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Speaking with a friend who's family owned a 30 unit apartment building in NYC, besides the rental income, there's a bit of leeway with respect to tax deductions.
I chose a different way of generating "rental" income.
When you purchase a house or a multi-family dwelling, you typically need to come up with the down payment on the asset in order to get a loan to purchase. Let's say your down payment is around $100k. Some portion of your rental income will go to repay the mortgage and then another portion will be used to budget for upkeep, maintenance etc.
Why not use that $100k and purchase dividend stocks? I have shares in several different companies that distribute rental income from strip malls, healthcare facilities and commercial properties. It's probably less lucrative than actually owning the rental properties but you don't have to worry about upkeep, maintenance or deadbeat renters.
The downside for the dividend approach is after several years, the mortgage is paid off and you get to keep most of the rental income.
Speaking with a friend who's family owned a 30 unit apartment building in NYC, besides the rental income, there's a bit of leeway with respect to tax deductions.
I chose a different way of generating "rental" income.
When you purchase a house or a multi-family dwelling, you typically need to come up with the down payment on the asset in order to get a loan to purchase. Let's say your down payment is around $100k. Some portion of your rental income will go to repay the mortgage and then another portion will be used to budget for upkeep, maintenance etc.
Why not use that $100k and purchase dividend stocks? I have shares in several different companies that distribute rental income from strip malls, healthcare facilities and commercial properties. It's probably less lucrative than actually owning the rental properties but you don't have to worry about upkeep, maintenance or deadbeat renters.
The downside for the dividend approach is after several years, the mortgage is paid off and you get to keep most of the rental income.
If you want to go that route, also look at Realty Income Corp, "The Monthly Dividend Company." They're a REIT, and have a very solid record.
I have 24 renters, it will be my sole source of income during my pre-retirement from age 56 to ~62. 5-four plexes, 2-duplexes. Both duplexes and two of the 4-plexes are paid off. They generate > $300K in gross annual rents and exceed my FT job income.
A 67-year-old friend of mine is living (very tight to the bone) off rental income from one apartment (she lives in the other one) and Soc. Sec. that she took at age 63. Her rental apartment is $1125/month. She also owns a modest Florida house but wants it for herself during the prime rental times, has managed to find short-term renters for the off season. It does seem she spends a lot of time and energy keeping the properties up and all, and it is a job in and of itself. Not too many tenant nightmare stories.
I know I don't have the temperament to be a landlord. I did have a couple of rental properties for a while, although I hadn't bought them for investment, but to eventually own them outright and have two places to live. I did find that I just don't have the temperament, plus, could not find property management for the distant property and took a bath on renting it, finally sold it and got very lucky in finding a buyer right away. I wouldn't want to try this again without good property management, so I decided that I'm a worker drone, heading towards my pension, and not an entrepreneur of any kind. It's good to know these things about oneself!
So rental income is a great way to get additional income not just for retirement, but for me I worry about the bad tenants and generally dealing with people.
You got that right. Waay too much work for me - a lone female. Gave up on the tenant business 20 years ago - had about 20 units at one time. People are a giant PITA. Son/dil rent from me now and that is the extent of my tenant dealings.
Quote:
Originally Posted by rjm1cc
The risk is to much is riding on the rental income. There could be a fire, vacancy, medical emergency, major repairs, turning neighborhood etc.
Indeed. How does one buy - and expect 30 years from now that neighborhood to hold??? Plus remodeling, updating.
My aunt/uncle had properties which helped their retirement considerably. But he was always fixing, painting, doing something. He couldn't still still. That ain't me. Never was.
I have a 75 y/o friend who very late in life - in her late 50's - got into the tenant business. Helped bring her back from insolvency, but the nonstop maintenance, renting and rerenting every blessed year - and phone calls - are awful at this age, imho. Now her daughter has taken over - and not in a good way - and is siphoning cash flow for herself. My friend is still living hand to mouth. Of course, that's a unique situation. Every June she loses more than half her tenants and is on the rerent merry-go-round. Plus, in their case, buildings are not paid off - and because they are commercial - require a refi every three years. More stress and worry. At this age, who needs it.
If the buildings are debt-free and big enough to warrant a PM, fine. Otherwise, no thanks.
A 67-year-old friend of mine is living (very tight to the bone) off rental income from one apartment (she lives in the other one) and Soc. Sec. that she took at age 63. Her rental apartment is $1125/month. She also owns a modest Florida house but wants it for herself during the prime rental times, has managed to find short-term renters for the off season. It does seem she spends a lot of time and energy keeping the properties up and all, and it is a job in and of itself. Not too many tenant nightmare stories.
I know I don't have the temperament to be a landlord. I did have a couple of rental properties for a while, although I hadn't bought them for investment, but to eventually own them outright and have two places to live. I did find that I just don't have the temperament, plus, could not find property management for the distant property and took a bath on renting it, finally sold it and got very lucky in finding a buyer right away. I wouldn't want to try this again without good property management, so I decided that I'm a worker drone, heading towards my pension, and not an entrepreneur of any kind. It's good to know these things about oneself!
I find it off that find a property management firm would be a problem. Even in my small hometown, there seems to be an adequate number of these providers.
I inherited 5 duplexes 6 years ago in this college town. They were built in the early 50's and my family bought them in 1955. I used to paint them when I was in high school but we always had management .
My mother was not a good owner. She was easily bamboozled by subsequent PMs and did not oversee them very well. She told me she would drive by from time to time but never asked to see the insides for over 25 years!
When I inherited them, I knew some major renovations would be necessary and we spent over $100k from our retirement remodeling some of the units. We haven't had any income in 6 months cause the rent has been spent for new roofs, increased parking and remodeled kitchens.
I'll never have to worry about the neighborhood because it is within walking distance of the medical school and most of my renters are either medical students or grad students. We do not rent to undergrads. In fact it is a Historical Neighborhood and getting permission for ANYTHING is a PITA.
From time to time I think about selling them but what would I do with the money?
They kept my mother in a very nice standard of living in her last years and they are certainly helping with ours. We have managed OK without the income these months but the property taxes are astronomical and need to be paid even if there is no rent.
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
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Quote:
Originally Posted by no kudzu
...We have managed OK without the income these months but the property taxes are astronomical and need to be paid even if there is no rent.
just for grins / benchmark... What is Property tax and average valuation? and your 'rents'
Left coast PNW my duplexes are in a very expensive tax district. ~$14.7 per thousand. so... a $150k duplex is taxed at $2200/yr I get $800/ month for <800SF 2 bedroom units (senior friendly). Not great, but pay's its way and gives me decent return ~7%. (beats the 'bank'). I usually get 5 - 7% equity appreciation / yr, and when I die (soon), my trust will get a 'step-up' basis. (unlike a pension with NO survivor benefit). I have had 20 days vacancy in 10 yrs. No one has trashed the place.
For my income props, I buy if I can very simply get 1% net rent / month on total cost basis (purchase price + fix-up). (And if I can resell tomorrow for a minimum of 110% (cover costs)) I Try to only buy view props at a 20 - 40% market discount. They usually come with a 'hitch'.... work or zoning issue. (I prefer to deal with zoning issues, especially if I can increase the land use!).
Water price is what kills me ($250/ month for 4 units). and to think I let 50" of rain / yr run off the roof!
I would do Rainwater recovery and convert potable water if I was to keep them... I might add individual meters.
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