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Not really feasible unless you can pay off some of the rentals. I own 4 rentals and all are paid off so I have a decent income from these rentals. They are still a big hassle to maintain and keep rented but I use a Property Mgmt company for 3 of them that are not located where I live. This reduces profit but greatly lessens the hassle of managing them.
I think someone mentioned that a key is at what price you but and I totally agree. Also, the rental versus cost varies tremendously by location. I have 3 siblings that have rentals in Louisiana while I have mine in Arizona and Washington. They are getting better rent compared to purchase price in Louisiana but I think I am getting greater increases in value in Arizona and Washington as I bought at the low points in each.
Renting to students is probably one of the worst scenarios (rough on the places and kids have no money).
8-10 properties (let's average and say 9), livable income (let's say $2700) which means each property nets $300 a month (not much). It would very easy to have a minor $300 repair eat up that revenue on a monthly basis, a roof/AC issue would probably negate the earnings for a single property for the whole year!
i've got some friends who have gone into the college-town scenario. if you choose your college towns wisely, it's really not that rough on the places. and you don't have to worry about kids having no money, because almost everyone i know that rented in college had to have their parents on the lease also.
Carpets get cleaned and walls get repaired and painted with each tenant change - that costs money. And that COULD be annually with college kids.
Things break, things go bad, appliances die.... then times that by the number of rentals you have.
Throw in the occasional Act of God and you get plenty of expenses.
Like a previous poster said, one new roof can wipe out a year or more of gains!
my landlord kept our security deposit. claimed the carpets were dirtier than when we moved in and some other misc. b.s. things. now, the funny thing about that is we had the carpets shampooed when we lived there because when we moved in if you walked around barefoot your feet would be dirty.
but yeah, i agree - there's lots of stuff that comes up when owning properties.
I have this dream of owning 8-10 properties in a college town (having lived in two college towns, I know it's never hard to find tenants) and having the rental income both pay off the mortgages on those properties and provide me a livable monthly income ($2000-$3000).
When I asked, my last landlord claimed he was was close to accomplishing what I was talking about. When I asked my current landlord, she just laughed at me. She said that her 6 duplexes were a nightmare to maintain, and every time she got $10,000 ahead, a tenant would wreck the place or there would be an unexpected repair, and she would be back in the hole.
Any thoughts from current or prospective owners of investment rental properties?
As a professional you would know that the current student loan bubble is unsustainable and bound to pop in the next 10 years.
All it takes is the next generation of college kids to throw their hands up at the amount of debt they have to take on to graduate and you would end up with a bunch of vacant rentals.
You make it sound like your tenants are deliberately burning down your properties or something. Unless you have like 20-30 properties full of Section 8 tenants, I cannot imagine that there is as much work as people are claiming. My landlord comes out 2-3 times a month, and in over 7 years of renting in 3 different places, I think I have called for emergency maintenance less than a half dozen times.
If you only have 10 or less properties, it won't take up all your time, but still, most of your repair calls won't be 9-5. They'll be when the tenants are home from work, meaning evenings and weekends. We manage a lot more properties than you are talking, about 160 total doors, and SOMETHING is broken somewhere every single day. Sometimes, like the first hot or first cold day each year, we get 10-15 people the same day with a problem. Usually we have 10-12 items on our repair list at any given time at some point of completion (from when the call comes in until the work is finished). We sign 10ish leases per month, and get easily 200+ calls regarding the properties each month. I would actually say we get 200+ calls from just our current tenants, not counting calls from ads for upcoming vacancies, and people who just call to see if we have anything available. You are talking about having 5% of the rentals we manage, so divide those numbers by 20 for you.
As for the original question, honestly, I think it better to own a few, rather than just one. With one, a large bill wipes you out. With several, the costs kind of level out. Most of the time, there aren't large expenses, just lots of small expenses, and that is easier to absorb when you have several properties, as are the inevitable vacancies. When there are large expenses, typically they aren't going to be for more than one of the properties at a time. It averages out better, I think. But you do have to plan on those damages, and on not being able to collect. The people who do the most damage are typically the same ones who aren't able to pay, and are judgment proof. We've had tenants do $15k, $10k, and $8k as my 3 biggest damages, but $3k-$5k happens with some regularity. Out of our 160 houses and duplexes, we have at least one a year that has excess damage.
I have this dream of owning 8-10 properties in a college town (having lived in two college towns, I know it's never hard to find tenants) and having the rental income both pay off the mortgages on those properties and provide me a livable monthly income ($2000-$3000).
When I asked, my last landlord claimed he was was close to accomplishing what I was talking about. When I asked my current landlord, she just laughed at me. She said that her 6 duplexes were a nightmare to maintain, and every time she got $10,000 ahead, a tenant would wreck the place or there would be an unexpected repair, and she would be back in the hole.
Any thoughts from current or prospective owners of investment rental properties?
Depends on how much you put in in down payments, and how good the deals are on buying in your area. It may be possible in some cases, but in the majority I suspect you'd reach a point where banks would refuse to give you more loans before you'd get that much passive income.
In most areas, you'd need so much down payment money for that anyway, you could just buy a couple of duplexes for cash and live in one side of one of them and rent the other side, and the other duplex, out.
I have this dream of owning 8-10 properties in a college town (having lived in two college towns, I know it's never hard to find tenants) and having the rental income both pay off the mortgages on those properties and provide me a livable monthly income ($2000-$3000).
When I asked, my last landlord claimed he was was close to accomplishing what I was talking about. When I asked my current landlord, she just laughed at me. She said that her 6 duplexes were a nightmare to maintain, and every time she got $10,000 ahead, a tenant would wreck the place or there would be an unexpected repair, and she would be back in the hole.
Any thoughts from current or prospective owners of investment rental properties?
Why target a college town, why not target a location where there are jobs and people already working and not moving every couple of years?
Why buy 8-10 properties instead of 1 apartment with 8-10 units? Take $400,000 as a down payment for a $1,000,000 and you can easily make money to live off. How you you get there? How did your current landlord get to 6 duplexes? Sell them and 1031 exchange them. I bet she has more value than she is letting on.
Last edited by thelopez2; 08-30-2014 at 10:26 AM..
Carpets get cleaned and walls get repaired and painted with each tenant change - that costs money.
That's strange... as a tenant, those expenses have been taken out of MY deposit every time I have switched apartments!
My landlord/landlady just spent the entirety of the months of June and July touring Europe. I don't get the impression they are doing too bad at all...
I have this dream of owning 8-10 properties in a college town (having lived in two college towns, I know it's never hard to find tenants) and having the rental income both pay off the mortgages on those properties and provide me a livable monthly income ($2000-$3000).
When I asked, my last landlord claimed he was was close to accomplishing what I was talking about. When I asked my current landlord, she just laughed at me. She said that her 6 duplexes were a nightmare to maintain, and every time she got $10,000 ahead, a tenant would wreck the place or there would be an unexpected repair, and she would be back in the hole.
Any thoughts from current or prospective owners of investment rental properties?
Rental property is like any other business, it requires experience to do it right.
That is why you will get mixed opinions on whether it is nightmare or a good business.
I have owned and managed rentals for 30 years and seen people do it right and do it wrong.
For me, it is a breeze except for the initial remodel of a new purchase.
I am not sure I agree with your target rental market though, young people as a general rule tend to be fairly irresponsible and that means headaches for landlords.
As a general rule, the more responsible your tenants, the easier your life is going to be.
There are two pieces of advice I will give you. The first is to try to use the 50/7 plan at least to get started. The 50/7 plan means you target your first rental to be something you can pay 50% in cash on the initial purchase. You then purchase the property on a 7 year low interest loan and reinvest your entire rent back into the payments. The way this works is on average you can double your principal payment every month which pays your property off in 7 years. Effectively you double your money in 7 years using the banks and the tenants money. At this point you can choose to sell and reinvest in a larger or more expensive property or to keep your paid for property which now is paying you mortgage free rent.
The second piece of advice is to only rent to people with good credit. A persons credit record tells a landlord everything they need to know about a tenant. For every 1 person with good credit there are 7 or 8 with bad credit and a sad story about how their lousy credit is someone else's fault.
When it comes to tenants there are only 2 kinds of people, the ones who are responsible and pay their bills and the ones who don't. You are trusting a tenant with an asset worth in many cases hundreds of thousands of dollars, don't take chances.
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