Give me some advice before I buy my first rental property

[model88_308]

I was/am a small time real estate investor. I've owned about 9 or 10 rental houses, total, over the last 22 yrs. I now, while fully retired, have pared down to one last house. The good? Dependent upon your income and tax situation now, you will likely find rental properties to be a decent financial benefit, come tax times.

I was, in fact, a realtor as I purchased my investment properties and was able to pick and choose in a very favorable manner. Seeing a property to purchase as a money making endeavour can be quite misleading. Lower priced properties generally draw lower income renters, some good, some not so good. Be forwarned.

If you use a management company to manage your properties, you pay them some of your profits. This most certainly does not ensure a smooth handling of your house(s). If you purchase lower prices houses in lower income neighborhoods, you can find problems with those neighborhoods declining, thus your "investment" losing some of its original value.

Two recommendations; purchase the nicest home(s) in neighborhood(s) that fully appear to be in popular and safe neighborhoods. And, manage your properties yourself after legal council to help you draw up a lease agreement AND putting them under a LLC and separate umbrella policy.

Good luck to you!!

 

[elfiii]

Experienced landlord here - Don't do it!

 

[jdgator]

Everyone thanks for the great advice so far.

 

[Milkman]

How long since it was occupied?

Any chance of speaking to the last occupants? They could give you the straight skinny on the house and and neighborhood.

 

[jdgator]

How long since it was occupied?

Any chance of speaking to the last occupants? They could give you the straight skinny on the house and and neighborhood.

They divorced and neither party saw fit to pay the mortgage. Hence the foreclosure sale. It was last occupied April 30th.

 

[Pig Predator]

They divorced and neither party saw fit to pay the mortgage. Hence the foreclosure sale. It was last occupied April 30th.

You didn't mention foreclosure I don't think. Is it going to be one of those auction sales that start at $38k on the court house steps? Or do you have some inside information before it hits the market? I've bought a couple places with the latter with decent results.

 

[jdgator]

You didn't mention foreclosure I don't think. Is it going to be one of those auction sales that start at $38k on the court house steps? Or do you have some inside information before it hits the market? I've bought a couple places with the latter with decent results.

My language was sloppy. To be specific it has been foreclosed. It is now bank-owned property. The bank is cutting the grass, etc. It will be listed on Monday.

 

[madsam]

I will give you my 2cents. After about a year or less you will be asking
yourself why you did this. Thats after you leave the court house for the
eviction process to start. Also, you will find out they have 60 days to live
in the house before they are required to leave. During that 60 days they
are finishing off what they haven't already destroyed.And now for the
best part ,For the perfect rental investment plan to work, you need to
focus on buying at least one rental house per year. This opinion is based
off of upteen yrs. experience and 18 rentals and 2 commercials.

 

[elfiii]

They divorced and neither party saw fit to pay the mortgage. Hence the foreclosure sale. It was last occupied April 30th.

Obviously it was a nasty divorce.

 

[marshallknight]

A good renter makes all the difference in the world. I've owned a couple of rental properties and I'll never own another one. While my sister owns some and she swears by it. I can't stress enough it all depends on tenant!! Can you renovate and flip it? That's the way I would go.

 

[jdgator]

I will give you my 2cents. After about a year or less you will be asking
yourself why you did this. Thats after you leave the court house for the
eviction process to start. Also, you will find out they have 60 days to live
in the house before they are required to leave. During that 60 days they
are finishing off what they haven't already destroyed.And now for the
best part ,For the perfect rental investment plan to work, you need to
focus on buying at least one rental house per year. This opinion is based
off of upteen yrs. experience and 18 rentals and 2 commercials.

You seem to be a very successful landlord. 18 rentals. Clearly you persisted. What was your secret?

 

[twtabb]

Investors will not get first option to purchase if it’s gov agency. They will offer to person planning on living there for the first so many days then investors can make offer if it does not sale then they will take highest offer and may even ask for your best offer to get bidding war going.

 

[twtabb]

If it’s a good deal the guy that’s a local realtor and owns rental property is way ahead of you in this game.

 

[BeerThirty]

What's with all the folks saying don't do it, yet they have several properties at their dispose as assets? Yes, I can surely imagine all the headaches but sure seems like the ability to cash out down the line is well worth it?

 

[4HAND]

What's with all the folks saying don't do it, yet they have several properties at their dispose as assets? Yes, I can surely imagine all the headaches but sure seems like the ability to cash out down the line is well worth it?

I think the 2 most important points are -
Is the rental close enough to you that you can manage it, including repairs?
Or
Are you going to hire a management company?

 

[DannyW]

No rentals myself but I know a bunch who do. From conversations with them the two most important factors for success seem to be the ability to immediately make repairs on the property, and screening potential renters.

If the dishwasher at your personal home goes out, you may wait a week or two to find a good deal and a convenient time to replace it. Renters want it replaced NOW.

And run a credit check on renters. One friend told me there is a rental scam where someone rents a property, maybe pays rent for a month or two, and then nothing. By the time you give up on collecting any more rent from them and go through the legal process to get them evicted, it may be 4-6 months. After being evicted they go to the next rental and do the same thing all over again. They get 6-8 months of housing for a cost of maybe a month or two of payments plus their security deposit...if any.

One of the friends has a rental property on the west coast. It was his own house before he moved here. He has the same renter since the mid-90's. She pays on time and never complains. In return he has never gone up on the rent. Sounds like a dream rental story if there ever was one.

In the end it seems that most of my rental friends constantly groan and complain, but none of them have thrown up their hands and sold out. That says something.

Good luck.

 

[Core Lokt]

A friend has 2 mobile home parks with 10 in each one. He does 100% of all repairs and remodels. One park, zero issues and long time renters. The other is a little "darker" and it seems each time someone moves out he has to do lots of work to get it back in good condition.

His in laws have 60 rentals. A mix of houses, duplex's and MH's. Seems like the key is getting good renters and being able to do all repairs yourself.

Good luck

 

[JSnake]

I'm in the multifamily industry so I've seen it all in terms of renters.

Screen, screen, screen. There's lots of fraud out there; people using fake SSN's to try and hide their eviction/prior landlord debt history among other things. Also falsifying incomes with fake pay stubs and whatnot. They are crafty and sometimes even gets by all of our sophisticated screens.

Above all else, like others have said, you need to have a system in place for addressing any repairs/replacements extremely quickly. Not sure how landlord friendly alabama law is but if things aren't fixed quickly that can work against you when they quit paying and you have to file on them. I work mostly in Texas where you can get non-paying tenants out quick but it's not like that everywhere. There are places in the NE where people game the system (and it's widely known how to) and never pay a dime of rent during the 6 months between when they quit paying rent and when the sheriff puts all their stuff on the curb.

People tear stuff up; from the $300/mo duplex to the $3000/mo townhome. Count on it and plan for it.

I've toyed with the idea before, targeting mid-priced homes in good school districts that would appeal to families with kids that actually care about their future but ultimately, i just don't think i want to spend my free time dealing with it. 3rd party management is going to eat into your margin but could be totally worth it depending on your individual situation and investment goals.

 

[JSnake]

oh, and it's legal to discriminate against billy

 

[elfiii]

What's with all the folks saying don't do it, yet they have several properties at their dispose as assets? Yes, I can surely imagine all the headaches but sure seems like the ability to cash out down the line is well worth it?

Go be a landlord for a while. The answer will come to you.