Do you own an investment home?

[skymama 35]

I'm thinking of buying a home for investment purposes. The plan is to rent it out for a few years and hopefully sell it for a profit. If you've done this before, do you have any helpful hints that you've learned? Any cons that made it so much of a headache that you swore you'd never do it again?

And, yes, I know my first rule should be to not rent to skydivers.

She is Da Man, and you better not mess with Da Man,
because she will lay some keepdown on you faster than, well, really fast. ~Billvon

[wmw999 2,148]

I did about 20 years ago. It actually went pretty well; we ended up selling it to the renters who had rented it the last 2 years we had it.

Problems:

well, the renters weren't exactly fix-it types; there were plenty of trips across town to fix things. Consider travel time and convenience.

I'm sure you're paying attention to the standard wisdom of being able to sustain at least 2 months a year of non-rental

when it comes time to sell, if your tenants buy it, they'll know all of the problems. Be prepared for the negotiations

If big weather comes, make sure for yourself as well that things are buttoned up. We had a big freeze, only to discover that the tenants had gone on vacation the day before, and not left the water running. Insurance covered it, but it was a pain in the rear.

last, and definitely not least, when you're negotiating, make sure that whoever's doing the negotiating has clear boundaries that they are comfortable with.

It was worth it for me and my ex-husband, but not painless.

Wendy P.

There is nothing more dangerous than breaking a basic safety rule and getting away with it. It removes fear of the consequences and builds false confidence. (tbrown)

[shropshire 0]

yes 2 ... they are our pension/old age toy fund :-)

No real problems to date .. agency sorts out rent collection and repairs (nothing major)

rules/laws will clearly be different .. but Get insurance and Safety check certificates (Gas & Electric). We also pay for Gas/Electric maintenance too..

(.)Y(.)
Chivalry is not dead; it only sleeps for want of work to do. - Jerome K Jerome

[FlyingRhenquest 1]

No, but I know a couple guys who do, and I went down the home-ownership road for the first time a couple years ago as well. Having to fix everything is a huge pain in the ass. My last landlord did everything himself because that's a lot cheaper than getting a plumber or electrician in. I only ever bugged him about broken stuff 3 or 4 times in 10 years, though. A couple of garbage disposals went bad, and a couple of leaky faucets. The outdoor one was a huge pain in the ass, but he still did it himself. Impressive bit of work that, but cost him a lot less than the $250 a plumber will charge just to come to the house, much less what they would have charged to fix that thing.

Another friend of mine actually owns a small block of apartments. He was able to stay unemployed for over a year after EDS terminated our contract. I sent him several good leads and he was like "Whatever, there are 6 inches of new powder in Vail today!" He also does all his own work.

The trend I notice with making a profit on rental properties is "Do your own work." And document the condition of the place when you sign the rental contract. I'd go through and take pictures of all the carpets, outdoor fixtures, rooms, etc. Then press a couple of DVDs for your files and one for the tenant. If they find something that's not in good condition, make sure to document that. Get all that in writing and file it in a folder labeled "Evidence." Do the same thing when they leave. You'll probably need to have a lawyer you can consult with, as well. I learned from my first boss you always get your lawyer early and factor his cost into the cost of business. Come to think of it, that guy had rental properties, too...

I'm trying to teach myself how to set things on fire with my mind. Hey... is it hot in here?

[DiverMike 5]

I have a few local houses and a 7 bedroom vacation rental house in the Outer Banks. If you enjoy do-it-yourself projects it makes good financial sense. If you don't have the skills to fix minor electric, plumbing, drywall, roofing problems - your profit might disappear.

You do have the advantage of knowing skydivers. Every DZ I have been to has skilled drywallers, roofers, plumbers, and electricians who would do the work and give you the friend/family rate.

For the same reason I jump off a perfectly good diving board.

[Squeak 17]

I have a couple, but real estate here in Australia is a lot different than in the USA.
I would suggest looking back over the last 10 years of property value growth, to see if you can in fact make any decent capital gains.
Also make certain that you don't over capitalize. And that you can make ALL payments, mortgage, repairs, insurance etc. Without the need for rental income.

You are not now, nor will you ever be, good enough to not die in this sport (Sparky)
My Life ROCKS!
How's yours doing?

[skymama 35]

I don't have any worries about fixing things; Normiss is very handy and if there is something beyond his abilities I have my dad and brothers in town who are all certified building contractors. I work for my dad's building company, so I have every subcontractor available to me. I'm pretty lucky that way!

She is Da Man, and you better not mess with Da Man,
because she will lay some keepdown on you faster than, well, really fast. ~Billvon

[DiverMike 5]

Then absolutely go for it.

For the same reason I jump off a perfectly good diving board.

[ryoder 1,398]

wmw999

If big weather comes, make sure for yourself as well that things are buttoned up. We had a big freeze, only to discover that the tenants had gone on vacation the day before, and not left the water running. Insurance covered it, but it was a pain in the rear.

A former co-worker bought a duplex up in the mountains at Winter Park, partly as an investment, and partly so he had a vacation home at a major ski area. He rented out one half of the duplex.

One winter, his tenant moved out, and the moron shut off the heat, resulting in frozen/broken plumbing. So my co-worker had to take a couple days off work to drive two hours up to the mountains to repair it all.

"There are only three things of value: younger women, faster airplanes, and bigger crocodiles" - Arthur Jones.

[normiss 622]

I'm counting on the house we buy to double my to-do list.

[Remster 24]

We had a rental condo in Montreal for almost 3 years.

It's a lot of work.

Remster

[normiss 622]

Was she cute?

[Remster 24]

normiss

Was she cute?

That was the rental unit in our basement in Toronto. And yes, she was. That is, if you're into the tall, model type.

Remster

[normiss 622]

I'm suddenly seeing a new angle to this.

[riddler 0]

Quote

I'm suddenly seeing a new angle to this.

So is the NSA. They are watching

Trapped on the surface of a sphere. XKCD

[airtwardo 6]

I've done it LOTS!

I gotta look for a book a buddy gave me and I'll get you guys the title etc.

There is a 'standard' formula that when followed makes the whole thing pretty straight forward and maximizes profit potential.

things to consider are location, condition, area economy, don't use a rental agency...on & on.

We're now down to two rentals, both paid for...though I've both rented or flipped MANY houses, it's a 'job'.

Remember to account for normiss's work both on paper & in consideration of quality of life a part-time job takes away in time from the family....seriously.

Right now with this economy...it's imperative you max the profit. Keep good records, review after a year or two...

I dumped several 'prosperities' a decade back right before the bubble popped, I kinda saw it coming but more did the math and could (and have) made considerably more using other investment vehicles with the money at the time.

OTOH I have a good friend who's 50...he has 22 rentals all following the 'formula'. His 'job' is doing the properties, all are well managed & maintained - he's in the black over 15,000 a month...not bad for a part-time 'job'

~ If you choke a Smurf, what color does it turn? ~

[ryoder 1,398]

Remster

***Was she cute?

That was the rental unit in our basement in Toronto. And yes, she was. That is, if you're into the tall, model type.

I had a friend in Chicago who rented out two apts in the building in which he also lived. He once rented to a chick who had appeared in Playboy. He was always complaining what a bimbo she was.

"There are only three things of value: younger women, faster airplanes, and bigger crocodiles" - Arthur Jones.

[jimmytavino 16]

not anymore.
we did ok with a Two Family House we bought a year after buying OUR 1st house...it was 1984 or so.
It was waaay low in price and needed a ton of work.
so I set out to DOING it.... It was a Big BITE...
The city inspector came out and wrote up a list of about 2 DOZEN, issues , concerns, violations etc. They gave us a conditional C of O so we could get some tenants into the apartments , and we worked with section 8, accepting what THEY, dictated in the way of rent. I had a 30 MONTH !! private mortgage with the previous owner... The inspectors were good about allowing extensions IF they saw at least SOME progress, one visit to the next... I did Most all the work, But one of the tenants did work around the place..or would help me, and I paid him out of MY own pocket...
We owned it for 3 years and did good upon it's sale. Those funds combined with a small Up Value in our home # 1 allowed us to buy our current house, with almost 50% Down...
So. we tried again after settling in here, late 80's and bought a single family house in our town... Lots of work there too, including finishing the entire upper floor of a cape-cod style house,,, We rented it to Nancys Mom who still had kids in college and High school, But wanted to access the equity in the house which SHE and the kids most recently lived. We would take a token "rent check " from her.. add 500 bucks and pay the mtg.... Owned that house for maybe 6 or seven years. Once Mom moved to an apartment complex we continued renting.....and dealt with some real phoney baloney people....who got to being late with rent...who brought 2 dogs INTO the house and let them ruin the place and who was damn near close to a fist in the face...... from ME!!!!!...can ya' imagine???...
We decided we didn't NEED that and sold the place for a very Small increase is price from what we HAD paid...Timing is important and location...
The rent part can be tricky as well . NOT easy to find good tenants and good ones CAN become Bad ones often unintentionally...
Looking for low priced undervalued places which CAN be rejuvenated takes a keen eye to locate...Some can be fixed up and sold. some can become a real estate portfolio which if planned well... can generate decent regular income..
when we dabbled in this . interest rates were Above 12 %.. but costs around HERE. were very reasonable.. Today,, if you can get financing and find a good place at a sensible cost........
then... I'd STILL flip a coin to make the decision !!!!.. hahaha
The variation in real estate values from place to place is astonishing...and what costs 100 grand in one place can cost 400K in another.. It's good that you have a support team and Good R. E. Agents... are YOU an agent?? given the work you do????
Anyway, just remember what we see TV.. where one moment they are Bashing the place with a Sledge HAmmer and the NEXT...... they are Groutin' the Tile backsplash !!!.. NEVER happens as fast or as effortless as it seems.... On the Cable Networks!!!!
wishing you Both, much luck and prosperity.
" work, Baby, Work"...

[DiverMike 5]

At one of my houses, every time I have gone there to fix something the tenant has called about, she opens the door wearing nothing but a towel. She either takes a lot of showers, or wants something off the rent.

I am pretty sure she would go 'Fatal Attraction' on me , or she is bat-shit crazy. I wouldn't risk either scenario.

For the same reason I jump off a perfectly good diving board.

[normiss 622]

I just hadda take a bigga crappa!

[skymama 35]

Thanks for all of your input, I'm reading it all with interest.

Jimmy, the "phoney baloney" people are the ones I'm worried about, but I guess that is part of the risk. The location of the home I'm looking at is a pretty good one. It's definitely a working class neighborhood, but that's ok. It's a short sale, so I think I can get a really good price on it. I do have my real estate license, but I never use it.

She is Da Man, and you better not mess with Da Man,
because she will lay some keepdown on you faster than, well, really fast. ~Billvon

[GooniesKid 0]

ryoder

******Was she cute?

That was the rental unit in our basement in Toronto. And yes, she was. That is, if you're into the tall, model type.

I had a friend in Chicago who rented out two apts in the building in which he also lived. He once rented to a chick who had appeared in Playboy. He was always complaining what a bimbo she was.

You know what's even worst than renting to a Playboy chick? A friend I know and grew up with is DATING a Playboy chick (Miss October 2012)....what a lucky bastard! If only i can date a Playboy chick i can stop my sinful ways and finally settle down to get married

Anyhow, not to go off topic but i tried renting out property once and for me it was ok. Just realize that it is best to know handiman stuff...i had to learn as i went to cut costs. I got tired of the maintenance so decided to sell (at a profit). Tips and tricks i've learned:
1. Be your best handiman or know people who can fix stuff.
2. Interview your potential renters (families with a stable income and careers tend to do better. College kids are iffy).
3. Watch the real estate market in trends to see if you will make a profit if you have to bail.
4. Location

Hope this helps

[JerryBaumchen 1,064]

Hi Moms,

About 1 1/2 yrs ago we had to move my 91 yr-old mother into a retirement facility.

I decided to rent out her house to offset some of the facility costs. I hold Power of Attorney for her.

The house was built in '53, my dad died in '97 and she had not done anything to it in the 15 ensuing years.

I spent $4200 & 3 months getting it ready to rent.

Just when we recouped the $4200 from the rent, we had a fire. NO, I did not start the fire.

Since 27 Jul 13 I have spent about 50% of my time dealing with the insurance company. It turns out that when I converted from a traditional HomeOwners policy to a Landlord policy they low-balled the policy and it only covered replacement 'in kind' and not replacement to current standards, codes, etc. They did not inform me that there were options regarding what type of policy to buy.

I have a file nearly 1 inch thick so far. But, the insurance claims rep called last week & finally agreed that the house is a total loss ( they were insisting that it was not and only needed some minor rebuilding ) and will pay what I proposed. I obtained four bids & letters from the bidders stating that the house was a total loss.

I will believe it once I see it in writing.

You need a very tough skin when dealing with insurance companies.

When you go looking for a Landlord policy, I would recommend that you sit down and discuss the various types of policies that they offer.

Just my $0.02 of thoughts,

JerryBaumchen

PS) And now I am dealing with the county to get the property taxes reduced as there is no dwelling there anymore. And on and on it goes.

[Phillbo 11]

Run a credit check on any potential renters!

[airtwardo 6]

Phillbo

Run a credit check on any potential renters!

THAT is an ABSOLUTE!

Rental agencies do the background & are pretty good for the most part, but these days it's just as easy to do yourself...

Have a solid criteria you intend to follow regarding tenants ~ and STICK to it.

Every time I've been burned it was because I bought a 'STORY' and gave what looked to be a decent family a break...do NOT do that - period.

~ If you choke a Smurf, what color does it turn? ~