If so, what are your good and bad thoughts? I would love to know, I have always wanted to get in the game (ironically what I also told all my HS coaches)
Anyone have rental properties?
- Thread starter SuperBigFan
- Start date
I used to for 20 years.
Being a builder I was a perfect fit. I could do all maintenence myself.
Where many lose $$ is by having to hire out simple repairs.
I had my share of troubles.
Read the “Landlord Tenant Law”, of whatever State you live in. Those are the rules, and very important to know.
I have stories, lol. Bent refrigerator door!
Tenants throwing glass top kitchen table out the front window, their table, at least they opened the window.
I have stories!!
I just picture getting some phone call on a fall Saturday that a water heater busted and .......pass.
If you buy right, you can factor in maintenance and management. If you’re overleveraged, and count on appreciation, you will get squeezed.
Train up your tenants to not call you for stupid stuff like using a plunger. Make your units desirable so you can attract quality tenants. Figure out how to make the average lease last for at least 3 years. Better to have a trouble free tenant stay a long time than get top of market rent with a bunch of turnover.
I got a call Thanksgiving morning when the kitchen sink drain rusted out….. fortunately I had repair parts in my shop to rebuild it.
But, we had 7, mailbox money was good, and these are choices you make.
My ex got most of it, and had a soft heart for sobs, all gone
The passive income is great. If you have more than 3 or 4 properties, I would hire a management company to handle the after hours calls and maintenance stuff. We have flipped and refurbished a some houses down here, some we have used for the passive income, others we just sold after getting them fixed. At one point we created a management company and hired a maintenance man that would be responsible for the after hours calls and stuff, but keeping that guy busy or finding a guy that would take the after hours calls turned out to be a pain in the ass. It was a great way to pay yourself for doing the routine maintenance, but unless you want to be on call all the time, like I said, tough to keep someone else available all the time and keep it cost effective.
The market is a little tough right now too. The number of good deals out there is small, especially in the Houston area, where I live. People are asking a premium for their places, interest rates are up, every house has something that needs fixed before you can get a tenant in there. There is a lot more out of pocket expense now than there was, say 4 or 5 years ago, when you could borrow against the renovated equity and still be below 80% LTV. Today, you are paying for the renovations out of pocket because the purchase price of the properties are at or above the 80% LTV allowed by Texas Law.
The market is a little tough right now too. The number of good deals out there is small, especially in the Houston area, where I live. People are asking a premium for their places, interest rates are up, every house has something that needs fixed before you can get a tenant in there. There is a lot more out of pocket expense now than there was, say 4 or 5 years ago, when you could borrow against the renovated equity and still be below 80% LTV. Today, you are paying for the renovations out of pocket because the purchase price of the properties are at or above the 80% LTV allowed by Texas Law.
I have 1 in Lincoln. I wish I had a couple more. It is super basic and easy (2 bed, brick ranch, big yard). My tenants have always been awesome. I make a decent little chunk on it each month, but nothing crazy. I have had to invest a little over the years, driveway, patio, windows, roof and then just the normal refurb that goes along with changing out tenants, but I love that kind of work and can do everything myself. I have heard a ton of horror stories though. I would have another house or 2, but prices are too high now and there are TONS of people out looking for a deal.
I hear commercial property is the way to go, but man the prices are outrageous.
I hear commercial property is the way to go, but man the prices are outrageous.
When I had them, I profited near $3500 a month.
10 hours a month of maintenence is $350 an hour.
As Tuco says, hire someone if you cannot do the work yourself, but there goes 10% in most cases.
Only thing I would not do is work on heating systems, too much liability.
As a carpenter it was fun and profitable.
Ex fell for every sob story and she lost them, that and my maitanence ability.
10 hours a month of maintenence is $350 an hour.
As Tuco says, hire someone if you cannot do the work yourself, but there goes 10% in most cases.
Only thing I would not do is work on heating systems, too much liability.
As a carpenter it was fun and profitable.
Ex fell for every sob story and she lost them, that and my maitanence ability.
I've flipped 5 houses and rented 2.
I won't rent anymore but will flip again when the market is good for it. Right now, the market is WAY too expensive in my opinion.
If I HAD to rent again, I would hire a management company to find quality tenants. I sucked at that part. I can repair just about anything myself though.
I've been told that renting houses is good after you get about 10 of them. But the repair requirements would probably also get pretty regular at 10 rents. And then you have a regular job again and not mailbox money I would guess.
Flipping nets way more money than renting short term and is a metric sheet ton less stressful. People really can be hard to deal with. A stubborn plumbing fixture can be too.....but you can kill a plumbing fixture and get away with it.
I averaged 50k profit on my flips. I couldn't touch that with a 100-foot pole renting even after tax write offs.
I won't rent anymore but will flip again when the market is good for it. Right now, the market is WAY too expensive in my opinion.
If I HAD to rent again, I would hire a management company to find quality tenants. I sucked at that part. I can repair just about anything myself though.
I've been told that renting houses is good after you get about 10 of them. But the repair requirements would probably also get pretty regular at 10 rents. And then you have a regular job again and not mailbox money I would guess.
Flipping nets way more money than renting short term and is a metric sheet ton less stressful. People really can be hard to deal with. A stubborn plumbing fixture can be too.....but you can kill a plumbing fixture and get away with it.
I averaged 50k profit on my flips. I couldn't touch that with a 100-foot pole renting even after tax write offs.
Ive heard of some investment company where you dont own the property but buy shares in it. Seems to good to be true. Ive yet to find anyone who has actually tried it. Benzinga I believe its called or something similar.
Agree. Renting a home is basically designed for someone else to pay your mortgage. Unless of course you paid cash for the house or dropped a huge down payment.
Like I wrote earlier, the passive income is cool but you won’t get rich on just renting. The big profit comes when you sell the rental to buy a bigger unit or just take the equity profit and invest somewhere else.
I have two friends and one owns a big complex. 100 units or so
The other owns a 36plex, 24 plex and 10 townhomes.
Both have said you really don't start making money on rentals unless you get at least a 4plex
True, because you will be replacing one roof not four, painting one building not four, landscaping 1 lot, etc.
If you can swing a fourplex and live in one unit, you live rent free and the other 3 will cash flow for you pretty well.
Right. I'm pretty sure if you're wanting to beat the S&P 500 with a single home rental, you're going to have to buy that property with no warts or very light catch up maintenance and buy it at a 70% discount. Trying to beat doubling your invested money in 10 years with a single home rental is hard to pull off. Property tax, income tax, damage, regular maintenance, tenants that don't pay the full contract ect. ect. ect.
Apartment complexes 25 units and above, I've heard, are the way to go.
Ultimately though the best rents are storage facilities. It only requires a 60% occupancy rate to break even on annual expenditures.
Should be some heavily discounted CRE properties coming to market within 18 months
The most important thing to remember about owning rental property today is that largely your tenants have no respect for your property or your costs of protection or maintenance of it. In rural communities renters are generally transit, are of the entitlement culture and have little concern for obligations of rent or utility payments. When confronted with past due payments they accuse you of being a crooked landlord, pack up and drop off the edge of the Earth. If you are lucky they will only leave trash behind rather than vandalism.
I sold an acreage that had been in our family since 1910 because of disrespectful tenants. For 6 years a young couple rented it and loved it and wanted to buy it but the 20 acres of woods and pasture that the house lived on was beyond their means at the time and I was reluctant to sell so they purchased a house in town when they were ready to own. The house went on the market for renters after that. The first was a single Mom that worked and cleaned houses including ours in town. She paid rent always on time but was habitually in arrears on utilities until her creditors started calling me in hopes of input of solving these problems. She moved on after 2 years but eventually paid off all her utility bills including a propane bill to me that I paid because the supplier had had enough. The next was a hispanic couple that I really liked and they were current on everything for almost a year then things went south. Rent and bills became in arrears. When I went to check out was going on, the couple did not live there anymore but 7-10 hombres claimed they did. I differed on that claim and offered them three days exit time or Sherriff disposal on the 4th day. They chose the former but left behind a lot of abuse and unpaid rent and utilities that I had to settle. No Mas. The single Mom who lived there before cleaned, patched and painted for us and we sold the place to a an "odd" couple of a Portland, OR wife and a Valentine, NE husband that fell in love with their new home on line. They still stop in to look at old pictures of the house and my history.
I sold an acreage that had been in our family since 1910 because of disrespectful tenants. For 6 years a young couple rented it and loved it and wanted to buy it but the 20 acres of woods and pasture that the house lived on was beyond their means at the time and I was reluctant to sell so they purchased a house in town when they were ready to own. The house went on the market for renters after that. The first was a single Mom that worked and cleaned houses including ours in town. She paid rent always on time but was habitually in arrears on utilities until her creditors started calling me in hopes of input of solving these problems. She moved on after 2 years but eventually paid off all her utility bills including a propane bill to me that I paid because the supplier had had enough. The next was a hispanic couple that I really liked and they were current on everything for almost a year then things went south. Rent and bills became in arrears. When I went to check out was going on, the couple did not live there anymore but 7-10 hombres claimed they did. I differed on that claim and offered them three days exit time or Sherriff disposal on the 4th day. They chose the former but left behind a lot of abuse and unpaid rent and utilities that I had to settle. No Mas. The single Mom who lived there before cleaned, patched and painted for us and we sold the place to a an "odd" couple of a Portland, OR wife and a Valentine, NE husband that fell in love with their new home on line. They still stop in to look at old pictures of the house and my history.
We were fortunate enough to buy a 9,000 square ft commercial property (office space) back in 2015 in Omaha.
Biggest expenses are snow removal, taxes and paying my commercial real estate agent whenever we need a new tenant (but totally worth having the agent find a tenant).
Generally you're able to lock in a 3-5 year commitment and our tenants are great. Once the loan gets paid off then it will be really great passive income.
We also have a single family dwelling in Lincoln. Basically we just break even, but it was a great deal (I think) and those opportunities don't come up very often so we jumped on it.
Biggest expenses are snow removal, taxes and paying my commercial real estate agent whenever we need a new tenant (but totally worth having the agent find a tenant).
Generally you're able to lock in a 3-5 year commitment and our tenants are great. Once the loan gets paid off then it will be really great passive income.
We also have a single family dwelling in Lincoln. Basically we just break even, but it was a great deal (I think) and those opportunities don't come up very often so we jumped on it.
Curious what the commercial property market is like in Omaha.. in other parts of the country, it's a huge problem waiting to unfold when companies have to renew leases and don't like the new rates, or want to downsize, or move to a cheaper market.
It’s a pain in the ass You would be better off painting houses in your spare time. Right now the prices of houses you would buy to rent out are ridiculous. Add to it that you’ll pay a higher property tax rate if you’re renting a house out. Something always gets worn out. Renters always sneak extra pets in that piss on the carpet etc. Try one small house if you must before you go whole hog. I’ve had great renters but the bad ones more than compensated for those.
This is so true. We had renters flush plastic bags down the drain to the point that it plugged the sewer drain and used the garage door opener for lifting auto parts. Passive income is nice, but it can disappear quickly if you rent to the wrong people.
I have always wanted to flip a house. I was in the process of finding one for me and my buddy to flip (using his capital and my work) right before covid hit. Now, the prices are too high so I gave up.
if you rent it to sec 8 folk, will the government insure to reimburse any damage?
I'd be lying if I said I wasn't nervous during/after covid. The idea of businesses working from home was a real concern.
But the tenants we have, they're in industries where office space is needed.
We have a "Class B" building so our costs aren't insane and therefore our tenants aren't paying $20+ / sq ft. While we've raised rent recently, we've stayed very fair so it seems to be working out for everyone.
To answer your first question, I think very good. They keep building brand new buildings so there must be a market for it still.
A tenant of ours didn't renew their lease (they needed warehouse space that we couldn't provide) in April/May, but we were able to get a new tenant in by August so a pretty quick turnaround I think.
A friend of mine started a Bounce House rental biz...has 6 bouncer I think. Dude is raking it in! made over 16k in the last 30 days renting them out.
Two things on rentals. I have a friend who is a retired realtor in Boise, and he has 3 rental houses that he bought before house prices skyrocketed. A few years ago, he kicked out all his long-term tenants (their leases were up) and went to listing them on Airbnb. His houses are close to Boise State Campus and just south of the vibrant downtown area so there is a demand for his properties. He has a woman cleaning the houses in between guests. He mows the lawns. He maintains his houses stay in better shape. For example, He says his long-term tenants never mowed the lawn or did any yardwork. He also said they were harder on the interior. (I had one rental and I had to spend thousands of dollars after my one tenant moved out).
When I was selling real estate, I went into rental properties with the owners so I could do a CMA when they were going to selling their property. A few times it was the first time the owner had been inside the property for a very long time because they had long-term tenants who paid their rent on time. Prior to the inspection they would be telling me how great their tenants were and then their jaw would just drop once we were inside. They were shocked at the disrepair and the lack of maintenance (cleanliness) inside their property. I am sure some long-term tenants are great, but obviously some get a sense of ownership and just neglect the property. Landlords maybe restricted by state law on how many times a year they can inspect the property, but I would recommend every landlord get into their rentals as much as the law allows. Do not rely on your property management either. See it with your own eyes.
Last edited:
He better have a rock solid liability policy. 5 million is kind of the going number.
And sometimes people who you think will be great with great references turn out to be deadbeats. Had one guy recommended by a scout acquaintance of mine that got two months behind on rent and utilities then moved out one night.
Our "tenant" actually uses our property to run their air bnb business. You're spot on with the condition of the property. It isn't getting beat to hell.
Insurance is a little more difficult to obtain, therefore more expensive, but so far that's the only downside.
We have two, single family rental properties. I wish had purchased more several years ago but I was too busy running schools and didn't have time. I would be very well off instead of just well off had I done that. I have a good friend who has 150 units in Salina including residential and commercial. Yes, things are high everywhere right now, too high to come out on with normal rents. What is happening in our town (talked to relator this week) is landlords with money are purchasing most anything in the 100K range and adding it to their inventory. The old adage was renting for 1% so a $100,000 K house would rent for $1,000. That no longer applies, things are way crazy BUT there are still deals out there, I have found several, I am just very selective at this time.
We secured the services of an attorney that cost us zero money up front. He supplied all of the contracts (I have redone but used much of what he gave me), all forms for moving in, moving out, etc, tons of stuff, all free. The only thing I promise to do is use him if I have to evict or collect from someone. So far, after 6 year + I have only asked a question or two.
My wife does all the accounting and bookkeeping. She keeps up on IRS rules and there are a bunch, especially depreciation schedules. This is considered passive income so if someone tells you they deduct this and that, double check it because it makes a difference if this is your primary income or passive. I do not believe you can deduct your own labor to fix or repair. We do all the work ourselves except HVAC and roofs. We gutted one to the studs, rewired, sheet rocked, plumbing all new and countertops and I made new cabinet doors. Most cities do NOT allow you to do your own work on a rental but many people do. Every contractor I know is super busy these days.
We shoot for a minimum return of 15% on each property. Our goal was simply to diversify our savings which as worked exactly as planned. I dislike giving money to banks so they are all paid off. There are several ways to borrow money. When you tell them this is investment real estate, it is labeled commercial property, MOST banks will set you up however many years you want to be saddled with debt up to 30, with loan renewal every 5 and interest can go up but generally not down. Commercial is usually, around here anyway, 1% higher than residential. To avoid the extra 1% and 5 year cap you can borrow against your home and interest is lower and no refi every 5 years. We did this once knowing we were going to pay it off which we did. Once you have some equity built up you can buy with no down payment which is usually 20% and I have heard commercial in some places is now at 30%.
We used a property manager to screen our tenants and it was well worth it, especially when I was working and too busy. She charges half of one month rent to advertise, show, collect deposits, run background checks, interview and all of that. I tell her what I want and don't want and she sticks to it. When we get older in about 5 years we may hire someone to manage which is 10% of the monthly rent. If property is paid for, that is not a bad deal. I still prefer to handle things myself at this point.
From the start, we made it clear we wanted to run this like a business which we do. We fix our properties up very nice to the point I would not have a problem living in them myself. We expect tenants to take care of things and we contact them if we suspect problems. We can visit a home whenever it is reasonable to do so, just let them know in advance. I do at least once a year to check smoke detectors and see if anything needs fixed that they are not seeing. If you see a problem, hit it early and tell them you are serious. It is YOUR house and they signed a contract, you have very specific rights and responsibilities. Sure people will try something, they are people, but it can be mitigated.
Your area will have a housing authority office. They often put on workshops to teach you the dos and and don'ts. Things like pets, service animals and emotional support animals, ADA and much more can be tricky but you just need to educate yourself, the tenant is not.
As per section 8 - it can be a very good deal but has some quirks. Raising rent takes longer and the house has to pass their inspection. They set the amount they give to the client based on their income, not what you are charging for rent. The renter has to make up the difference. My friend has more on Section 8 than anyone in the area and he loves it. The checks come in like clockwork. The downside is he does occasionally get some challenging people on section 8 - mental issues, drugs, bad life choices, etc.
People always ask about how much time I am spending managing my two units. I can go several months and never get a call. We chose to do some extra things like I change furnace filters, I check smoke alarms, I clean the AC condensers, I clean gutters and I trim trees but if I tracked my time I would be hard pressed to account for over a hand full of days in a full year. It is a business and think of the high prices things are bringing now and the people who bought these units several years ago and are now selling, they are making big bank.
We secured the services of an attorney that cost us zero money up front. He supplied all of the contracts (I have redone but used much of what he gave me), all forms for moving in, moving out, etc, tons of stuff, all free. The only thing I promise to do is use him if I have to evict or collect from someone. So far, after 6 year + I have only asked a question or two.
My wife does all the accounting and bookkeeping. She keeps up on IRS rules and there are a bunch, especially depreciation schedules. This is considered passive income so if someone tells you they deduct this and that, double check it because it makes a difference if this is your primary income or passive. I do not believe you can deduct your own labor to fix or repair. We do all the work ourselves except HVAC and roofs. We gutted one to the studs, rewired, sheet rocked, plumbing all new and countertops and I made new cabinet doors. Most cities do NOT allow you to do your own work on a rental but many people do. Every contractor I know is super busy these days.
We shoot for a minimum return of 15% on each property. Our goal was simply to diversify our savings which as worked exactly as planned. I dislike giving money to banks so they are all paid off. There are several ways to borrow money. When you tell them this is investment real estate, it is labeled commercial property, MOST banks will set you up however many years you want to be saddled with debt up to 30, with loan renewal every 5 and interest can go up but generally not down. Commercial is usually, around here anyway, 1% higher than residential. To avoid the extra 1% and 5 year cap you can borrow against your home and interest is lower and no refi every 5 years. We did this once knowing we were going to pay it off which we did. Once you have some equity built up you can buy with no down payment which is usually 20% and I have heard commercial in some places is now at 30%.
We used a property manager to screen our tenants and it was well worth it, especially when I was working and too busy. She charges half of one month rent to advertise, show, collect deposits, run background checks, interview and all of that. I tell her what I want and don't want and she sticks to it. When we get older in about 5 years we may hire someone to manage which is 10% of the monthly rent. If property is paid for, that is not a bad deal. I still prefer to handle things myself at this point.
From the start, we made it clear we wanted to run this like a business which we do. We fix our properties up very nice to the point I would not have a problem living in them myself. We expect tenants to take care of things and we contact them if we suspect problems. We can visit a home whenever it is reasonable to do so, just let them know in advance. I do at least once a year to check smoke detectors and see if anything needs fixed that they are not seeing. If you see a problem, hit it early and tell them you are serious. It is YOUR house and they signed a contract, you have very specific rights and responsibilities. Sure people will try something, they are people, but it can be mitigated.
Your area will have a housing authority office. They often put on workshops to teach you the dos and and don'ts. Things like pets, service animals and emotional support animals, ADA and much more can be tricky but you just need to educate yourself, the tenant is not.
As per section 8 - it can be a very good deal but has some quirks. Raising rent takes longer and the house has to pass their inspection. They set the amount they give to the client based on their income, not what you are charging for rent. The renter has to make up the difference. My friend has more on Section 8 than anyone in the area and he loves it. The checks come in like clockwork. The downside is he does occasionally get some challenging people on section 8 - mental issues, drugs, bad life choices, etc.
People always ask about how much time I am spending managing my two units. I can go several months and never get a call. We chose to do some extra things like I change furnace filters, I check smoke alarms, I clean the AC condensers, I clean gutters and I trim trees but if I tracked my time I would be hard pressed to account for over a hand full of days in a full year. It is a business and think of the high prices things are bringing now and the people who bought these units several years ago and are now selling, they are making big bank.
It will be deadly for the regional banks. They probably hold 70% of all commercial property loans.
Last week, a bit unrelated, but the most money was withdrawn from local and regional banks since the 3 big banks went down.
