<p>We’ve discussed this on cc before. PEople w either love having rental properties or hate it. We hated it. Glad, GLAD to be rid of that headache. Took a loss. It was a long time ago. Don’t care. One less hassle to deal with.</p>
<p>Bromfield Oh my gosh…that sounds just like my childhood. Parents are also immigrants with the same philosophy. And, it has worked very very well for them. The have a more than comfortable life with income that is inflation adjusted. The downside to their particular situation is the properties are located in a rent control town (went into effect many years after they purchased) and rights are so heavily in the renters favor that now management is frustrating.</p>
<p>H and I went into the ‘business’ - starting with one single family home. I think those are the most difficult to manage. We progressed to larger and larger multi unit properties and now are mainly in off campus student housing in another state. It has worked very very well for us. Another poster mentioned negative tax implications, not sure what they were referring too because the depreciation schedule is a wonderful thing! Yes, it is a business and as such will have complications, irritations risks and frustrations just like any other business. It doesn’t seem like it would be any different than having your own law practice, consulting business or other independent type of situation where you are the first and last point of contact. The benefit to having larger properties is that you will have a resident manager to handle the day to day stuff.</p>
<p>Oh, and if structured properly as a family business, FAFSA does not count these assets when calculating EFC. So, yes, it is a pain that can come with a pretty good reward.</p>
<p>Well, when you stop and think about what is involved in maintaining the home you live in, it’s time-consuming and expensive. Now add in renters who have no ‘skin in the game’ and no reason to take care of the place and it becomes even more expensive and/or time consuming. My husband and I owned a lake house in addition to our primary residence and between the two it was always something. Personally, I much prefer the idea of buying cheap houses, fixing them up and flipping them. Though, I guess those days are long gone…</p>
<p>It’s one thing to be in the business of owning rental properties, as some have described above, quite another when it’s a side show to your full time job.</p>
<p>This discussion reminded me of a real estate experiment two friends and I did back in the early eighties, when the condo market was blisteringly hot in our town. We bought a two bedroom condo (split three ways, it was a very modest investment for each of us), and rented it out for three years, figuring we’d make a bundle on resale and move forward into more of the same. We split the responsibilities among us, with one doing the accounting, one handling rent collection and bills, and the third with the positive sounding job of “tenant relations”. Of course we ran into the typical problems of late rent payments and cleaning and rehabbing the place between tenants, none of whom stayed more than a year. (One memorable renter had painted an entire wall black.) The peak moment of the experience was when the condo management company frantically called our “tenant relations” guy, telling him he had to come there immediately to control our tenant, who had blocked the entrance gate in a stand-off parking dispute with another tenant and was threatening to have his very large brother-in-law kill the latter. While we did make a decent sum on resale (in fact, the money enabled me to make a down payment on a house), we ended the experiment and never became the real estate magnates we had envisioned.</p>
<p>Maybe for younger folks, buying fixer uppers and flipping is a good idea. For a lot of us who are nearing retirement and don’t want to be hassled with even our primary residences, extra houses are a big nuisance and another thing to waste time on. I can think of better things to do with my time than worry about extra houses.</p>
<p>
In our case, it is a side show, as H and BIL both have other, full-time jobs.</p>
<p>The answer for the op depends on so many factors. I seem to remember there was a recent thread where someone posted links to houses in Vancouver. Tiny, 50 year + homes in the million $ range. </p>
<p>Those million $ homes, could be had for … less than $130,000 about 25 years ago, when some of us here could very well afford the down payment $50,000. The rent was about $700 to probably about $1500 today. Property taxes would be $2000 to the probably close to $10,000 today (market value assessment). </p>
<p>I am using average examples, I know of some individual returns where appreciation of value is much better. For eg. change of land use from single residential to multiple or commercial. Those figures would be closer to $50,000 cost and current value of more than a mill.</p>
<p>Munchkin…did you ever buy a place in So Cal?</p>
<p>Yes, bought two single residential houses. I sold a house in a good market (not in US) to finance the two in Cali. Improved the cash flow tremendously - about 3 to 3.5 times because of the lower prices in Cali. </p>
<p>I had been doing this for years, as soon as I saved a bit of money, I would itch for something to buy. It worked out ok for us but as everyone mentioned previously, it was a bit of work. I always think making money is hard work though, getting up at 5 am in the morning in the dark and driving 25 miles to work in -10 degree weather with icy roads and fog was just as difficult. That’s not even taking into consideration difficult work situations or people.</p>
<p>Munchkin…I am happy it worked out for you. I remember reading your posts…that you were trying to buy a place and it wasn’t easy.</p>
<p>Most of the time, I think making money in real estate is a lot harder than it looks.</p>
<p>If is was so easy…I would be doing it. I don’t believe in hard work. :)</p>
<p>We are discussing evicting the tenants we have. Besides chasing them down literally every month for the rent , they have violated the lease by letting the wife’s mother move in. I found out because the electric company red flagged them when they tried to change the bill into mama-duke’s name ( her name is NOT on the lease ) When I called the woman , she told me poor mama was going to be moving into a nursing home for her broken arm…uh huh …until she saved the day. Not only is she moved in but so are her two dogs
We heard from a friend whose son plays a sport with one of their children that they are planning on skipping out as soon as school lets out so we are making a move before that happens…they owe us money, of course
I cringe when I think of what I am going to see when we go in the house</p>
<p>Lje62…when I read posts like yours…I can’t say I want to become a landlord.</p>
<p>It’s how we intend to finance our retirement, and hopefully leave a substantial amount of assets to our kids.</p>
<p>Can being a landlord be a pain? Sure. But you have to be willing to be a hard-a** sometimes, and not everyone can do it:</p>
<p>
The notice to quit (or whatever the procedure is in your state) should have been delivered after the rent was more than a couple days late. Instead, you want to believe the sob story, you want to give them the benefit of the doubt, you want to believe they are reasonable people who will live up to their obligations. Not to pick on you specifically lje, but that seems to be common to those who have had trouble landlording.</p>
<p>Rule #1 of landlording: tenants are not your friends
Rule #2 of landlording: an empty apartment is better than a bad tenant.</p>
<p>It helps that my DW is a RE agent, and renting apartments has a significant portion of her business. She has a system for screening tenants.</p>
<p>We’ve had to do one eviction in 20 years, so I guess her system works.</p>
<p>I do a lot of the maintenance (it’s a 2nd job for me) but at this point most of our units are in sufficiently good condition that I don’t have to do a lot. I do have a plumber on speed-dial though. 
</p>
<p>We are small time (not nearly as many units as sylvan), but they cash-flow nicely, my tenants are paying down the mortgages to the tune of $5K/month or so, and the phone doesn’t ring that often.</p>
<p>
What assumptions are you using for maintenance and vacancies to come up with this number? I would never (have never) bought a building that returns only 5%.</p>
<p>“Rule #1 of landlording: tenants are not your friends
Rule #2 of landlording: an empty apartment is better than a bad tenant.”</p>
<p>Yeah - I had a family who the realtor I was dealing with had recommended and said he had gone to school with the father. First they started to send in payments late, then not at all and finally they skipped out in the middle of the night. When I called a lawyer, he said consider yourself lucky - at least you can rent it out now. The laws are heavily in the tenant’s favor and its virtually impossible in the state where the house is located to evict nonpaying tenants.</p>
<p>Notrichenough…</p>
<p>You can’t get more than 5% in many places.</p>
<p>5% is high around here…</p>
<p>I figure 1% for upkeep…</p>
<p>I am not even counting vacancies…which of course lowers the returns.</p>
<p>I am looking at a condo.</p>
<p>$500,000.</p>
<p>Will rent for 2500 to 2700 a month.</p>
<p>Let’s say 2500 a month…30,000 a year.</p>
<p>Prop tax wil be about 6,000 a year.</p>
<p>Condo fees will be about 4800 a year.</p>
<p>So…without any additional costs…which we know is a fantasyland…</p>
<p>The property is already under a 4 percent return.</p>
<p>Around here…people like the area. They have too much money too invest so it is competitive…and they count on housing price inflation…</p>
<p>Otherwise prices would be lower.</p>
<p>^ Add in a vacancy allowance, insurance costs (for the condo and extra liability insurance for you), commission costs (unless you find your own tenants or the tenants pay in your area; in my area the landlord pays the commission), any utilities not covered by the condo fee…</p>
<p>You are probably under 3%.</p>
<p>Basically you are counting on the tax write-off and capital appreciation to make money.</p>
<p>And btw - if you and your W combined make over $150K you don’t even get the tax write-off, it gets deferred.</p>
<p>There are probably better ways to bet that prices are going up than buying this condo.</p>
<p>That’s how it is for most property around here…which is why I never buy anything. ;)</p>
<p>OK, I guess that math makes me feel better about my rentals 
Except…in a low cost area, the real dollars pale significantly, even if the percentages are much better. The headaches, however, stay the same no matter how high/low the percentages or dollars.</p>
<p>Most definitely agree with the above poster that you have to be a harda$$. As a general rule, you bend the late fees once, they’ll try to play you more months than not. I’m sure the renting scenario could be much different in a locale where stable people with good incomes and credit routinely rent. Here…not so much.</p>
<p>You really cannot pencil out a condo in Marin, SF, San Mateo or parts of Santa Clara. You need to do it in Contra Costa, Sonoma, Napa, Alameda Counties. Of course it would be a lot of driving. The other alternatives are Multi-family, either 4 plex or 5+, for those the cap rate is already figured out for you. Duplexes are not going to pencil out either.</p>
<p>I agree with you artloversplus. Multifamily places aren’t going to pencil out either.</p>
<p>Plus…by the time I see a place 1,000 eyes have already seen it. :)</p>
<p>I wonder how efficient the market is.</p>
<p>You buy a place in Marin and get a 3% cash on cash return.</p>
<p>You buy a place in Sonoma and get a 6 or 7% return.</p>
<p>In 20 years…do you end up with the same return? Better price increases in Marin? Larger rent increases? Etc…</p>