is your feelings on being a landlord? Too much work, great experience,
not worth it, great tenants, awful tenants, investing in repairs, draining,too much time, easy etc?
Thanks.
Re: Becoming a Landlord Experiences
Yay!
35 years of 9%+ appreciation and annual rent increases of 6-7% and not ONE day of unplanned vacancy.
http://www.bizjournals.com/pacific/news ... ert&page=2
Woohoo! 20-51% YOY increase in median value in 2012.
All tenants deposit rent directly into my bank accounts BEFORE the first of the month! Never an eviction. Late nite plumbing calls? Nope, YPYP. (your poop, your problem).
$1500 rent per toilet and $300,000 market value per bedroom.
Now why do you think it makes financial sense in your area? Your GRM (gross rent multiplier) is 10.5. I understand that to be pretty typical in the midwest. Will the property rent quickly at stated rent and stay rented? What appreciation do you anticipate and what have rents increased over the years?
There are lots of ways to make money in landlording. Some I would not do.
35 years of 9%+ appreciation and annual rent increases of 6-7% and not ONE day of unplanned vacancy.
http://www.bizjournals.com/pacific/news ... ert&page=2
Woohoo! 20-51% YOY increase in median value in 2012.
All tenants deposit rent directly into my bank accounts BEFORE the first of the month! Never an eviction. Late nite plumbing calls? Nope, YPYP. (your poop, your problem).
$1500 rent per toilet and $300,000 market value per bedroom.
Now why do you think it makes financial sense in your area? Your GRM (gross rent multiplier) is 10.5. I understand that to be pretty typical in the midwest. Will the property rent quickly at stated rent and stay rented? What appreciation do you anticipate and what have rents increased over the years?
There are lots of ways to make money in landlording. Some I would not do.
It's slowly dawned on me that we won the real estate lottery!
Re: Becoming a Landlord Experiences
The rent I quoted would be on the low side according to comparables. Is that enough to keep it rented? Good question. House requires some upfront investment.
As an investment return I'd hope after taxes, expenses, vacancies, fees, this rental could generate 5-8% ROI per year. Now over 10 years, who knows - with luck and good tenants, I probably wouldn't raise the rent.
What ways would you not want to make money as a landlord (since you stated)?
As an investment return I'd hope after taxes, expenses, vacancies, fees, this rental could generate 5-8% ROI per year. Now over 10 years, who knows - with luck and good tenants, I probably wouldn't raise the rent.
What ways would you not want to make money as a landlord (since you stated)?
Re: Becoming a Landlord Experiences
I'm probably not the best to provide advice considering I've only been a landlord for two years. My experience has been great though. My tenants are low maintenance and I cash flow my property each month for a few hundred dollars. I'm sure it won't always be like this. I believe what has helped with our success is diligently screening our tenants. We looked at credit reports. We even conducted an interview. Since they have been so great, we try to incentivize them to stay by not increasing rent. We feel like we've found great tenants and don't want to risk losing them over $25 or $30 a month. A terrible tenant could cost us thousands.
Re: Becoming a Landlord Experiences
I don't want to be a negative nelly, but my experience owning a 3 family was awful and I dumped it for a loss after 2 years.
My property looked great on paper too, but things never go as planned. Issues I had: vacancies, non paying tenants, unhappy tenants, boyfriends moving in with tenant that dealt drugs, repairs, issues with snow removal, tenants fighting over parking, leaky roof, tenants verbally accosting me, repairs, fleas, angry neighbors....did I mention repairs? I hated it and it was depressing work.
Fast forward 5 years and we bought a 4BR/3.5BA condo at the beach that we rent out for $3,300 a week in the summer. We break even after renting it for 8 weeks in the summer. It doesn't cash flow, but it's easy work and all high end renters who are on vacation. We get paid in advance and only have each guest for a week. We use it when it's not rented (beginning and end of summer, and all off season).
My property looked great on paper too, but things never go as planned. Issues I had: vacancies, non paying tenants, unhappy tenants, boyfriends moving in with tenant that dealt drugs, repairs, issues with snow removal, tenants fighting over parking, leaky roof, tenants verbally accosting me, repairs, fleas, angry neighbors....did I mention repairs? I hated it and it was depressing work.
Fast forward 5 years and we bought a 4BR/3.5BA condo at the beach that we rent out for $3,300 a week in the summer. We break even after renting it for 8 weeks in the summer. It doesn't cash flow, but it's easy work and all high end renters who are on vacation. We get paid in advance and only have each guest for a week. We use it when it's not rented (beginning and end of summer, and all off season).
Re: Becoming a Landlord Experiences
A terrible tenant could cost you the whole house.gator15 wrote:"A terrible tenant could cost us thousands."
A terrible tenant could cost you everything.
Did you ever see that movie Pacific Heights? People like that are real, and they get into your house to take control over your life and destroy you.
Re: Becoming a Landlord Experiences
Have had rental properties for 18+ years with very good results. My most important recommendation would be to thoroughly screen your tenants. My very first tenant (recommended by a friend) I had to evict, but over 18 years he was the only one. Also buy your properties at a price where you can rent them and be cash flow positive. Great tenants = great investment. Bad tenants = bad investment.
Re: Becoming a Landlord Experiences
Aren't you basically a landlord in the latter situation as well? Is the difference that your summer place attracts higher-end renters and maybe they are less problematic?TRC wrote:I don't want to be a negative nelly, but my experience owning a 3 family was awful and I dumped it for a loss after 2 years.
My property looked great on paper too, but things never go as planned. Issues I had: vacancies, non paying tenants, unhappy tenants, boyfriends moving in with tenant that dealt drugs, repairs, issues with snow removal, tenants fighting over parking, leaky roof, tenants verbally accosting me, repairs, fleas, angry neighbors....did I mention repairs? I hated it and it was depressing work.
Fast forward 5 years and we bought a 4BR/3.5BA condo at the beach that we rent out for $3,300 a week in the summer. We break even after renting it for 8 weeks in the summer. It doesn't cash flow, but it's easy work and all high end renters who are on vacation. We get paid in advance and only have each guest for a week. We use it when it's not rented (beginning and end of summer, and all off season).
I just find it interesting because in other ways I would think people on vacation, paying a lot of money, etc could be equally demanding since they want everything to be perfect on vacation, etc. Or maybe it's because you live there already off-season and so it's easier to maintain the place.
Just wondering because I too am wary of being a landlord for the reasons you state. But if there's a way to make it work with a vacation home that I'm also going to enjoy that could be interesting
Re: Becoming a Landlord Experiences
For simplicity and to save many hours of time and many possible hours of grief, if you are interested in real estate why not buy a REIT index fund? Those professionals who manage REITs likely can manage properties as well as or better than you can and let them lose the sleep.
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Re: Becoming a Landlord Experiences
1. Buy at the right price. If you don't, no amount of savvy management can overcome this. If in your area a house generating 1,350/month generally goes for 170k, be picky and try and do better. This is your best chance to make this investment successful, making up the difference later is much more difficult.pc95 wrote:I am entertaining the idea of becoming a landlord. Believe it would make sense financially for the area I'm looking at.
$170k - 1450 sqft house renting for about $1350/month rent, 1.5% property tax. Of course there's much more to being a land-lord
than just financials.
Those of you who have been or are landlords, what is your feelings on being a landlord? Too much work, great experience,
not worth it, great tenants, awful tenants, investing in repairs, draining,too much time, easy etc?
Thanks.
2. Screen tenants. Vacancy >>>> Bad Tenant.
3. It is work, expect it to be work. It is not comparable to buying an REIT. The more you can do yourself, the more $$$ you make. Only you can decide how much of that is worth it to you, based on your ability and like/dislike for doing that type of work (management, repairs, general maintenance).
4. Has worked out well for me, but it is not without its own risks and headaches.
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Re: Becoming a Landlord Experiences
We just sold a rental house. It had been a rental for 30+ years. There were upsides and downsides.
Upsides:
The rental income kept up with inflation. We raised the rent each time it was vacant
Due to a good location, vacancies were short
We had the house many years - long after the mortgage was paid off. So we sold it at a very nice profit.
Downsides:
We moved about 50 miles away and it got harder to stay on top of things. We used a property manager, but there is nothing like driving past once in a while to see work that needed to be done.
We had to spend money on maintenance. New roof, replacing the furnace, replacing appliances
Tenants are hard on rentals. They, generally, do not take as good care with a rental house and appliances as with their own home. They did the minimum of yard maintenance.
The gross rent looks good, but you need to set money aside for property taxes, insurance, maintenance and repairs.
Upsides:
The rental income kept up with inflation. We raised the rent each time it was vacant
Due to a good location, vacancies were short
We had the house many years - long after the mortgage was paid off. So we sold it at a very nice profit.
Downsides:
We moved about 50 miles away and it got harder to stay on top of things. We used a property manager, but there is nothing like driving past once in a while to see work that needed to be done.
We had to spend money on maintenance. New roof, replacing the furnace, replacing appliances
Tenants are hard on rentals. They, generally, do not take as good care with a rental house and appliances as with their own home. They did the minimum of yard maintenance.
The gross rent looks good, but you need to set money aside for property taxes, insurance, maintenance and repairs.
Re: Becoming a Landlord Experiences
I have owned rental property most of my adult life. Have always made money. Have had mostly good tenants and a couple bad ones. Several things to always do.
1. Buy the right property at the right price.
2. Have an eye to resale as some day you will want to sell it.
3. As you are not attached to this property personally, find two or three that will work for you and make really low ball offers until someone blinks.
4. As with all real estate, location, location, location is still the primary buy decision.
5. Stay with markets you know.
6. Screen tenants well, credit reports, references, and any other possible way to know them.
7. Do as much of the work and management as possible. Think of it as all profit.
8. This is a business, it requires work, and decisions must be made as a business. Leave your emotions out of it.
Thee are many different types of rentals that can work. There is the standard monthly rental with year over year leases. There is the vacation rental that is usually a week to week lease. There are destination rentals that usually rent month to month or multiple months at a time. Each one has pro's and con's. I currently own two destination homes with monthly tenants. More management work, but higher returns. Find a market you know and understand and invest carefully and you will be successful.
1. Buy the right property at the right price.
2. Have an eye to resale as some day you will want to sell it.
3. As you are not attached to this property personally, find two or three that will work for you and make really low ball offers until someone blinks.
4. As with all real estate, location, location, location is still the primary buy decision.
5. Stay with markets you know.
6. Screen tenants well, credit reports, references, and any other possible way to know them.
7. Do as much of the work and management as possible. Think of it as all profit.
8. This is a business, it requires work, and decisions must be made as a business. Leave your emotions out of it.
Thee are many different types of rentals that can work. There is the standard monthly rental with year over year leases. There is the vacation rental that is usually a week to week lease. There are destination rentals that usually rent month to month or multiple months at a time. Each one has pro's and con's. I currently own two destination homes with monthly tenants. More management work, but higher returns. Find a market you know and understand and invest carefully and you will be successful.
Re: Becoming a Landlord Experiences
Pretty much any way other than what I'm doing now. I think I fell into a very good niche market and am happy with the results of no fuss/no muss management and consistant high returns. i could be missing out on something but from others experiences I don't think I'd be happy mith multi-families as I've heard so much about dealing with squabbles between tenants. From limited experience I don't like to deal with people that do not have middle class values. i know people who do very well/better than me but they collect rents in cash, in person, carrying a baseball bat! Even if I could hire that part out I would still be uncomfortable.pc95 wrote:
What ways would you not want to make money as a landlord (since you stated)?
It's slowly dawned on me that we won the real estate lottery!
Re: Becoming a Landlord Experiences
A year ago I bought an 1850 sq ft home for $150k. I tried to rent it myself for a few weeks with no luck. I hired a leasing agent and she found a dream tenant pretty quickly at $1375/month. I almost never heard from the tenant in the past year and their rent was always timely. Unfortunately the tenant just gave notice so I need to go through the process again. It's been a pretty good experience, mainly because it was a new house which didn't require much maintenance. In the past year I also discovered private money lending where I can make a mortgage loan to someone with slightly dinged credit and they'll pay 8.5% - 10%. They buy a house and they put down 35% - 40% cash down payment, so they're pretty motivated to make their payments to me. I have two loans like this outstanding, and payments have been timely and, as opposed to being a landlord, I don't think about the properties at all since I'll only own them if I need to foreclose. Overall, I prefer the private money lending to being a landlord, but being a landlord hasn't been nearly as bad as people had me believe.
Re: Becoming a Landlord Experiences
Yes, I'm still a landlord, but it's for a vacation rental vs. long term rental. I've had no issues with tenants being demanding becuase the place is really, really nice. We outfitted for our own personal use, it's a relatively new construction (built in 2006), and the building is solid. We don't live there in the off season, but we use it on weekends, school vacations, etc.rjbraun wrote:Aren't you basically a landlord in the latter situation as well? Is the difference that your summer place attracts higher-end renters and maybe they are less problematic?TRC wrote:I don't want to be a negative nelly, but my experience owning a 3 family was awful and I dumped it for a loss after 2 years.
My property looked great on paper too, but things never go as planned. Issues I had: vacancies, non paying tenants, unhappy tenants, boyfriends moving in with tenant that dealt drugs, repairs, issues with snow removal, tenants fighting over parking, leaky roof, tenants verbally accosting me, repairs, fleas, angry neighbors....did I mention repairs? I hated it and it was depressing work.
Fast forward 5 years and we bought a 4BR/3.5BA condo at the beach that we rent out for $3,300 a week in the summer. We break even after renting it for 8 weeks in the summer. It doesn't cash flow, but it's easy work and all high end renters who are on vacation. We get paid in advance and only have each guest for a week. We use it when it's not rented (beginning and end of summer, and all off season).
I just find it interesting because in other ways I would think people on vacation, paying a lot of money, etc could be equally demanding since they want everything to be perfect on vacation, etc. Or maybe it's because you live there already off-season and so it's easier to maintain the place.
Just wondering because I too am wary of being a landlord for the reasons you state. But if there's a way to make it work with a vacation home that I'm also going to enjoy that could be interesting
With a vacation home, you likely won't cash flow as much as a long term rental, but you have less baggage to deal with. Plus I like the fact that we get personal use out of the property.
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Re: Becoming a Landlord Experiences
I'm a landlord and despite problems now and again it's worth it for me. Be sure before you go in that you've thought it through and know why you're doing it in the first place, then be super diligent about doing your research and buying the right price. Most properties on the market don't cash flow right at the list price so you need to have a decent model to help you evaluate deals.
Re: Becoming a Landlord Experiences
TRC and others. Vacation renters are the worst case for rental properties IMO. Just because you think they can pay the big weekly rents thus making them more responsible is incorrect. These people are there for a week of FUN. They could care less if they break things or if the faucets leak. Plus they will steal the artwork off the walls or the fireplace tools or anything that is not attached.
For instance I know of two rental properties right in my neighborhood that BURNED down while vacation rented. Yep the renters were careless with candles and the properties burned. Both times the homes were total losses. One also partially burned out the neighbor as well. Or how about renters who left the water running and flooded the whole downstairs. This has happened to two others I know. One in the winter and one in the summer. Or how about someone leaving the patio door open for 2+ weeks during the winter for giant heating bills and ruined carpet. This happened to me when my rental agent did not check the unit adequately after a person checked out. So beware, vacation renters can be big trouble.....
Net net rentals can make you a lot of money but they are work and there are risks. Just be careful and close by so you can check up on the renters and make sure things are going well.
Bill
For instance I know of two rental properties right in my neighborhood that BURNED down while vacation rented. Yep the renters were careless with candles and the properties burned. Both times the homes were total losses. One also partially burned out the neighbor as well. Or how about renters who left the water running and flooded the whole downstairs. This has happened to two others I know. One in the winter and one in the summer. Or how about someone leaving the patio door open for 2+ weeks during the winter for giant heating bills and ruined carpet. This happened to me when my rental agent did not check the unit adequately after a person checked out. So beware, vacation renters can be big trouble.....
Net net rentals can make you a lot of money but they are work and there are risks. Just be careful and close by so you can check up on the renters and make sure things are going well.
Bill
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Re: Becoming a Landlord Experiences
I have a relative who made some decent money renting out his beach house, but he was super picky on who he rented to by allowing only people he knew personally. I wouldn't want to be in that business, it's more like owning a hotel. The vast majority of work and expense comes when you switch tenants, why would you want to do it more often?btenny wrote:Vacation renters are the worst case for rental properties
Re: Becoming a Landlord Experiences
Good points. I rented a vacation home about a year ago. Though I was careful and diligent, the downstairs wreaked of mildew and come to think of it, I don't believe I mentioned it to the owner. (Not out of any kind of malice...it's just that I was there for a weekend so it didn't affect me much and I forgot about it til now. But from the owner's perspective, the problem likely got worse.)btenny wrote:TRC and others. Vacation renters are the worst case for rental properties IMO. Just because you think they can pay the big weekly rents thus making them more responsible is incorrect. These people are there for a week of FUN. They could care less if they break things or if the faucets leak. Plus they will steal the artwork off the walls or the fireplace tools or anything that is not attached.
For instance I know of two rental properties right in my neighborhood that BURNED down while vacation rented. Yep the renters were careless with candles and the properties burned. Both times the homes were total losses. One also partially burned out the neighbor as well. Or how about renters who left the water running and flooded the whole downstairs. This has happened to two others I know. One in the winter and one in the summer. Or how about someone leaving the patio door open for 2+ weeks during the winter for giant heating bills and ruined carpet. This happened to me when my rental agent did not check the unit adequately after a person checked out. So beware, vacation renters can be big trouble.....
Net net rentals can make you a lot of money but they are work and there are risks. Just be careful and close by so you can check up on the renters and make sure things are going well.
Bill
Re: Becoming a Landlord Experiences
I bought my first property 11 years ago, owned three during this time period sold two, have one left. I will echo what others have said, you make your money when you buy the property. Pay too much and it will never cash flow. All of my properties looked great on paper, but most years if I made a little money it was a good year. I only did 15 year fixed mortgages so I built equity quickly and that is really where I made money, after I sold. I never needed the monthly cash flow and was just happy if they covered costs as the tenants were paying off the mortgage. I am getting out of it as I have three little ones and frankly don't have the time and interest in being a landlord that I once did. I am very glad I did it and not sorry to be existing the endeavor. The problem I find with only a single place is repairs on one place are not offset by revenue on a 2nd, 3rd, or 4th place. I would recommend it, but have very realistic (low) expectations about what it will really be like in terms of profit, tenants, repairs, work, etc.
Re: Becoming a Landlord Experiences
Bill - candles and flooding can happen to any rental property (vacation rentals or short term).btenny wrote:TRC and others. Vacation renters are the worst case for rental properties IMO. Just because you think they can pay the big weekly rents thus making them more responsible is incorrect. These people are there for a week of FUN. They could care less if they break things or if the faucets leak. Plus they will steal the artwork off the walls or the fireplace tools or anything that is not attached.
For instance I know of two rental properties right in my neighborhood that BURNED down while vacation rented. Yep the renters were careless with candles and the properties burned. Both times the homes were total losses. One also partially burned out the neighbor as well. Or how about renters who left the water running and flooded the whole downstairs. This has happened to two others I know. One in the winter and one in the summer. Or how about someone leaving the patio door open for 2+ weeks during the winter for giant heating bills and ruined carpet. This happened to me when my rental agent did not check the unit adequately after a person checked out. So beware, vacation renters can be big trouble.....
Net net rentals can make you a lot of money but they are work and there are risks. Just be careful and close by so you can check up on the renters and make sure things are going well.
Bill
Winter rentals aren't short term vacation rentals. I don't bother with them...they're typically not good clients and are more trouble than they're worth.
I'm relating my experience that since I've owned both long rental properties and short term rentals. I believe high end short term vacation rentals are less head aches and lower risk compared to long term renters. Why?
- You get all the rent in advance before you send them a key.
- High end rentals screen out the riff-raff. After it's all said & done, I collect more than $4k per a week (rent, tax, cleaning fee), PLUS a $600 security deposit. In my two summers of doing this, I have not had a single issue. Most of the time my cleaner tells me the renters leave the place cleaner than they found it. All of the renters I've had are upper middle class folks - usually grand parents, parents, and kids vacationing together. I personally screen all my tenants to make sure I know how many, what ages, etc.
- People want their $600 back. I have a thorough punch list they have to go through to get it. All of them do it.
- You don't have to deal with evictions and all the other types of headaches that come with long term renters.
- When people are on vacation, they're happy! Most of my renters spend their time at the beach, down town, or out at restaurants. Not in our condo looking for things to nit pick.
Also, we're very anal about keeping our property clean and extremely well equipped. For 2013 summer, 5 of the 8 weeks are already rebooked with repeat renters that I know are awesome and love the place. Our neighbors have been renting for 6 summers and they've only had 1 "bad" renter (where they just left the place slightly messy) in her entire time renting. She also has a solid line of repeat renters that she knows personally. It comes down to location, quality of the property, and how well you screen the tenants. And by the way, I've yet to turn anyone away. Maybe I'm just lucky, or maybe the price just filters out the disrespectful renters.
Now, if you're talking about low end summer rentals that attract college kids and lower income folks, I could totally see the risk of damage and vandalasm.
It sounds like you made the mistake of using a rental agent. Remember, no one will care as much about your property as you. From what I've seen, rental agents care most about slamming any renter in there they can so they can take their 15-20% of the cut.
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Re: Becoming a Landlord Experiences
I agree with the good advice already posted. I have 6 rental properties and I think it is worth it but it is work. Buy really well and know your market. I also do the math planning on a 15 year fixed loan at 4%. If I can get monthly rent to cover that mortgage, I move ahead. My properties are long distance, about 12 hours away. I have managed it myself by developing a team of people to address all the different possible issues.
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Re: Becoming a Landlord Experiences
Landlording is a business/a full time job. If you can get your head around that (plus all the other great advice from posters), then you will be good.
Re: Becoming a Landlord Experiences
My in laws are basically financing their retirement through their investment properties. Several apartments, a retail space, and a restaurant. They hire someone full time to manage the property which is nothing more than opening letters, paying the bills and collecting rent. Seems to work well for them and something we hope to achieve.
This is not legal or certified financial advice but you know that already.
Re: Becoming a Landlord Experiences
One bad tenant can really mess things up. I've been a landlord (not by choice) on and off for years.
I rented our high end luxury former home to a seemingly good tenant who turned out to be the psychomonster from hell.
This true sociopath (who's name incidentally rhymes with 'deadbeat') trashed my old house, sabotaged ALL the plumbing and
had to be evicted. This tenant was procured by a real estate rental 'management professional' who 'specialized' in high end homes.
On the other hand, I have two other places that I've rented out. One has been occupied by a good tenant (I get the check
on time and I never hear from them) and the other by a younger couple starting a family. Unfortunately, the couple
created a child before they found out they hated each other (making an innocent victim) and separated. Both left without advance notice
on the day rent was due and the property was vacant for a month. I just re-rented and I'll see how it goes.
1) Keep rent lower than comparable property to make it highly attractive.
2) Be very picky who you rent to, do a full background check.
3) Emotions can play NO part in being a landlord - it's a business. People can, and often do, play you for a sucker and a fool, then skip out. Anyone who's had a 'bad streak' or is down on their luck for whatever reason is NOT a viable candidate. You'll be the next one getting shafted (READ THIS AGAIN).
4) Avoid management companies - they suck the profit out completely and really don't add a thing of value.
5) Craigslist has been the BEST source of getting tenants for me.
6) Cashflow is important. Always assume that your property will be vacant for at least two months out of a year when projecting a budget.
7) Avoid renting high end properties, stick with lower priced properties that can be easily afforded by the hoi polloi.
8) If you're a handyman type, so much the better. If not, don't become a landlord!
9) Make sure that you have your security deposit, first (and preferably last) month's rent and proof that they have ordered utilities switched over BEFORE you give them keys or permission to occupy. (That deadbeat didn't switch utilities over and guess who paid for their squatting in luxury!)
Personally, I can't wait to get out of being a landlord.
I rented our high end luxury former home to a seemingly good tenant who turned out to be the psychomonster from hell.
This true sociopath (who's name incidentally rhymes with 'deadbeat') trashed my old house, sabotaged ALL the plumbing and
had to be evicted. This tenant was procured by a real estate rental 'management professional' who 'specialized' in high end homes.
On the other hand, I have two other places that I've rented out. One has been occupied by a good tenant (I get the check
on time and I never hear from them) and the other by a younger couple starting a family. Unfortunately, the couple
created a child before they found out they hated each other (making an innocent victim) and separated. Both left without advance notice
on the day rent was due and the property was vacant for a month. I just re-rented and I'll see how it goes.
1) Keep rent lower than comparable property to make it highly attractive.
2) Be very picky who you rent to, do a full background check.
3) Emotions can play NO part in being a landlord - it's a business. People can, and often do, play you for a sucker and a fool, then skip out. Anyone who's had a 'bad streak' or is down on their luck for whatever reason is NOT a viable candidate. You'll be the next one getting shafted (READ THIS AGAIN).
4) Avoid management companies - they suck the profit out completely and really don't add a thing of value.
5) Craigslist has been the BEST source of getting tenants for me.
6) Cashflow is important. Always assume that your property will be vacant for at least two months out of a year when projecting a budget.
7) Avoid renting high end properties, stick with lower priced properties that can be easily afforded by the hoi polloi.
8) If you're a handyman type, so much the better. If not, don't become a landlord!
9) Make sure that you have your security deposit, first (and preferably last) month's rent and proof that they have ordered utilities switched over BEFORE you give them keys or permission to occupy. (That deadbeat didn't switch utilities over and guess who paid for their squatting in luxury!)
Personally, I can't wait to get out of being a landlord.
If I have seen further, it was by standing on the shoulders of giants.
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Re: Becoming a Landlord Experiences
I have stopped doing credit reports on my tenants. I'm sure this is a controversial move but I go with a high security deposit as my trump card. I have nice properties so I tend to get high market rents for the area and almost all are SFRs in nice areas. I used to do first and last month's rent plus $500 security deposit. Now, I just do first month's rent and one full month's rent as security deposit. I have found that no one wants to risk that much money and they want that full month's value of security deposit back so the property has been left in good condition.
364
Re: Becoming a Landlord Experiences
But if you get a psychopath in your house, it won't be about money.travellight wrote:"I have stopped doing credit reports on my tenants. I'm sure this is a controversial move but I go with a high security deposit as my trump card. I have nice properties so I tend to get high market rents for the area and almost all are SFRs in nice areas. I used to do first and last month's rent plus $500 security deposit. Now, I just do first month's rent and one full month's rent as security deposit. I have found that no one wants to risk that much money and they want that full month's value of security deposit back so the property has been left in good condition."
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- Location: San Diego
Re: Becoming a Landlord Experiences
Yup, not much can protect you if you get a psychopath in the house. I do call the past landlords although I know that is not completely reliable. There is no foolproof way to avert that disaster.
364
Re: Becoming a Landlord Experiences
One simple, and kind of obvious, bit of advice.
Students belong in dormitories.
You may not state a discriminatory preference in an ad, but with less than 4 units you can turn people away with no stated reason.
Also, "no co-signers accepted" is a good code against kids.
Students belong in dormitories.
You may not state a discriminatory preference in an ad, but with less than 4 units you can turn people away with no stated reason.
Also, "no co-signers accepted" is a good code against kids.
Re: Becoming a Landlord Experiences
Anyone have experience with duplexes versus single family houses?
Re: Becoming a Landlord Experiences
Would you take $170k in cash - and leave it with a stranger to look after while you are not there?
Precisely what you are doing with your $170k asset.
Precisely what you are doing with your $170k asset.
Leonard |
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Market Timing: Do you seriously think you can predict the future? What else do the voices tell you? |
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If employees weren't taking jobs with bad 401k's, bad 401k's wouldn't exist.
Re: Becoming a Landlord Experiences
We had both a 4-plex and a couple of single family houses,newbogleb wrote:Anyone have experience with duplexes versus single family houses?
The 4-plex you get more turn over in tenants they last anywhere from 1 year to 5 years (for us anyway and typically on the shorter side 1 to 2 years) a little younger and even the ones with kids (we did have some 3 bedroom units in the 4 plex) - another issue is if the neighbors decide they don't like each other, then you become a mediator that happened only twice in the 10 years, but wasn't much fun.
Houses the tenants don't move as often, more families with kids looking for a particular school district (we had one tenant 9 years, typical for us in SFR 4 years plus average)
We have since sold 1 rental house and the 4 plex had it about 10 years, still have 2 SFR we continue to rent out, did a 1031 into a small commercial building,
Residential is like everyone has said all about screening tenants - better it is empty than with someone you will need to evict in 3 months
Re: Becoming a Landlord Experiences
Cash is liquid, anonymous and fungible precisely in a way houses aren't.leonard wrote:Would you take $170k in cash - and leave it with a stranger to look after while you are not there?
Precisely what you are doing with your $170k asset.
Re: Becoming a Landlord Experiences
Why not just buy some REITS? Many pay 7% or greater on a monthly basis. Not satisfied, a simple click of your mouse & a $6.00 comission will instantaneously vaporize any deal that you're uncomfortable with. No tenants, complaints, vacancies or slow-pays.
If you are interested, may I humbly offer up a suggestion. Take a look @ WSR. They're buying-up top quality properties here in Scottsdale for 50-60% of replacement value. Pay monthly & stock price has improved nicely. It's around $14.00. I think it's a bit overpriced now but at around $13.00 I'll be increasing my position.
Be Well,
fmhealth
If you are interested, may I humbly offer up a suggestion. Take a look @ WSR. They're buying-up top quality properties here in Scottsdale for 50-60% of replacement value. Pay monthly & stock price has improved nicely. It's around $14.00. I think it's a bit overpriced now but at around $13.00 I'll be increasing my position.
Be Well,
fmhealth
Re: Becoming a Landlord Experiences
TRC, care to share your punch card that you have tenants review before leaving your property?
TRC wrote:Bill - candles and flooding can happen to any rental property (vacation rentals or short term).btenny wrote:TRC and others. Vacation renters are the worst case for rental properties IMO. Just because you think they can pay the big weekly rents thus making them more responsible is incorrect. These people are there for a week of FUN. They could care less if they break things or if the faucets leak. Plus they will steal the artwork off the walls or the fireplace tools or anything that is not attached.
For instance I know of two rental properties right in my neighborhood that BURNED down while vacation rented. Yep the renters were careless with candles and the properties burned. Both times the homes were total losses. One also partially burned out the neighbor as well. Or how about renters who left the water running and flooded the whole downstairs. This has happened to two others I know. One in the winter and one in the summer. Or how about someone leaving the patio door open for 2+ weeks during the winter for giant heating bills and ruined carpet. This happened to me when my rental agent did not check the unit adequately after a person checked out. So beware, vacation renters can be big trouble.....
Net net rentals can make you a lot of money but they are work and there are risks. Just be careful and close by so you can check up on the renters and make sure things are going well.
Bill
Winter rentals aren't short term vacation rentals. I don't bother with them...they're typically not good clients and are more trouble than they're worth.
I'm relating my experience that since I've owned both long rental properties and short term rentals. I believe high end short term vacation rentals are less head aches and lower risk compared to long term renters. Why?
- You get all the rent in advance before you send them a key.
- High end rentals screen out the riff-raff. After it's all said & done, I collect more than $4k per a week (rent, tax, cleaning fee), PLUS a $600 security deposit. In my two summers of doing this, I have not had a single issue. Most of the time my cleaner tells me the renters leave the place cleaner than they found it. All of the renters I've had are upper middle class folks - usually grand parents, parents, and kids vacationing together. I personally screen all my tenants to make sure I know how many, what ages, etc.
- People want their $600 back. I have a thorough punch list they have to go through to get it. All of them do it.
- You don't have to deal with evictions and all the other types of headaches that come with long term renters.
- When people are on vacation, they're happy! Most of my renters spend their time at the beach, down town, or out at restaurants. Not in our condo looking for things to nit pick.
Also, we're very anal about keeping our property clean and extremely well equipped. For 2013 summer, 5 of the 8 weeks are already rebooked with repeat renters that I know are awesome and love the place. Our neighbors have been renting for 6 summers and they've only had 1 "bad" renter (where they just left the place slightly messy) in her entire time renting. She also has a solid line of repeat renters that she knows personally. It comes down to location, quality of the property, and how well you screen the tenants. And by the way, I've yet to turn anyone away. Maybe I'm just lucky, or maybe the price just filters out the disrespectful renters.
Now, if you're talking about low end summer rentals that attract college kids and lower income folks, I could totally see the risk of damage and vandalasm.
It sounds like you made the mistake of using a rental agent. Remember, no one will care as much about your property as you. From what I've seen, rental agents care most about slamming any renter in there they can so they can take their 15-20% of the cut.
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Re: Becoming a Landlord Experiences
Yeah what Honobob said is absolutely correct.
You can generally expect about 10+% (conservative) appreciation on housing, plus 10+% annual rent increases every single year reliably with no troubles. People from my high school did it all the time.
You can generally expect about 10+% (conservative) appreciation on housing, plus 10+% annual rent increases every single year reliably with no troubles. People from my high school did it all the time.
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
Re: Becoming a Landlord Experiences
Beverly Hills High?Nathan Drake wrote:Yeah what Honobob said is absolutely correct.
You can generally expect about 10+% (conservative) appreciation on housing, plus 10+% annual rent increases every single year reliably with no troubles. People from my high school did it all the time.
To be fair, MY experience over thirty years is 9-11% appreciation and 6-7% rent increases in two metropolitan areas. My almost 7 year tenant is leaving!!?? The upside is market rents are 21% MORE than she was paying after modest increases since she's been in. Good, long term tenant better than annual top dollar rent.
So who/what/where/when/ type of properties are you getting 10% annual rent increases? If they have the same low vacancy/management/maintenance as my properties I would be interested.
It's slowly dawned on me that we won the real estate lottery!
- HardKnocker
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Re: Becoming a Landlord Experiences
Read this first. It's a hoot.
“Gold gets dug out of the ground, then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility.”--Warren Buffett
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Re: Becoming a Landlord Experiences
Mathematically that is almost impossible.Nathan Drake wrote:Yeah what Honobob said is absolutely correct.
You can generally expect about 10+% (conservative) appreciation on housing, plus 10+% annual rent increases every single year reliably with no troubles. People from my high school did it all the time.
Yes US housing prices are down c. 40%. And housing starts hitting 1991 lows. So a 'pop' in housing prices of 10-20% is quite possible.
But think after that:
- people either buy houses with incomes (which are rising maybe 2-3% pa at the moment)
- OR they buy them with increased mortgages -- do you think Americans will be able to leverage up to that extent, as they have done in the past?
Similarly rent is paid by incomes. And nominal incomes (not real) are rising maybe 2-3% pa right now, and might rise to say 4-5% pa in a recovery.
That gap would have to be made up by cutting other types of consumption (and your average renter does not have that kind of slack on food, gas etc. to cut forever).
Best guess is US housing prices rise 5-10% pa from here and rents perhaps 5% pa-- however there is the possibility, noted above, of a 'pop' if the economy finally gets into full recovery mode. Of course there will be exceptions-- but both ways. I remember graphs showing me that, adjusted for inflation, housing prices in Buffalo had not risen for over 30 years. Then there's Detroit.
- Clearly_Irrational
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Re: Becoming a Landlord Experiences
My experience is that you can expect about a 15% total return on 5:1 leveraged property over the long term. Like the expected return for financial assets, this can be somewhat volatile from year to year.
I've personally seen appreciation at 5.75% and rent increases at 4.25% along with some pretty significant tax advantages. (over a 14 year period)
I've personally seen appreciation at 5.75% and rent increases at 4.25% along with some pretty significant tax advantages. (over a 14 year period)
Re: Becoming a Landlord Experiences
Sure, below is what's in the rental agreement. This makes it a breeze for my cleaner to come in afterwards. Another thing I forgot to point out is I make a point to let the renters know this is our personal secondary residence and is our dream beach home. I let them know it's a person on the other with tremendous pride of ownership vs.rental company with an anonymous owner. Knock on wood, no issues so far.master36 wrote:TRC, care to share your punch card that you have tenants review before leaving your property?
To ensure you receive 100% of your security deposit, please make sure all of the items below are complete prior to your departure:
- Sheets are to be washed, dried, and placed back on their respective beds (beds do not need to be made).
- Bath towels are to be washed, dried, and placed in their respective closets.
- Empty the refrigerator, freezer, and closets completely of any food, beverages or other items you placed there while on vacation. Do not leave any food or personal items behind when you check out.
- Wash and put away all dishes, including those in the dishwasher.
- Place all trash in trash barrels in the closet outside. Double bag if necessary, as our cleaners will be taking the trash to the dump in their car.
- Appliances, counter, and other surfaces must be wiped clean. Cleaning supplies are located underneath the kitchen sink.
- Carpets and floors are to be broom cleaned of excessive debris. There is a vacuum in the 3rd floor guest room closet. A broom is located in the Kitchen.
- Heating / AC should be turned off completely.
- Return furniture to original location.
- Outdoor grill should be turned off and cleaned if used. Leave cover on once cool.
- Leave keys on the center island and lock the doors / windows upon leaving. Garage should be closed as well.
- abuss368
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Re: Becoming a Landlord Experiences
Calm Man wrote:For simplicity and to save many hours of time and many possible hours of grief, if you are interested in real estate why not buy a REIT index fund? Those professionals who manage REITs likely can manage properties as well as or better than you can and let them lose the sleep.
I agree. Let the professionals handle it and send the investor those dividend checks. Better diversification, low costs, no debt and leverage. I recently watched a Donald Trump clip on CNBC where he stated that in good times leverage is great in Real Estate and in bad times "it will absolutley crush you". He went on to recommend everyone should have REITs in their portfolios.
John C. Bogle: “Simplicity is the master key to financial success."
Re: Becoming a Landlord Experiences
fmhealth wrote:Why not just buy some REITS? Many pay 7% or greater on a monthly basis. Not satisfied, a simple click of your mouse & a $6.00 comission will instantaneously vaporize any deal that you're uncomfortable with. No tenants, complaints, vacancies or slow-pays.
If you are interested, may I humbly offer up a suggestion. Take a look @ WSR. They're buying-up top quality properties here in Scottsdale for 50-60% of replacement value. Pay monthly & stock price has improved nicely. It's around $14.00. I think it's a bit overpriced now but at around $13.00 I'll be increasing my position.
Be Well,
fmhealth
This is one of those areas where the personality and aptitude of the investor is key. I am an academic, so I am fortunate to be able to trade a little brainwork for money on occasion. For me, being a landlord would be a nightmare, so I invest in Reits, which gives me the benefits of real estate without the headaches. My brother, on the other hand is a very hands on guy. He has no problem managing rentals along with his other businesses. For him I recommended the physical real estate because when it comes to stocks he has a hard time buying and holding. He can also fix toilets and any number of other issues which is convenient. I cannot fix anything. So it really depends on the aptitude of the individual, but the reit return should give you a baseline to start with, otherwise it is not worth the headache.
- HardKnocker
- Posts: 2063
- Joined: Mon Oct 06, 2008 11:55 am
- Location: New Jersey USA
Re: Becoming a Landlord Experiences
Being a successful landlord is 90% people skills and 10% fixing toilets.
Fixing toilets is the easy part.
Fixing toilets is the easy part.
“Gold gets dug out of the ground, then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility.”--Warren Buffett
Re: Becoming a Landlord Experiences
Well my figures are fact so quite possilbe.Valuethinker wrote:
Mathematically that is almost impossible.
Yes US housing prices are down c. 40%. And housing starts hitting 1991 lows. So a 'pop' in housing prices of 10-20% is quite possible.
But think after that:
- people either buy houses with incomes (which are rising maybe 2-3% pa at the moment)
- OR they buy them with increased mortgages -- do you think Americans will be able to leverage up to that extent, as they have done in the past?
Similarly rent is paid by incomes. And nominal incomes (not real) are rising maybe 2-3% pa right now, and might rise to say 4-5% pa in a recovery.
That gap would have to be made up by cutting other types of consumption (and your average renter does not have that kind of slack on food, gas etc. to cut forever).
Best guess is US housing prices rise 5-10% pa from here and rents perhaps 5% pa-- however there is the possibility, noted above, of a 'pop' if the economy finally gets into full recovery mode. Of course there will be exceptions-- but both ways. I remember graphs showing me that, adjusted for inflation, housing prices in Buffalo had not risen for over 30 years. Then there's Detroit.
You make a lot of VERY general statements that are some what true. But do you really think that US housing is one market? So you think $700,000 one bedroom condos in SF appreciate the same as a $30,000 one bedroom in Detroit? Ask buyers in Honolulu if they've seen a 40% drop in the last 5 years.
I would agree that first time homebuyers are having a hard time keeping income up with housing prices. That's why there is rent control and first time buyer programs and micro condos. That's why it takes two incomes in some areas to enter the market. Plus there are people that pay cash for houses or use the hundreds of thousands of equity from their appreciation to either buy more expensive or equity immigrate to lower cost areas and bid up prices.
As far as rents increasing in certain areas it basically gentrifies them and people with lower incomes are being forced out of certain areas. My recent rental is in a very nice area on the slopes of Diamond Head. Several callers have commented how they are being priced out of the area. My clientele is being converted from solid middle class in the early 80's to working professionals (had a doctor and lawyer look yesterday).
It's slowly dawned on me that we won the real estate lottery!
Re: Becoming a Landlord Experiences
Family members have had rentals. I learned a lot about property management by serving on my Condo Association Board.
Being a landlord can be a very profitable experience, in part because a lot of people want nothing to do with managing properties.
It is a must that a landlord be assertive with his or her renters. Otherwise you will get pushed around and taken advantage of. You also need to be knowledgeable about landlord/tenant law in your state. There are renters that are knowledgeable enought about the law to take advantage of landlords, particularly elderly landlords. Renters will always have convincing sob stories about why they can't pay their rent on time.
You need to carefully screen your renters. There is a service for landlords that is similar to credit bureaus. They can tell you if other landlords have have problems with a particular renter. Also check their credit. Be aware of the law, you don't want to run afoul of anti-discrimination laws.
It sure helps if you are handy. Good old sweat equity helps a lot.
You need to learn from those who have managed rental properties. There is a lot to it.
You want a good plan to wind down your real estate empire as you get older. If you can't afford a property manager as an elderly landlord, you probably should unload your properties when the time comes. At some point, managing properties and all the problems get to be too much.
Somebody told me that they wanted to have rentals and hire a property manager. I told him that most likely he would be giving away his profit to the property manager. In the beginning, a person needs to do a lot of this himself. Later on, hiring a manager makes more sense.
In your plan, you need to have a margin of error. Particulary for vacancies.
What I learned convinced me that I don't want to manage rental properties. Being on the Condo board, we had problems with three renters that took a lot of our time to deal with. I don't want to deal with these kind of problems.
Being a landlord can be a very profitable experience, in part because a lot of people want nothing to do with managing properties.
It is a must that a landlord be assertive with his or her renters. Otherwise you will get pushed around and taken advantage of. You also need to be knowledgeable about landlord/tenant law in your state. There are renters that are knowledgeable enought about the law to take advantage of landlords, particularly elderly landlords. Renters will always have convincing sob stories about why they can't pay their rent on time.
You need to carefully screen your renters. There is a service for landlords that is similar to credit bureaus. They can tell you if other landlords have have problems with a particular renter. Also check their credit. Be aware of the law, you don't want to run afoul of anti-discrimination laws.
It sure helps if you are handy. Good old sweat equity helps a lot.
You need to learn from those who have managed rental properties. There is a lot to it.
You want a good plan to wind down your real estate empire as you get older. If you can't afford a property manager as an elderly landlord, you probably should unload your properties when the time comes. At some point, managing properties and all the problems get to be too much.
Somebody told me that they wanted to have rentals and hire a property manager. I told him that most likely he would be giving away his profit to the property manager. In the beginning, a person needs to do a lot of this himself. Later on, hiring a manager makes more sense.
In your plan, you need to have a margin of error. Particulary for vacancies.
What I learned convinced me that I don't want to manage rental properties. Being on the Condo board, we had problems with three renters that took a lot of our time to deal with. I don't want to deal with these kind of problems.
A fool and his money are good for business.
Re: Becoming a Landlord Experiences
Having a little experience in this area it amuses me when people want to retire to manage rental properties. All I can think is that they must have had really lousy jobs. My suggestion is to find your passion while your working and the rest will follow.
From the investment standpoint I prefer the 3:45 PM buy/sell option to having one more illiquid asset
From the investment standpoint I prefer the 3:45 PM buy/sell option to having one more illiquid asset
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Re: Becoming a Landlord Experiences
TRC- That is an amazing list of expectations. I haven't dared to do that when I did vacation rentals. Do you make sure they know this before they decide to rent your place? I would be afraid to lose most of my business.
364
Re: Becoming a Landlord Experiences
I tried this once in the 80's and it was not an enjoyable experience, but sort of humorous now.
It was a rental condo, my sister in law was in real estate and found and supposedly screened the tenant. Within a month, he had set up a small car repair operation in the garage and so obviously I received a demand from the HO assn to have the activities terminated. Then the tenant stopped paying the rent and I had to evict him and of course he left the place a total mess. After cleaning up the place, I rented it to two older women, hoping to have some stability. They were close friends, but did not enjoy living together, one moved out and the other could not afford the rent by herself. So then I sold the place, never to own a rental again. The entire experience was a major PIA.
It was a rental condo, my sister in law was in real estate and found and supposedly screened the tenant. Within a month, he had set up a small car repair operation in the garage and so obviously I received a demand from the HO assn to have the activities terminated. Then the tenant stopped paying the rent and I had to evict him and of course he left the place a total mess. After cleaning up the place, I rented it to two older women, hoping to have some stability. They were close friends, but did not enjoy living together, one moved out and the other could not afford the rent by herself. So then I sold the place, never to own a rental again. The entire experience was a major PIA.
Re: Becoming a Landlord Experiences
Yes, it's in the lease. I sell out every summer.travellight wrote:TRC- That is an amazing list of expectations. I haven't dared to do that when I did vacation rentals. Do you make sure they know this before they decide to rent your place? I would be afraid to lose most of my business.