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We have had the same renters for 8 years and are now going to sell the house. The renters have always paid their rent, so no problem there. A large part of the money has gone into maintenance and repairs. The tenants will soon be moving out, and after the repairs we will have to make, we will have lost money.
I've had multiple properties for over 20 years that were debt free. Yes, there are times when it isn't so much fun, but I've had long tern tenants that pay like clock work. They were the reason I could retire at 58. I've honestly never lost a dime on any of my tenants. I've had a couple of bad ones that I was able to push out the door before their lease was up on one, and not renewing for another. I always insist on first months rent, last months rent and a security deposit. If they are five days late on the rent I begin the eviction process. Fortunately it's never gone to eviction on any of them.
I'll give you a second scenario with some good friends with a two flat that they lived in and rented out the top apartment. They made constant poor choices based on emotion vs good credit reports and back ground checks. They've lost money and had to physically evict one tenant. It was a mess and I helped them do it late one night. They finally sold the two flat and are happy in a single family home.
Rentals are not for everyone. but when it's good, it's great. It helped make us financially independent in our 40's. It was also a ton of work with months that would go by without a day off if a property was down. When it's bad? It's a nightmare and stressful. If you are not handy and not willing to get your hands dirty, don't do it. If you are not good with money and don't have the instincts to find a good deal on a property, don't do it. If you're too kind and your tenants become your friends, don't do it. Invest in the stock market and mutual funds instead. That's worked out well for us without all of the physical work, but the real estate has made us the most money.
I’ve owned rental properties since 1987. The first because I couldn’t sell the house so I just rented it out. Then, seeing it as a good investment, I have acquired and sold many, many rental properties in addition to working as an HR professional in industry. Now retired, I still have 7 income producing properties that provide an income stream. I have found it to be a good investment.
We own 4 homes, we live in one, or son and his family live in one and the other 2, I rent out. I have had really good tenants. I don't mind being a landlord at all.I make sure we do yearly check ups on air conditioner, heating, trees trimmed, we live in the same neighborhood so it takes only a minute to swing by and check out the properties. Our tenants love their homes and take care of them like its their own. The yards and houses always look neat and taken care of.
Works for me. I use a large property management company to manage it for me. Yes, it cuts into what I make but their service is worth it. Income generation certainly better than having the equivalent amount sitting in the bank or fluctuating investments.
I thought about getting into investment rentals, but it didn't make sense when I compared it to low-cost mutual funds. I've always liked the idea of rental properties, so maybe someone with experience can share their opinions on my assumptions...
Rental Property:
-average return: 5-10%
-very "active" investment: finding tenants, collecting rent, evictions, maintenance
-stressful - dealing with bad tenants, having empty units between renters, dealing with major maintenance issues
Mutual Funds:
-average long-term return: 8-12%
-completely passive investment: you just need to re-evaluate your portfolio every year or 2
-stress free (so long as you can keep yourself from watching day-to-day changes in the market)
I'm also fairly young, so I have time to ride out market fluctuations. It would be a different situation if I was close to retirement.
Location: Formerly Pleasanton Ca, now in Marietta Ga
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Quote:
Originally Posted by bigcheese11
I thought about getting into investment rentals, but it didn't make sense when I compared it to low-cost mutual funds. I've always liked the idea of rental properties, so maybe someone with experience can share their opinions on my assumptions...
Rental Property:
-average return: 5-10%
-very "active" investment: finding tenants, collecting rent, evictions, maintenance
-stressful - dealing with bad tenants, having empty units between renters, dealing with major maintenance issues
Mutual Funds:
-average long-term return: 8-12%
-completely passive investment: you just need to re-evaluate your portfolio every year or 2
-stress free (so long as you can keep yourself from watching day-to-day changes in the market)
I'm also fairly young, so I have time to ride out market fluctuations. It would be a different situation if I was close to retirement.
If you plan on working until retirement, then mutual funds are the way to go. Fund it and forget.
Not sure where you got the 5-10% return. I get over 12% non leveraged.
I know 3 people that worked full time and were very active in real estate investing, though none actually swung a hammer.
They are in their mid 30's and quit their jobs.
One is traveling all around southeast asia and has returned to the US for only a few weeks. The last picture I saw was him touring India on a motorcycle.
The other is learning martial arts in Asia with specialists. Not sure when he is coming back.
A good property in a good location attracts good tenants. If you are in a bad location, you get bad tenants. I've have several properties and I've never had a tenant default on rent or destroy the house in the over 10 yrs I have been a LL. In fact, I plan to buy more properties
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