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Re: Be a landlord? Bah Humbug!
Old 12-06-2005, 09:31 PM   #21
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Re: Be a landlord? Bah Humbug!

As JG often says, the 3 key factors with property are LOCATION LOCATION AND LOCATION.
To my mind, this is not only geography, but aso the properties location on the accommodation food chain. A lower end rental at lower end price would inevitably draw a lower end tenant. Higher end property at higher end prices draws a higher end tenant. Doesn't necessarily make the tenant any easier to deal with as human being, but they are less likely to trash the place, hold gang meetings there or default on the rent.

Anyway, to show the other side of the fence, my experience so far has been very different to those posted. I have four rentals in total. Three apartments and a car park space. The car park tenant can't really trash the place and there are no repairs or maintenance to do so unsurpisingly after signing the agreement in October 04 I haven't seen or heard from him since. Every month the rent is deposited in the bank. No hasse, no work, I almost forget about it from one month to the next. The other apartments are similar. One tenant I met at the viewing back in December 03. We agreed on some minor repairs and I bought them a new TV and a washing machine. Signed the agreement and only met him again last week to agree the continuation of the original 2 year lease for another 6 months. Rent paid direct into the bank every month. Another tenant I have never met. Agent found him and arranged the viewing and the lease agreement. Again, rent into the bank every month without hassle. The third apartment, is leased to a Company to accommodate one of their executives. Same deal, never met the occupant and never missed a rent payment.

During the currency of the latest leases and tenants on the 3 apartments I have had to arrange one minor plumbing job (US$80) and paid one tenant to replace a TV.

Once a month I spend less then 2 hours, checking the bank account to see that the rent has been paid, and checking that the necessary building management fees are settled. Once a quarter, I pay the property taxes, which takes about 30 minutes online. Once a year, I spend a day finalising the company's account and send them to the accountant for audit and submission with the Company returns.

This has been the case for over 4 years now.

However, as the landlord, I require a 2 month security deposit and 1 month's rent in advance. All tenants are either employed or are a company renting for their staff. I make sure that the units are in good shape, repainted and clean when they are on the market. Every year I have the electrics and gas system and appliances checked and certified. The tenant is given copies of all the certificates so he is immediately aware that I look after the place. So far, no tenant has caused any damage beyond normal wear and tear. One tenant actually repainted some areas where he had chipped the paintwork!!

Thats my experience with nearly 250 'Tenant Months" under my belt (4 units, for almost 5 years, almost 100% occupancy).

All the properties are "higher end". They rent for US$1400, US$1900 and US$2700 per month respectively. The car park for US$360. If instead of the 3 apartments renting for an average of US$2000 per month, I had 10 apartments renting for US$600, I would expect more hassle. If instead I had 20 apartments renting for US$300 I would expect more hassle still.

Like I said, LOCATION LOCATION LOCATION.

Cheers

Honkie.
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Re: Be a landlord? Bah Humbug!
Old 12-06-2005, 10:20 PM   #22
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Re: Be a landlord? Bah Humbug!

Quote:
Originally Posted by Honkie
A lower end rental at lower end price would inevitably draw a lower end tenant. Higher end property at higher end prices draws a higher end tenant. Doesn't necessarily make the tenant any easier to deal with as human being, but they are less likely to trash the place, hold gang meetings there or default on the rent.
Same here. We rented as much as possible to military tenants (advertising on bases). We've had troubles with toilet-training toddlers & incontinent dogs, but that's what security deposits are for. We raised the rent every year about 3-5% to what the market would bear. Other than a roof leak and a broken window, no emergency calls.

The woman across the street from us owns the exact same model & floor plan. She was placing classified ads in the newspaper, not doing credit checks, and never raised the rent. (She was 25% below market at the time we talked about her property.) She had drug dealers & deadbeats to the point where neighbors were videotaping and having confrontations. After the latest eviction (since her tenants were bringing down the neighborhood) I gave her the military Housing Office number, suggested what rent she should charge, and wished her luck. Now the military tenants are frequently in the same units and feel much more comfortable in their homes, leading to better property condition & higher rents.

I think it's location AND price. The more you can afford to charge, the more your tenants will be invested in taking care of your place. There's a reason that a low-priced property is a bargain, and it's a pretty significant undertaking to improve an entire neighborhood just to realize the value of bottom-fishing.
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Re: Be a landlord? Bah Humbug!
Old 12-06-2005, 10:41 PM   #23
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Re: Be a landlord? Bah Humbug!

With all this talk about problem tenants I started researching TICs (tenant in commom). Basically you sell your rental or investment property and do a 1031 exchange into a commercial property anchored by long term tenants like Home Depot, Staples, etc with professional property managers. The CAP rates that I have seen so far are in the 7-8% range. I even saw one that was for a self service multi story parking lot and I thought of Honkie and his parking spot. Low overhead and always a demand for it. So all this got me thinking of the following scenario:

500k spread out over 4-5 different TICs
8% CAP rate
40k annual income

One of the major benefits is that there is no tax bite as you sell your headache rental and buy into the TIC thus no errosion of built up equity. I think this is especially good for those that want to diversify their real estate rich portfolios. So far I think this will be a major part of my FIRE strategy. There are other considerations that I have to look into such as qualified investor status which I think you have to be and the minimum investment allowed.
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Re: Be a landlord? Bah Humbug!
Old 12-06-2005, 11:51 PM   #24
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Re: Be a landlord? Bah Humbug!

Quote:
Originally Posted by Nords
The woman across the street from us owns the exact same model & floor plan.* She was placing classified ads in the newspaper, not doing credit checks, and never raised the rent.* (She was 25% below market at the time we talked about her property.)* She had drug dealers & deadbeats to the point where neighbors were videotaping and having confrontations.* After the latest eviction (since her tenants were bringing down the neighborhood) I gave her the military Housing Office number, suggested what rent she should charge, and wished her luck.* Now the military tenants are frequently in the same units and feel much more comfortable in their homes, leading to better property condition & higher rents.
Nords - I think I might have been tempted to do the old dear a favour and offer to take the place of her hands at a price well below market (she sounds like she would have been glad to get out), then either install the military tenants and take the higher yield resulting form the lower purchase price or sold it at market for the gain. I guess the thought must have crossed your mind?

Quote:
Originally Posted by Arif
I even saw one that was for a self service multi story parking lot and I thought of Honkie and his parking spot. Low overhead and always a demand for it.
I would love to get my hands on a self service (or minimal service) multi-storey parking lot. Difficult to come by and very expensive though. On the other hand I do love my one parking space. The yeild is great and the management and hassle is almost zero and the prices generally move in something like lock step with the price of units in the building apartment. The entry price is relatively low (I posted earlier that I paid about US$53,000 for my space) but the tenant and property quality is driven by the building as whole with higher end/more expensive units. The only downside is that the resale market is relatively small - only people in the building wanted the space or more knowledgeable investors who like car parks. Not impossible to sell, but one is selling to a limited audience. That aside, I would like to expand on this front.

Cheers,

Honkie
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Re: Be a landlord? Bah Humbug!
Old 12-07-2005, 08:51 AM   #25
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Re: Be a landlord? Bah Humbug!

Quote:
Originally Posted by Honkie
Nords - I think I might have been tempted to do the old dear a favour and offer to take the place of her hands at a price well below market (she sounds like she would have been glad to get out), then either install the military tenants and take the higher yield resulting form the lower purchase price or sold it at market for the gain. I guess the thought must have crossed your mind?
Ooooh, yeah. Many times, and hers was one of three properties on that street.

In 1998 my FIL and I agonized for weeks over buying the place two doors up or that old dear's across the street, but we had no overwhelming reason to do it. We were on track with our ER portfolio and, at the time, RE was so Old Economy. Hawaii RE had also been in the toilet for eight years and we couldn't ever see it recovering to the insane prices of the late '80s. You younger posters, are you listening to the echo of history repeating itself for the blissfully ignorant?

Of course the property two doors up was on the market for $289K and is now worth over $600K. (It was bought by a nice local couple who'd left Hawaii in the '80s after high school but who were tired of CA and wanted to raise their kids on the island.) But aside from those eye-popping 25% cap gains, I bet a detailed spreadsheet analysis would show that we've done just as well with Heartland Value (sold at the peak), Tweedy, Browne Global Value, or Berkshire Hathaway. And let's not forget that we were trying to raise a six-year-old while working 50-hour weeks (we were really slacking off then!).

Aside from those issues, the "problem" that held us back was diversification. We couldn't see any advantage to owning two properties subject to the same factors and such a big part of our net worth. Of course today we're interested in doing largely the same thing but as a much smaller %. Somewhere in the next decade or two, when we start seeing RE agents throwing themselves in front of our cars, we'll probably pick up a local townhouse or condo. Naturally we think that we're much smarter more experienced, more prepared, and better able to handle the work. Or else spouse is just trying to help our kid find her first place if she wants to stay local.

BTW the third property is our neighbor's house. He's in his mid-70s and still working part-time for Hawaiian Tel because, frankly, he makes Jack Nicholson in "About Schmidt" look like Dale Carnegie. He's never truly happy unless he's fighting with someone about anything. I'm pretty sure that his wife said "Congratulations on your retirement. Now get the heck out of here."
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Re: Be a landlord? Bah Humbug!
Old 12-08-2005, 09:44 AM   #26
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Re: Be a landlord? Bah Humbug!

Fun to read different rental experiences ... thanx for sharing.

Had all the headaches when I had 23 units. Including 4 dead tenants (no guns though ... 1 hung himself in the basement). Ran about an eviction a year (~4%) ... and I considered this acceptable. Have lots of stories : drugs, aids, runnings with the city/town. That's largely why I sold off to the 6 I still have. All SF units with long term tenants. Couldn't have fired any other way.

JG,

Back when I had a property manager, she had a simialr string of poor choices. I reasoned that her commision incentivised poor choices since she got 1 months rent for each placement (more vacancies = more commisions). So I told her that if the tenant did no fullfill the lease, she re-rents the unit for free. Furthermore if she did not accept these terms I would take the unit back (and rent it myself). Was surprised how the tenant quality improved.

Hope this helps.
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Re: Be a landlord? Bah Humbug!
Old 12-08-2005, 10:53 AM   #27
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Re: Be a landlord? Bah Humbug!

Nords: The above problems are addressed in full in my (soon to be published), book "Confessions of a Fly-Fishing and Golf Bum".

Special attention is given to "empty-nesters", when the term "Get a life", takes on a whole new meaning.

Jarhead
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Re: Be a landlord? Bah Humbug!
Old 12-08-2005, 11:15 AM   #28
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Re: Be a landlord? Bah Humbug!

[quote=ex-Jarhead ]
[quote=Nords ]
Didn't I see an ad for that in my local grocery store's wheat bread aisle?
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Re: Be a landlord? Bah Humbug!
Old 12-17-2005, 01:19 AM   #29
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Re: Be a landlord? Bah Humbug!


I also had lots of problems with tenents when I started renting houses. Almost got out, but finally found a good system and everything has been smooth for about 5 years. Glad I did. I am FI mostly because of real estate, not savings.

Mike
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Re: Be a landlord? Bah Humbug!
Old 12-17-2005, 04:42 AM   #30
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Re: Be a landlord? Bah Humbug!

Quote:
Originally Posted by tryan
Fun to read different rental experiences ... thanx for sharing.

Had all the headaches when I had 23 units.* Including 4 dead tenants (no guns though ... 1 hung himself in the basement).* Ran about an eviction a year (~4%) ... and I considered this acceptable.* Have lots of stories :* drugs, aids, runnings with the city/town.* That's largely why I sold off to the 6 I still have.* All SF units with long term tenants.* Couldn't have fired any other way.

JG,

Back when I had a property manager,* she had a simialr string of poor choices.* I reasoned that her commision incentivised poor choices since she got 1 months rent for each placement (more vacancies = more commisions).* So I told her that if the tenant did no fullfill the lease, she re-rents the unit for free.* Furthermore if she did not accept these terms I would take the unit back (and rent it myself).* Was surprised how the tenant quality improved.

Hope this helps.
Thanks Tryan. I also pay one month's rent to my manager, but only if the
condo is rented for 12 months straight, which probably will not happen.
It seems she automatically adjusts the fee for rents lost. Plus, she is the
acknowledged "rental queen" in that area and is only a mile from the
condo. If I didn't have her I wouldn't know where to go (for management).
Still, the tenants have been pretty bad so far.

An aside. The other day I was digging around in some old records and found
photos of all the property I owned up until about age 32. Brought back a lot of memories, mostly good but I was young and full of P and V back then.

I obviously did not ER due to my LBYM/savings. In my case, it was mostly
real estate/owning my own business which put me over the top.
Interesting that I went into this without any thoughts of
retirement whatsoever. Serendipity?

JG
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Re: Be a landlord? Bah Humbug!
Old 12-17-2005, 05:24 AM   #31
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Re: Be a landlord? Bah Humbug!

being a landlord is great...that is until its not great!...i owned a co-op in new york city for 18 years which i leased out..for 15 years the tenants i had were good,,but then darkness fell.....a tenents husband left her..well scattered lateness fell into missed payments...6 months of court and finally 8,000 in damages to the apartment she was gone...i wouldnt be a landlord again..ever
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Re: Be a landlord? Bah Humbug!
Old 12-17-2005, 06:58 AM   #32
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Re: Be a landlord? Bah Humbug!

We are currently Tennants, we look after the place (Which is furnished) as if it is our own. Every time we hint about moving, our landlady (who lives remotely and does not use a rental agent) convinces us to stay longer. I am/was and engineer so I install things for her and fix most everything that breaks (usally at my cost, the cost are so small, so far a toilet flapper, a washer belt, a faucet seal, and the odd light bulb, I feel too embarassed to ask for anything to be repaired) In return she gives us a MOST reasonable rent and flexible lease arrangement. I also pay her 2 months in advance and in return she asks for no security deposit or last months rental payment. Oh, and we also have the carpets cleaned every so often at our cost, as we do not wear shoes in the home. Unfortunately others do, so we need to have them cleaned once in a while. Sadly we do not have a garage, so sooner or later we will leave. This is our first rental since we retired after owning homes for 25 years.


Anyone got a place to rent in the NE Florida palm coast or Daytona area?

The point I found clear when I dealt with Rental Agents was that they were more concerned with the amount of rent as opposed to the quality of it. They were also unpleasent to deal with in my experience, at least from a renter's perspective. I am a negociator by trade and education and the agents that I tried to deal with did not want to neociate at all. My current landlady told me horror stories about agents who rent to anyone with a credit card or a check. While she also makes it quite clear that she would get $200 - $300 more per month from an agent, she also makes it even clearer that good tennants are worth their weight in gold, and hence deserve preferred rental rates. I am always on the look out for great rates. Now, the place we are in was well maintained in the first place, otherwise we would not have rented it.

We plan on renting in NE Florida for some time, but again we will be on the look out for something with a garage next time, even though this place has a great view of the water. Really we will be sad to leave this place both for the cost and location.

We got this rental from the Craig list.

SWR
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Re: Be a landlord? Bah Humbug!
Old 12-17-2005, 07:26 AM   #33
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Re: Be a landlord? Bah Humbug!

Quote:
Originally Posted by mathjak107
being a landlord is great...that is until its not great!...i owned a co-op in new york city for 18 years which i leased out..for 15 years the tenants i had were good,,but then darkness fell.....a tenents husband left her..well scattered lateness fell into missed payments...6 months of court and finally 8,000 in damages to the apartment she was gone...i wouldnt be a landlord again..ever
You did a good deed today. Your post reminded me of just how bad it could be
and made me feel a little better about my situation, After all, I did gross
about what I estimated for last year, and (so far as I know) the last
tenants did not walk off with all the furnishings. If I could afford it, I would just
leave it empty until we wanted to use it.

JG
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Re: Be a landlord? Bah Humbug!
Old 12-17-2005, 10:44 AM   #34
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Re: Be a landlord? Bah Humbug!

I rented the same small house for 8 years, had a great landlord (he's still a friend of mine), I paid on time and the place was better than when I moved in.

Now the bad side - he had a heart attack and had to sell.

The new owner was the b-tch from hell who ripped off the deposits of my neighbors (I know as a first hand fact they didn't cause any damage, because I had helped the previous landlord with repairs to the property). We moved out as soon as practical, and I didn't clean a damn thing, as I knew it wasn't worth my trouble.
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Re: Be a landlord? Bah Humbug!
Old 12-17-2005, 11:22 AM   #35
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Re: Be a landlord? Bah Humbug!

And this is why I invest using the Tiaa-Cref Real Estate account in our 403b plan.
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Re: Be a landlord? Bah Humbug!
Old 12-17-2005, 11:44 AM   #36
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Re: Be a landlord? Bah Humbug!

Funny how these things go. I have no particular desire to be a landlord, but I would jump right intothe rental RE pool if the economics were attractive enough (like after a housing crash). I have been a tenant enough to know that the people I would most like to rent to (responsible individuals like me) can easily afford theirt own home.
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Re: Be a landlord? Bah Humbug!
Old 12-18-2005, 05:26 AM   #37
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Re: Be a landlord? Bah Humbug!

I have been a tenant enough to know that the people I would most like to rent to (responsible individuals like me) can easily afford theirt own home.



this reminds me of will rogers..only buy stocks that will go up and dont buy those that dont ....sounds so easy dont it ha ha ha
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Re: Be a landlord? Bah Humbug!
Old 12-18-2005, 08:51 AM   #38
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Re: Be a landlord? Bah Humbug!

Thanks to all for your stories and advice. I have lots of stories too
but will restrain myself. Besides, none of mine are nearly as
bad as some y'all have posted.

Regarding "location".................I pulled up the website of my
rental manager's real estate company and accidently got all of their
listings in the county where our condo is located.
They were listed by price in descending order, and the first
house (most expensive) was $5,500,000. That was not too
surprising except it was on our street and a short walk from the condo (waterfront obviously). This means that we must own about the cheapest dwelling in the neighborhood. Really not a bad
position to be in.

JG
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Re: Be a landlord? Bah Humbug!
Old 12-19-2005, 04:18 PM   #39
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Re: Be a landlord? Bah Humbug!

My mobile home was in a mobile home park for several years before we bought our property. A mobile home park company purchased the park from the private owners who had built it about 20 years ago. After a few months they came around with a check list of things the tenants needed to do - fix decks, skirts, haul off junk. Unfortunately they basically docked everyone - even me, with new deck and fence, flowers, always mowed - I was your dream tenant. From that point on our running comment was " skirt is down, they must be moving soon". Everyone who paid their bills on time left. Including us.
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