Anyone have rental properties? Advice?

[Mosaud1998]

I had a conversation with one of my family friends last night while he was at my house (family party).

We were talking about a business that we could start at our age. I'm 23 he's 21.

He brought up rental properties. Basically, taking a loan out on a house in an area where it's easy to put a house on rent. Using the rent money to pay off the house mortgage. Once the house is paid off, the rent money is basically all profit that can be used towards purchasing another rental property.

From what I've read and heard real estate is usually one of the best investments. Once the housing market booms, you can sell one of the rental properties and make a profit. If that makes any sense.

I just wanted to see if anyone on here has any experience. Of course, there's going to be a risk with rental properties.

Maybe even some real estate advice would be helpful. If I do decide to go with the rental property business, it'll be my first time buying a house and taking a loan out.

Any advice would be appreciated.

[Murf993]

If you get a decent house that doesn't require much up keep and a tenant who pays the rent it can be an excellent long term investment. However, a bad tenant will sour the experience, I had one not pay rent for a year. Check your local laws regarding eviction for non-payment, also expect lots or repairs when tenants move out.

[Mosaud1998]

For example. This house is 20 min away from my house. I can put $5k down. The estimated rent is $1200/month. I can use the rent money to pay the house mortgage off.

https://www.zillow.com/homedetails/3...oF2coaiROF79bA

[ASAP]

Do you have a proof of income to get a loan on that property or are you buying cash?

If you have business income that's not steady, then gl getting a loan.

[Mosaud1998]

Originally Posted by ASAP

Do you have a proof of income to get a loan on that property or are you buying cash?

If you have business income that's not steady, then gl getting a loan.

Yeah, I've got proof of income.

[ASAP]

Originally Posted by Mosaud1998

Yeah, I've got proof of income.

As long as you can get a favorable loan... will prob need 20% down and after the rent can cover, mortgage, insurance, taxes and whatever other costs come into play it could work. You need to see what that area rents for and if the place you are buying needs any renovation, upkeep... right now that could cost a bit.

[UncleWede]

10 months rent has to pay the annual mortgage/tax, or you will lose out on months when people move out and you have to repair/replace the damage they caused. Are you a handyman who can afford 2 weeks off from your day job to do the repairs yourself? If not, it's probably closer to 9 months.

[Mosaud1998]

Originally Posted by UncleWede

10 months rent has to pay the annual mortgage/tax, or you will lose out on months when people move out and you have to repair/replace the damage they caused. Are you a handyman who can afford 2 weeks off from your day job to do the repairs yourself? If not, it's probably closer to 9 months.

I mean, I can do minor repairs. My dad knows more than I do

[UncleWede]

Originally Posted by Mosaud1998

I mean, I can do minor repairs. My dad knows more than I do

Fix the faucet they tweaked and didn't tell you it leaks?
Paint?
Repair the door handles that never come loose in my own home, but are always hanging half-off in the rental bathroom?
Adjust all the hinges/handles on the kitchen cabinets?
Make the kitchen exhaust fan blow again?
Screens, always lots of screens need replacement.
Garbage disposal replacement

[TrevorM3]

Originally Posted by Mosaud1998

For example. This house is 20 min away from my house. I can put $5k down. The estimated rent is $1200/month. I can use the rent money to pay the house mortgage off.

https://www.zillow.com/homedetails/3...oF2coaiROF79bA

But at 5k, what point would you be able to pay this down to have a good ROI?

This is broad topic, with many variables. i've been fortunate enough to have a few, all paid off. In my area, taxes and insurance isn't cheap. But all relevant to the rent i suppose.

[damnitBobby]

You need to think about every single thing when renting out properties. Property taxes, maintenance, tenant screening, unforeseen repairs, leasing contracts, property management, home depreciation (or appreciation), and most importantly know your local eviction laws. Trust me when I tell you that if someone stops paying you rent you cannot simply just tell them to leave. You can end up in long drawn out court battles.

After considering all of that, look at your income. Is it worth the time and effort?

[VAcurler]

Also we are at the top of the market in terms of housing prices right now (Colorado is insane not so sure about the Chicago exurbs) so make sure that there is a demand for houses to rent so you don't own something with no renters. This particular house must need a lot of work if it is listing for less than what it sold for in 2001.
Worse case scenario - would you willing live there if you could not find a renter? If so then see if the numbers work. If not, then be prepared to cover losses while you rehab the place and also look for a renter.

One easy way to get started is to buy a place that needs work and live there. Do the work yourself and then when it's ready decide if you can get more by selling or renting out. Just don't forget to account for your labor costs.

[XutvJet]

Originally Posted by damnitBobby

You need to think about every single thing when renting out properties. Property taxes, maintenance, tenant screening, unforeseen repairs, leasing contracts, property management, home depreciation (or appreciation), and most importantly know your local eviction laws. Trust me when I tell you that if someone stops paying you rent you cannot simply just tell them to leave. You can end up in long drawn out court battles.

After considering all of that, look at your income. Is it worth the time and effort?

^All of this. It's also a TERRIBLE time to be buying property as you'll likely be paying 10-20% too high.

My father-in-law had rentals for 10 years. Nothing but trouble for him. The tenants being most of the problem. They tear stuff up, leave the place in disrepair when they move, calls late at night to fix issues they caused, and it's damn near impossible to evict.

Given his experience, I'd never do it. If I ever did investment properties, I'd flip cheap homes.

[Alfisti]

I am from the old school wog program that says buying is winning. BUT, even I say don't do it now. Rent is not cash positive, you are relying on the appreciation which is less likely right now given sky high pricing.

[shawnhayes]

I own five rentals. It's the most profitable investment I have, and the one that adds the most to my bottom line. But, it can be a risk. They can tear up the property. The insurance might not pay for any injuries. As above, if they stop paying, eviction is a giant pain in the ass.

Advice: Buy one and manage it yourself. Buy a cheap one that will be easy to rent. Find out what a pain in the ass it can be and then do the math.

Still in? Get a management company that will take a management fee from the rent and turn it over to them. Then give it more time and do the math AGAIN.

Still in? Then you need to go talk to investment advisors and find out how to make this work as an investment. Find out how much trouble vs. how much money and then stay in or get out, or stall where you are.

This is a winning path. Lots of possible pitfalls of course.

Shawn

[eleven11]

I love rental properties. However, right now is certainly more challenging.

Go here and starting reading/interacting daily:
https://www.biggerpockets.com/

[driftqueen]

Location and profit margin are key things to consider! Where are you looking to buy?

I started with one home and bought another house out of state this morning!

Also, it's always better if you have discretionary income going in!

[stevenc]

We have a rental property managed by an outside company. We don't have to do much thanks to the management company however we don't make that much money. It rents for $1800 a month. Property company takes 10% and first month rent. Property taxes are $7k since there is no homestead exemption. AC went out last year so that was $5k. Usually another $2k in misc repairs and $1k in insurance.

So intake is $21,600, expenses are $14k a year with no mortgage and no major repairs. If we had a mortgage the house would actually cost us cash flow and after interest there would be no profit.

Im happy we have it but not sure its the cash flow king people think it is. It can be a good investment over time, but dont count on it making monthly cash flow...

[Alfisti]

WHich is what I said, you're relying on appreciation which is risky right now.

[ramman434]

Wife & I are in the process of searching for our 1st rental, and plan to buy many many more.

Go over to BiggerPockets.com . It's an entire real estate forum with books, podcast, blog posts, etc. about getting into Real Estate Investing (I'm a realtor btw, so I'm drawn to it either way)

[Zara]

Originally Posted by damnitBobby

You need to think about every single thing when renting out properties. Property taxes, maintenance, tenant screening, unforeseen repairs, leasing contracts, property management, home depreciation (or appreciation), and most importantly know your local eviction laws. Trust me when I tell you that if someone stops paying you rent you cannot simply just tell them to leave. You can end up in long drawn out court battles.

After considering all of that, look at your income. Is it worth the time and effort?

THIS.

If you're only making about $200-$300 a month per door then I don't think it's worth the time and hassle. I would rather invest into well paying safe dividend stocks and enjoy a hassle free income at that point.

Also, I would stay away from Crook County. The eviction laws are ridiculous for us here.

[6oclockshadow]

Being a landlord can be a MAJOR PITA, and can be a full time job. The tennant has more rights than you do. Especially now-Tread carefully.