Questions for Landlords or Property Managers??? Need your advice! (tenants, duplex, 5%)

[gizmobizmo]

Hi,
Hubby and I are considering different options for investing and have come to a stand-off. Hubby wants to invest in real estate (house or condo) and rent them. Then when we are ready to retire, sell the property. He likes the idea of someone else paying for the property then collecting the booty in 20 years. He seems to think it will be a piece of cake.

I'm not loving the idea at the moment. I have heard so many horror stories about the tenents from H*LL that it makes the idea of investing in a rental scary. There are a couple other issues also but a big concern I have is finding good tenents and avoiding a lot of headaches.

So, my question for the current or former Landlords & Property Managers Only, Please............

1. What are your pro's and con's of being a landlord.
2. Do you manage it yourself or do you use a property manager?
3. Which is a better investment: house or condo? Why?
3. Any general advice for the uninitiated?

Thanks everyone!

[20yrsinBranson]

Originally Posted by gizmobizmo

Hi,
Hubby and I are considering different options for investing and have come to a stand-off. Hubby wants to invest in real estate (house or condo) and rent them. Then when we are ready to retire, sell the property. He likes the idea of someone else paying for the property then collecting the booty in 20 years. He seems to think it will be a piece of cake.

I'm not loving the idea at the moment. I have heard so many horror stories about the tenents from H*LL that it makes the idea of investing in a rental scary. There are a couple other issues also but a big concern I have is finding good tenents and avoiding a lot of headaches.

So, my question for the current or former Landlords & Property Managers Only, Please............

1. What are your pro's and con's of being a landlord.
2. Do you manage it yourself or do you use a property manager?
3. Which is a better investment: house or condo? Why?
3. Any general advice for the uninitiated?

Thanks everyone!

My husband owned a duplex for many years before and after I married him. I can tell you that you could not GIVE him a rental property today. The last thing he said, when he sold it for a fraction of what it was worth (just to get rid of it), was "never again". The people who rented his unit, were, for the most part, PIGS. They were filthy, never cleaned anything, left food rotting in the refrigerator, smoked like fiends, stole the appliances, let friends and relatives live in the property in violation of the lease. They repainted the kitchen, splattering paint EVERYWHERE, stopped up the toilet and then used the bathtub as a toilet, they refused to pay the rent and ultimately had to be evicted. (these were many, many tenants, not just one or two bad apples).

Every time they moved out it took weeks of work, and lots of money to go in and replace/repair/repaint/renovate the property so it would be once again rentable.

Unless your husband has a lot of time, money and is very handy with tools, etc., I would pass if I were you. Otherwise, buy a multi-family complex and HIRE someone to manage it for you. That is the only way I would even consider this type of arrangement.

20yrsinBranson

[Houston3]

It has pros and cons. Just remember it's a business. Get a GOOD deposit, check out tenants REAL GOOD. Be prepared to wait and find GOOD TENANTS even if the property is vacant for a month or two, it's worth the wait. I do and it has payed off for the most part. Put as much of the profits in saving as you can, build up a surplus of cash.

RENTERS will lie to you about jobs and income, so CHECK their employment.

Get back up phone numbers to call if they skip out. (I haven't had that problem yet)

And be a good landlord, keep things fixed and do it fast. A happy tenant is a good tenant.

It's like any other business, you own a corner store some people will steal from you.

[chet everett]

Everything Houston3 said it true, but sadly a lot of things that 20yrsinBranson said are also true.

I got started renting out houses because it made more sense for me to rent out a house than to sell it when it was much tougher to get a mortgage. That changed and it made sense to sell property that had appreciated instead of continue to use for income. That "20 year time frame" is VERY much out of your hands!

Different towns have different kinds of tenants. Different property attracts different kinds of people. Not everyone is cut out to drop everything and RUN to your tenant the way that you sometimes have to as landlord. There are property management companies that can take some of the headaches out of being a landlord, but often they cut DEEPLY into you cashflow. With uncertain real estate appreciation you really have to get a LARGE discount on any property that you could reasonably expect to profit from. We have been through about 20 years of rather hungry real estate markets and many "easy to fix" properties were snapped up, though this recent turmoil may be creating pockets of homes that may benefit from "repurposing" from low-equity owners to rentals.

In regards to house vs condo my personal take is that it is GENERALLY easier to CONTROL the direction of a house (or even smaller apartment building) than it is to control the direction of all but the smallest TOTAL condo association. I have seen TOO MANY condo complexes go from desirable to "omigawd" in short order, and often there is just about nothing a single unit owner can do. Of course in some markets there are exceptions, but without knowing the details of what you'd be facing it is hard to be more specific.

General advice: If you think this is "easy money" (or your husband does) you are NOT cut out for it. You have to look at LOTS of property to find ONE that seems discounted enough to make a go of it right now. That alone is HARD WORK, especially becuase more than a little of the good rentals are probably NOT what you would call a "dream neighborhood". Once you have a place in good enough shape to rent out you want to have tenants that are the right kind of tenants -- finding people with enough going fro 'em that they can PAYmeans more hard work/possible investment of time/money. Once the place is rented and you are getting income from it you MUST diligently track your costs and your competition to know if you are really making money.

[austin-steve]

1. What are your pro's and con's of being a landlord.

The only Pro is wealth generation. The cons are numerous, including losing all of your money plus some.

2. Do you manage it yourself or do you use a property manager?
I own rentals and also manage for others. If you are not willing and able to manage yourself, hire a property manager. Don't be lazy about hiring one either, ask a lot of questions, call a lot of references, and do lots of research on how they market properties and how they treat tenants.

3. Which is a better investment: house or condo? Why?
House. Only fools buy condos. I refuse to manage condos, for all the reasons you shouldn't buy one. Yes, there are exceptions, but condos are a very, very poor investment for the vast majority of people.

3. Any general advice for the uninitiated?
Tell your husband to prepare a spreadhsheet showing the 20 year gain of the money you wish to invest. You do the same with whatever method you think would be smarter. Compare spreadsheets and go talk to your accountant about it too. It's a financial decision, nothing more, but one that should be made in the context of your risk tolerance and emotional ability to handle the ups and downs of real estate investing.

Steve

[bentlebee]

1. What are your pro's and con's of being a landlord.

So far I had more pro's than cons. If you check out the tenants and you have good judgment skills you will know if the tenants are more to trust or not. IMO it is very important to tell them all the rules and regulations (my properties are in HOA communities) and I have in the contract that the tenants are responsible for the yard, fertilizing, etc. and to obey the HOA rules and regulations and they have to sign for it. So far I never had issue with it other than that one tenant had 2 letters from the HOA about the yard and he took care of it (now I have a new tenant who keep the yard like he owns the place), and the tenants know that if I get fined for something they should take care of, they are the once who have to pay. Clear rules. Cons, well you have to be prepared for unexpected calls if something isn't working, but my properties were build in 2005 so not that old.

2. Do you manage it yourself or do you use a property manager?

I manage myself.

3. Which is a better investment: house or condo? Why?

IMO a house, or a town home. Condo's have mutiple people living close to each other so the chances of issues are bigger and values of single family homes are better

3. Any general advice for the uninitiated?

set clear rules and have them in writing and treat it as a business deal and I rather have strangers than friends, since we all know what happens with friends if it comes to money. I have tenants with bad credit, but that doesn't mean they don't pay. I did check with their last Landlord and she told me they always paid on time and was sad that the moved, but understood that they needed a bigger place. I also checked their work place

[adlnc07]

I had to rent out a condo I bought in 1988 for about six or seven years because the value tanked and I didn't want to live there any more. I fall into the "never again" category - make that never EVER again.

1. What are your pro's and con's of being a landlord.

The pro was that I could cover some of the mortgage, and later all of it, but not every month. I never actually "made" money off the rental. The con's were many - top of the list was having to go to court to evict tenants who had somehow completely infested the place with cockroaches (there were no bugs when I lived there). I didn't evict them for the cockroaches, but failure to pay even one months rent after they moved in.

2. Do you manage it yourself or do you use a property manager?

I did it myself for a while then had a realtor manage it for me. It was better when the realtor did it, although it was still a major pain.

3. Which is a better investment: house or condo? Why?

I rented a condo out because that's what I had - overall it was a terrible investment as I had it for 10 years and sold it for $1K more than I paid for it.

4. Any general advice for the uninitiated?

Expect your tenants to lie to you.

You may not have as bad experience as I did - but there is no way it will just be a "piece of cake."

[2bindenver]

Read Gary Keller's The Millionaire Real Estate Investor.

[kinkytoes]

First make sure that you are actually investing by buying property that you can afford with money you actually have. If you need to get a mortgage for all or almost all of the cost of the property the risks will be much greater. I’m not even sure that should even be considered investing.

Big Renting Risks:
1. The govt. is doing all they can to keep irresponsible people in their homes at prices that may be lower than rent. Grrr. Simmer.

2. There are lots more properties for rent on the market. Some of them are fancy new construction and this may reduce the amount you can charge for rent.

3. People are losing their jobs like crazy – So their ability to pay rent will become lower. I don’t know when this will improve. It may not.


Advice:
1. What are your pro's and con's of being a landlord—I have a relatively-high paying regular job so my massive losses as a landlord help to reduce the income tax I owe on my regular income. Everything else is a hassle.

2. Do you manage it yourself or do you use a property manager?
I manage the property myself in order to take the maximum deductions. This used to be easier when I lived closer to my property. Now I have a husband who helps me. I thank God for him. I have a very low profit margin, and a property manager would eat that up.

3. Which is a better investment: house or condo? Why?- I would say a condo. I have both and with a condo you have a built-in property manager and the entire group shares responsibility for the upkeep of common areas. The insurance situation is also handled as a group.

3. Any general advice for the uninitiated? –
a. Do not buy a building with existing tenants. If you plan to do that, make sure you have them fill out applications BEFORE you close if they want to stay as your tenants. Do a background check, credit check and reference check. IF they fail or they refuse to re-apply, make sure the existing owner terminates their lease and they LEAVE before you close on the property.

b. Do Background checks (in Maryland doing online civil and criminal case checks is free to the public), call references, do credit checks. I can tell you that people with good credit seem to always pay rent on time or EARLY. People with even MARGINAL credit are not good payers. This is from experience. This leads me to believe that people with bad credit have bad credit for a REASON. I still have not gotten someone who has a foreclosure, but I may make an exception for something like that. But unpaid CC bills, gas bills, student loans? Heck bleeping No.

c. Find out about regulations in your area – Is there an occupancy limit? Are there fire codes that you need to comply with? Is there a property registration system? I would recommend talking to an experienced landlord in the city where you plan to buy the home. You may want to spend a couple $$ contracting a LOCAL property management company to help you do the homework. Everything I learned, I learned the hard way and while that works eventually, I would not recommend it.

d. Charge Late Fees – As soon as rent is late notify your tenants in writing. Sometimes it’s just as great to get the rent a few days late . . . cuz you get late fees! (emits evil laugh) Just let the tenants know the deal. And find out the limits on late fees, in my state I think it’s 5%.

e. Allow Payment Online – Paypal is pretty secure and well-known. It also allows the tenant to use a credit card. The transaction fees are 3%, I think, so you should charge the tenant a fee.

f. Perform Regular Maintenance! –

i. Pest Control --Get a yearly contract with a well-known company.
ii. Heating and Cooling – I recommend a yearly contract.
iii. General Inspections - Also, sometimes my tenants will NOT TELL ME when things are broken. So, I would inspect the place at least once during the lease period. Include a clause in your lease and give the tenant a few days notice.
During your visit, I recommend:
1. Walls for damage
2. Plumbing for leaks
3. Faucets , turn them on and off
4. Toilet Seats and toilets
5. Light switches
6. Garbage Disposals
7. Exterior lights and security systems

Maintenance may add 1-3K to your yearly expenses.

[On-da-Beach]

I have a property management co. here in the Fl. panhandle and can tell you it's a tough market out there right now. These are typically vacation rental homes, townhouses and condos. They are/were usually built or bought by investors and considered a business for tax benefits. When the real estate values were rising at incredible rates, there was lots of money to go around. People were buying and selling, others were vacationing and all had money to spread around. Well, that hit the wall in 2005. Those folks who bought high thinking it would go higher are stuck with a big mortgage on property they can't sell. So now they are dumping those homes into the rental market to try and slow the bleeding. Everyone is supersaturated with unrented units. Renters (vacation or long term) can now negotiate for the lowest rent and people who are desperate for the income will take anything.
Don't hesitate to research every possible avenue of this future investment. Reality may not meet your expectations.