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Old 07-08-2016, 12:19 PM
 
Location: East TN
11,046 posts, read 9,686,505 times
Reputation: 40288

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Living in the bay area, he probably hasn't had anything sit vacant. If you price under market the tenants won't move unless they absolutely have to because everywhere else costs more. And in the bay area, many can't afford to buy, so rentals are in high demand. That's also the case where our rental is located (also in CA). The housing market is tight as a drum and folks can't afford to buy. Low cost houses sell in days with multiple offers. Our rental was only ever vacant long enough to clean it in the whole 15 years we've been renting it out.
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Old 07-08-2016, 12:35 PM
 
52 posts, read 50,314 times
Reputation: 32
Quote:
Originally Posted by mathjak107 View Post
in retirement no rent or tenant issues can be a huge problem . unlike passive investing real estate carry's expenses . those expenses when rent is interrupted increases sequence risk greatly as excessive amounts of cash is spent down and that money is gone for future growth .

anything that adds to spending in times of negative returns can be especially painful in the decumulation stage
I see your point completely, but I would have to be extremely stupid to expect 100% occupancy and factor that in as my primary income in retirement. My expectation in good area is 2-3 months after each tenant moves out. But there will be no mortgage when I retire. Only taxes. At that time, I should have a spare fund for 1-3 years worth of taxes, anyway.

It's basically the same irresponsible thing as earning X amount of money during your work years, but spending 20% more each month using credit cards.

During first years, I will accumulate some rent fund (say, 3-6 months worth of mortgage), the rest will either go to another property or to pay off this one sooner.


I personally believe the greatest risk factor is how will the area change. I've seen so many examples of great areas becoming dangerous one in less than 7 yrs, that it's virtually impossible to guarantee that an average area will stay the same in 20 yrs. That's part of the risk.
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Old 07-08-2016, 12:47 PM
 
52 posts, read 50,314 times
Reputation: 32
Quote:
Originally Posted by aslowdodge View Post
Don't buy in crappy areas if you are not ready for it. You can make a lot of money there, but know what you are doing.
Don't buy blindly because someone told you it's a good rental-do your due diligence.
When I was in Ca I had 5 rentals and spent about 3 -4 hours a month on them max. Some months 1 hour, another month maybe a day or two on a repair or something. It still averages out to very little time.
If you are buying a rental in an area you are living, quite likely it's a decent area and you can get decent tenants.
Yeah, some deals in the crappy areas are unbelievable. You can buy properties for $30-$50k that need some work, but nothing serious, yet rent out for $2-$3k each month in that area. That's absolutely worth the risk. Due diligence on an area is a must, of course.


Having 2 or 3 properties like that would mean you do not have to work - as you already mentioned.
Of course, this is still work, but not 40 hrs a week.
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Old 07-08-2016, 12:47 PM
 
2,016 posts, read 3,178,041 times
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My mother started out with condo rentals 38 years ago in southern California. In the beginning she had a lot of problems with tenants and having to go to court. I use to tell her to just get rid of them, what a pain, but she stuck it out over the years and got better with finding decent tenants. Now she is 85 years old with Alzheimer's and has one rental house left. She pays a management company to take care of renters and property management. Us kids wanted to sell the house now but the lawyers strongly encouraged us not to sell and keep it as continuing income for her.
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Old 07-12-2016, 04:42 AM
 
Location: Mount Airy, Maryland
16,183 posts, read 10,326,018 times
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Why in the world would you want to sell your mother's house and cut off that income for her?
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