Investing in Rental Property

[massphatness]

If you don't want the hassle of actual property ownership, explore real estate investment trusts geared toward rental property: rREIT

[chippewastud79]

I own a few rentals, depends on what you want to accomplish with them and how much work you want to do.

Do you want cash flow or equity?
Easy money and more headaches? Less money and potential easier tenants?
Long-term tenants? College kids?

We own college rentals, the money is greater because I can charge by the room instead of the entire unit. We also rent a residential condo that was our former residence, the income is slim to none and we have problems with our HOA allowing rentals.

Expect to put down a minimum of 20-30% and the best rate you will be able to get is prime +1%. A lot of banks are shying away from income properties, so qualifying for conventional loans has become more difficult, expect to get better rates on 5-10 year balloon, ARM or <15 year loans.

It is a headache, its a lot of work, but you get your own hours. With rentals expect to break even a lot, there are always expenses and lots of unforseen issues. Our rental 'income' last year was enough to reduce our tax liability into the lowest possible bracket. Thank you very much, $5000 in our rental vehichle repairs, 2 new wells in 9 months, evictions and vacancy.

If you have specific questions about anything, shoot me a PM or post them in here. Its not like I am a some super slumlord with all the answers, doing something other people haven't.

Reading:
Your local Circuit Court documents on:
Small Claims
General Civil
Evictions
Landlord/Tenant Rights

Look at lots of leases, seriously, start throwing parts of leases together to make one that works for you. Our lease changes every time we change tenants because of one issue or another. I have seen leases as short as 3/4 of a page and as long as 12 pages, ours being in the middle of those extremes.

I apologize for this being a jumbled mess of crap.

[SvilleKid]

Originally Posted by chippewastud79

It is a headache, its a lot of work, but you get your own hours. With rentals expect to break even a lot, there are always expenses and lots of unforseen issues. Our rental 'income' last year was enough to reduce our tax liability into the lowest possible bracket. Thank you very much, $5000 in our rental vehichle repairs, 2 new wells in 9 months, evictions and vacancy.

As a teenager, my father owned 15 or so rental homes. It kept me and my best buddy (builder's son) in very good cash flow doing the constant repairs where needed, plus putting every one of the houses back in livable condition when the renters moved out. It was pretty much a given that every vacated home would need plenty of renovations to get them back into lease-able condition.

If you can do some of the renovations yourself, you will be able to keep those cost to at least a manageable level. Just be prepared that most renters will leave a property in worse condition than they found it. I wish it was otherwise!

On the positive side, there's hardly a better time than now to be to be buying property!

[cobra03]

I am a landlord by necessity not choice. I moved for work and could not sell my house without taking a huge hit ( thank you economy) so now i rent it. Im not in it for investing but i can tell you finding good renters is key. I have yet to do that. No matter how hard i screen people i seem to get the dregs of society. You should have seen my house after the last people moved out. They smashed windows, ripped the banister off the wall, ripped the control panel for the sprinkler system out, and broke all of the shelves in a brand new fridge. Just to name a few things.This was a family mind you, a mother and two 10 year old kids. If you dont mind dealing with people im sure theres plenty of money be made. As far as im concerned once i can break even im selling the house and i will never rent out property again.

[chippewastud79]

Originally Posted by SvilleKid

As a teenager, my father owned 15 or so rental homes. It kept me and my best buddy (builder's son) in very good cash flow doing the constant repairs where needed, plus putting every one of the houses back in livable condition when the renters moved out. It was pretty much a given that every vacated home would need plenty of renovations to get them back into lease-able condition.

If you can do some of the renovations yourself, you will be able to keep those cost to at least a manageable level. Just be prepared that most renters will leave a property in worse condition than they found it. I wish it was otherwise!

On the positive side, there's hardly a better time than now to be to be buying property!

I rarely contract out any work, except electrical and plumbing. Having to drill a brand new well pretty much kicked our ass (I don't drill wells either). Also went through a huge debachle of deadbeat renters who lived for 5 months, paid for 2 and cost me another month cleaning up the mess.

[jluck]

The two best tips I have learned.
>Don't rent to family or friends! It just invites awkward and unnecessary problems. Also they seem to feel like on time and full payments are optional.
>Charge a premium and or invest in "better" property's and skip the slum lord route. There are plenty of people looking to rent a house and more all the time with the current foreclosure rates.

I have been involved in the rental business since I was eight or nine years old, My folks have had many rentals and they still continue to be my problem. I have seen some of the grossest nasty things you could imagine (including a suicide) in a rental.....It can be tough.

With decent planning it can be a very lucrative proposition though.

As a side note....with all I have seen I still am trying to purchase another property.....

Originally Posted by jluck

The two best tips I have learned.
>Don't rent to family or friends! It just invites awkward and unnecessary problems. Also they seem to feel like on time and full payments are optional.
>Charge a premium and or invest in "better" property's and skip the slum lord route. There are plenty of people looking to rent a house and more all the time with the current foreclosure rates.

I have been involved in the rental business since I was eight or nine years old, My folks have had many rentals and they still continue to be my problem. I have seen some of the grossest nasty things you could imagine (including a suicide) in a rental.....It can be tough.

With decent planning it can be a very lucrative proposition though.

As a side note....with all I have seen I still am trying to purchase another property.....

I would like to buy decent homes to rent out to families or young couples. Part of making money on this is buying nice homes for bargains and then charging a premium. I know a guy that has made tons of money with his rental property business, however he rents to really bad people. He has TONS of issues with his people, and I know its because he rents out crap property for cheap. He has told me many times he carries his Glock with him whenever he makes stops at his property. I DON'T want that type of property or those people renting from me. I know now is the time to buy property, but I don't have enough cash. 5 years down the road I'd like to have enough.. I want to plan right now to have enough cash when the time comes..

Originally Posted by massphatness

If you don't want the hassle of actual property ownership, explore real estate investment trusts geared toward rental property: rREIT

I'll take a look into this tonight.. Sounds interesting..

[awsmith4]

I run a rental management business and my number one piece of advice is to perform proper background checks on all applicants. This includes criminal history, credit history, landlord referrals and rental history. Not everyone I rent to is a perfect candidate but you can make a more informed decision. There are a good number of companies that perform this service and the cost is generally $15-35 per report and is worth every penny. If you want to save the cost to yourself, charge an application fee.

Next make sure you understand landlord/tenant law and equal housing laws. Follow them to the letter and you will avoid most legal issues.

Check with your local chapter of NARPM and see if they allow non members to attend the seminars and classes. They are a wealth of knowledge for property managers and landlords.

Last, learn to be fair but firm. This may sound like an easy thing but I have rescued so many landlords that just wouldn't stand up to their tenants. You have a signed agreement with the tenant, make them follow it.

If you want to start sooner check out Homepath.com for a list of Fannie Mae foreclosures in your area. You can then find a lender that participates in Homepath loans and they even have options for investment borrowers and renovation loans.

Be leery of condo purchases. Condos often have association fees which can be as much or more than your mortgage payment. This can seriously eat away at your profits. I am not saying that all condos are bad investments but its something to watch out for, same goes with homes that have HOA fees. On that note, make sure that if purchasing in a subdivision that the HOA allows rentals.