Retiree Real Estate investors: Pros, Cons, Success, Failure, Advice (pension, physically, weather)

[selhars]

Another conversation is prompting this thread….
I'm trying to learn about this topic.

Any retirees who have specifically and intentionally invested in real estate?
-- Residential? Commercial?
-- BEFORE you retired was that how you made your living?
-- Did you invest in it AFTER retirement, and to boost you retirement income?

-- How and why did you get started?
-- What successes or failures have you had?
-- What would you do differently?

-- Did you just want one or two properties, to manage yourself?
-- Did you want a real estate empire?
-- Do you prefer SFHs, or multiple unit buildings only?

-- How do you decide WHERE to buy? And how much money have you invested?
-- What's the price point of your purchases and your rents?
-- Do you research up and coming areas? or buy in your own area?

I know a couple of people who've done very well with rentals. But, personally, I've always been "too afraid" because I never had what I thought was enough capital reserves.
But in retirement I will have some money I COULD possibly put into real estate.

Thanks.
As I said I'm just trying to learn about the issue…..so hearing your stories would be great.

[Tall Traveler]

I'm not retired but rentals are part of my retirement plan which I may retire in less than a year. I bought 3 houses in Phoenix area in 2010 because the market had crashed. The houses have been rented the entire time....the rates were low at first but are increasing and the value of the houses is up about 60%. These I bought with cash so I have a positive cash flow on a monthly basis. We use a property manager recommended by a friend in the area and they have been fantastic.

I bought a duplex in my local area in Washington state but it was an older house that had too many problems and the renters were a bit tough on them so I sold that one for a small profit....that one wife and I managed. I also own a vacation rental in Spain and it's been a challenge due to the tax laws and distance but it also is now producing a decent income and has increased in value.

I would say if you do it, research your costs, whether you can handle a situation where you have to put money into it and what income you can derive, etc.

For wife and I it's been fantastic and gives us an income over expenses of over $2K/mo....but it has hed up a portion of our capital but it's done better for us than stocks.

[sanshaloo]

I lived in a house for about 10 years and now paid off. Using the house as a rental and it is financing my son's education.

Later in life, I'm counting on it as a income stream. I have a property manager for it. Since I lived in the house, I know it does not have any problems but having a property manager, ensures rent is on time, any complaints are addressed in timely manner.

The drawback is, Social security payments might be lower 'cause of the extra income. I still need to work out these numbers.

[JayCT]

I am not a retiree but owned a rental property for the past 22 years so I can give you my perspective. During most of that time I had good tenants. They paid their rent on time, fixed small things that broke in the unit and only called when there was a real problem that needed addressing. Even then they would be the one the met the workmen to let them in and make the necessary repairs. There have however been a few instances where I wondered if owning an investment property was worth it. Like the time there was a rash of doors kicked in for a burglary in the complex. The tenant was afraid to be there alone so I had to go and sit with her until the front door was repaired. It took several hours.

Then there was a tenant who signed a lease in September and then notified me that she was moving in October even though it was a one year lease. She had lost her job (should have known that was coming when I talked with her supervisor and got a very odd feeling about the way she responded to my questions) and wanted her security deposit back. At that point I still had a mortgage to pay on the place and I knew it would be a month or two before I could get another tenant in so I refused. She cried but I had to say no and tell her that is what a security deposit is for. I really did end up needing it since she left the place a mess and a lot of garbage behind including furniture.

The final straw was the last set of tenants I had. They were there for about 4 years and were always late on their rent. Early on I would have to meet them at night in a supermarket parking lot where they would pay me in cash. Later they would drop the rent off at the house but after I started charging them late fees, the rent always arrived late at night on the last day of the 10 day grace period. Even worse was problems they caused when they got a second very aggressive dog. DW and I are dog lovers so when they said they had a small friendly poodle we did not think twice about renting to them. Then three years later I got a letter from the association calling me to a meeting about a problem with their second dog. Second dogs are not allowed and this one was well over the size limits of the complex. IT seems this dog would charge the window every time someone walked by. The window was broken and you could see the dogs head marks in the glass and the frame of the window had been broken. I told them that if the association said the dog had to go, it had to go. The association was kind (too kind in fact) saying that the dog needed to be controlled. The tenant fixed the window but I later found out that the issues with the dog never really ended. The absolute final straw came when they moved out and I found the place in complete shambles. Every window had been broken and not just the glass. They had broken almost every lock by forcing open windows so the locks no longer worked. The doors to the bedrooms had been kicked open so the frames were splintered. The kitchen had cabinet doors and drawer front ripped off. There was no carpet in the living room and both bedroom carpets were damaged beyond repair. One of the toilets had been physically broken (not sure how they did that). In total there was almost $9,000 in damages they left. Fortunately our insurance company covered about half of the damages. I decided to sell the place so I did a complete remodel which actually helped sell the place quickly and for a better price than any of the other units in the complex. Still the whole experience turned me off from being a landlord again.

I should also say that I did have many good tenants as well. One paid the rent every month right on the first of the month (not sure how she got the postal service to cooperate so well). When she went on vacation she sent the rent check early with a note apologizing for it being early. Most of the renters were young and left to buy their first home. The thing I found odd was that I never got a call from a bank or another landlord inquiring about whether they paid their rent on time. You would think that a lender would do that since it is a sure sign if the tenant will pay a mortgage or another rental on time. Anyway, I do not mean to discourage you but I thought I would share my experiences. Good luck, Jay

[StealthRabbit]

Today (very) early retiree, (since age 49) no pension, no healthcare, LONG ways away from Medicare. (Doing medi-vacations for HC).

30% net worth in qualified (stocks)
40% investment real estate
30% cash equivalents / cash generating / income stocks

Real estate has been better wealth builder than stocks (for me) most people would not like the work I put into it, but.... It justifies my tractors, bulldozer, excavator, dump trucks, machine, welding, and woodshops + lots of deductible travel to nice places where my homes are.

I've done commercial, residential, building (each) and land development as a hobby for over 40 yrs. (~40 props)

2008 I got out of Commercial, but looking to get back into a NNN lease to non- internet erosion business, or a land lease.
(A 94 yr old friend has a tire shop building 2500 miles away) leased to a Japanese national company. He gets $8000/ mo NNN (7 yr leases) on a $1m asset. Never seen it, never plans to go see it, just send the rent...


Currently I have several rural view residential rentals in 2 income tax free states. I bought them right, so Net Cash flows are 10% +, but lots of maint, but very good resale and appreciation. I plan to sell them on contract or cash out before I get too old to manage them.( ~age 70)

I hold one residential rental in a IRA LLC, that works well.
I will use more qualified monies to buy a NNN commercial property (income tax free state)
My last investment commercial land just sold (finally). I will NOT be doing that again while so many commercial props are empty.

I will build a few more energy homes on view lots.
I will do several more trashed mobiles on view acreages (I bulldoze, then build shop with apartment)
Plan to roll several primary residences in places I want to visit for a couple yrs. (While keeping existing primary.... Too nice to sell, too much STUFF, can't be replaced Built within a National restricted Scenic area, 20 min to great international Airport. Has Two living spaces, one is rented out to cover expenses (and someone to feed the dog and cat, since I choose to seldom be Home(?). )

My rentals usually have extra living space for me (free cabin or apartment). I have barns and shops at each, so keep an extra $35 car that gets 50 mpg in each location, and fly to suit my desires / weather / season / event interests.

I send a lot of time overseas ( most of 2016) so I appreciate my happy and competent renters. They fix and keep the places up. If they are never late with rent, and they take care of issues, they get a substantial rent rebate at Christmas.

Advice:
Only do it if you can love it.
Never pay too much. (If it can't be rented tomorrow for 1% of purchase price, I pass)
I only buy if I can resell tomorrow for minimum 110% break even.
Watch property taxes and zoning (I love to get properties rezoned)
Be nice, but firm with tenants. They will take a mile if you let them.
Have an exit plan
Have an alternative plan.

[DaveinMtAiry]

We will be downsizing and using the sale and proceeds of our current home to help finance our retirement. I had honestly never considering using a good portion of this money to purchase a 2nd home and the rental income it could provide. I have no interest in fielding a phone call at 10:30 about a bad water heater, I would hire a rental company to handle all the BS like this, screening applicants etc. I have never been a landlord and am a bit skeptical, the area we will relocate to is poor and I see problems down the road. But this will be extra income, it won't kill us if a payment or 3 are missed while we make changes to the tenants.

So yeah, I'll be watching this thread. Thanks for the idea.

[DaveinMtAiry]

For a first time landlord would you recommend a condo? Seems to be less maintenance, less things tenants can trash etc. What are the pros and cons to renting condos?

[selhars]

Those of you who've done it you all have a wealth of experience. Thanks for sharing.

-- What are your thoughts on renting out a house that has mortgage on it vs one that's paid off?
Other than not having as much money tied up in the house, I can't see a plus to having a mortgage on a rental, if I don't have to.
I'd rather pay cash for the house…seems simpler.

-- Do you buy preexisting rentals? Of buy properties and turn them into rentals? Have you ever bought a rental with a tenant already in there?

-- Also do you like your rentals in various neighborhoods? I can see how it would be better, because not all you investment is in one area. BUT, suppose I get a deal on one or two houses in the same block, or two places next to each other? Lord knows, three houses next to each other would be easier for maintenance and management….than three house in different areas, neighborhoods or jurisdictions.

-- How much does whether an area is "tenant friendly" vs landlord friendly figure into your purchase decisions?
I know people who have rental property in Phila. - which is "tenant friendly."
I'm already thinking that IF I'd buy a rental, get in in a neighboring county, not the city.

-- Have you found more success with stand alone single family homes, row homes/town houses, or multi-unit buildings/duplexes, triples or larger?? Is one house rented in a good neighborhood, better than a duplex in the "hood?"

I'm with DaveinMrAiry. I had never thought of rentals. Obviously there's money to be made. But I just never thought "it was my thing." But the more I think about it…..I WILL have the money to try it once I retire so…maybe it's something to consider.

[DaveinMtAiry]

Selhars: would you manage the property yourself or hire a property management company? If you do it yourself be prepared for phone calls at 11:00 about a leaky water heater.

[StealthRabbit]

I prefer multi tenant commercial (not residential), anything with a bed is added hassle.

If i can get low interest rate and long terms, I will be happy to have a loan on rental property, ( in fact prefeered to have a direct wrote down for interest expense.) That said... Several friends lost excellent properties during the meltdown, as banks can 'call due' commercial loans even without default or cause.. Tough to cough up a few million $ on the spur of the moment to satisfy lender's request.

I often use my HELOC or investment margin accounts for 'bridge loans' to my RE investments.

When you buy... Don't inherit the tenants. Better to start with a fresh batch on your terms. (Make very firm rules and stick with them),

All about cash flows, run the numbers.
I like 10% cap rates and 5%+ annual appreciation.(as a bonus). Buy the right places for the right prices. Ez rents, ez resale, attractive and nice. Keep it nice.