Landlording

[ferco]

Who looks forward to being a landlord in their 60's? Also, is there a distinct advantage in having a zero mortgage on your investment real estate as opposed to having that same money invested in the market, particularly as you get into your 60's close to retirement?

 

[Arif]

We own rental real estate and don't plan to be landlords when we're 60. I doubt I'll be a landlord in my 50s to tell you the truth. While rentals can be a great way to grow your wealth IMHO it is time consuming and suits the younger investor. When the time comes I'll probably sell my rentals and do a 1031 into less management intensive real estate investments with a correspondingly lower rate of return. We're still in the growth phase so it'll be a few more years till we downsize.
As far as comparing a no mortgage real estate investment to the stock market I would compare the rates of return and then make a decision. Obviously the rentals would have to reward you with a much higher rate of return for the additional work (not passive). One advantage with real estate is the income is sheltered by the depreciation "losses" each BUT it will be taxed upon the sale if you don't do a 1031.

 

[macdaddy]

One answer is that it depends on the property.  I would not want to have to be a landlord for the SFHs that I oversee.  They can be time and money intensive and in a word - unpredictable.  On the other hand, the condos I oversee are a breeze.  They require 4 or 5 phone calls a year and could likely be run from overseas without a management service (but with a capable rental service for 1/2 fee).  Condo tenants also seem to be more "docile" for whatever reason.  And it helps to rent only to professionals who are much less likely to try to burn you.  For this reason, I will try to pick up more upper end condos in similar areas in the future.  My investment return comparable to what I would net after a sale is ~ 4% which I am comfortable with.

Owning the units outright provides flexibility to take advantage of low rate environments in the future.  I know landlords who pulled a few million dollars out of their properties when rates hit a low in 02-03.  Now they earn a few points on the spread on those liquid investments.  Loan service usually allows tax advantages too. Not a bad job if you can get it.

 

[boont]

When I was first out of college and in a new job I rented a flat from a nice Italian couple. They were retired. They owned several apartment buildings.

He puttered around. She collected the rent.

They had the sweetest retirement set-up I have ever seen. Of course it didn't hurt that this was San Francisco. Rents went up, prop 13 made property tax low, and the values went shy high.

I now model my investments on that couple. So far I am a happy camper.

"Mail box money", that is what my friend Dennis used to call it. "

"Unearned income", I call it. The best kind.

boont

 

[tryan]

The reality of rental property is that no matter how hard you screen your tenants, if your in the business long nough - you'll have a problem tenant. That's not the type of recreation/activity I want in my 60's.

Some of the best people - on paper - turned into the worst tenants. They just knew how to play the game; or lost a job; or turned to drugs .... All things no rental ap or 20 minute interview could predict.

Some of the shakiest people - on paper - turned into the best tenants. They genuinely cared about the roof over thier head; stay true to thier word; good work ethic; trust worthy. All things no rental ap or 20 minute interview could predict.

We'll bail out of residential RE by 60. But will probably still have a vacation rental or commercial RE.

 

[unclemick]

Yep

I was a landlord for 15 yrs(one duplex) - didn't take to it. Yet - I know others who took to RE(various forms) like ducks to water.

Like Scotch - it's an aquired taste.

heh heh heh heh

 

[Outtahere]

When I met my dh we both owned our homes. It was decided we would keep mine and sell his. It was a bad time for real estate so we tried renting, bad bad bad move. We had renters from hell even with screening by our realtor and not just one but 3 different tenants. After the last ones moved we rehabed it again and left it empty until it sold 6 months later. We've had several chances to buy rental units at bargin prices, they couldn't GIVE them to us. We just don't have the temperment for being landlords, we took the money from the sale of his home, paid off all our debt and paid down my mortgage. On the other hand I have a friend that love it, buys units all the time, doesn't mind dealing with the tenant and actually ERed not too long ago.

 

[Leonidas]

I'm not cut out to be the landlord type as I have no patience for deadbeats.

An old partner was a landlord and one afternoon when I came to work I noticed the front door from someone's house laying in the back of his pickup. "What's up with the door?" I asked him a few minutes later.

"Those damn renters of mine. They're late on the rent again - two weeks this time. So, I went by and talked to the old lady and after she gave me a song and dance I told her that I noticed the front door was sticking and I would take a few minutes to work on it. After I had the door in the bed of my truck, I hollered back inside, 'You'll get your door back when I get my damn money!'"

 

[mathjak107]

I was a landlord for 19 years ..it was good as long as the tenents were okay and paid the rent...but then darkness fell and we got a tenent who started out okay but ended up being a nightmare...i would never be a landlord again......

 

[rw86347]

I am a land lord, and I like it. And I love the return on investment. I make $1800 per month on a $220,000 house. It would take $550,000 to return that kind of money in the market.

RW

 

[macdaddy]

Rw - 1800 on a 220k house - what market is that in? Texas?

 

[mathjak107]

LANDLORDING HERE IN NYC IS A NIGHTMARE....the courts make it so difficult to get bad tenents out as well as theses stupid rent control and rent stabilization laws ....a smart tenent could bounce from apartment to apartment for years and never pay rent once you know how to manipulate the system.... id rather get aggravated loosing money the old fashioned way,in the stock markets

 

[yelnad]

We just had a new tenant move into the first floor of our 3 unit victorian (1 unit per floor). It has a nice wrap around porch on it which she has furnished like a living room from the 1970s. I bet the neighbors are going CRAZY. She's sweet, but I'm glad I don't have to look at it every day. It really makes the place look sort of trashy.

 

[tryan]

I make $1800 per month on a $220,000 house.

hmmmm ... must be gross rent. Bet you're keeping about 60% of it after paying: property taxes (12%); vacancy (5%); maintenance (15%); insurance (2%); water/sewage (2%).

 

[Nords]

We just had a new tenant move into the first floor of our 3 unit victorian (1 unit per floor). It has a nice wrap around porch on it which she has furnished like a living room from the 1970s. I bet the neighbors are going CRAZY. She's sweet, but I'm glad I don't have to look at it every day. It really makes the place look sort of trashy.

My MIL has livingroom furniture from the 1950s which is in the process of being re-upholstered for the second time (last time was in the '70s). The furniture guys rave about its quality construction, and each piece has a story about searching for searching for good deals in the Bronx. I guess it provides a feeling of great comfort and familiarity.

 

[Arif]

LANDLORDING HERE IN NYC IS A NIGHTMARE....the courts make it so difficult to get bad tenents out as well as theses stupid rent control and rent stabilization laws ....a smart tenent could bounce from apartment to apartment for years and never pay rent once you know how to manipulate the system.... id rather get aggravated loosing money the old fashioned way,in the stock markets

NYC doesn't count! That is the Bizzaro world of RE. How are the prices on multifamily buildings out there. Considering all the headaches involved you'd think no one would want them as an investment but I bet prices are through the roof.

 

[bearkeley]

We just closed on 3 quads (12 condos) today, replacement for one SFH we sold, and adding to the other two SFHs that we already have.....our hopes would be to rely on the income from these properties when we RE. The numbers look like it's going to work well, and with the increasing reports that landlording is the way to go in RE nowadays (income versus appreciation), we're excited about it.....We'll let you know how it goes in July after the property manager we hired collects the rents!

(By the way - this forum has been a great help to us...Arif, in particular was very helpful with our decision...THANK YOU!)

 

[Arif]

Bearkeley,
Congrats on the purchases! Those were some pretty solid units you bought that should appreciate well and provide a great income. As you know, buying those units were the easy part, now comes the management headaches challenges.

 

[mathjak107]

NYC doesn't count! That is the Bizzaro world of RE. How are the prices on multifamily buildings out there. Considering all the headaches involved you'd think no one would want them as an investment but I bet prices are through the roof.

thats the problem,we havent had a rental building built here in all of nyc in 20 years...no one wants to be in the rental business.everything built is co-op or condo and we have a huge shortage of rentals .the city has made rents higher for everyone except the rent controlled tenents ..as usual another brilliant government move to protect us from ourselves

 

[BunsGettingFirm]

I'm interested in this topic because I'm heading to a real estate class. (Don't worry. It's not one of those $2000 flip-a-house seminars. It's taught by my professor for $75.) So I have read some of the crazy stories of dealing with tenants in this thread (and I have seen a friend deal with a cemented toilet), but then again, the paths to wealth and/or a secure retirement that I have learned on this board seem to be 1) operate your own business, 2) own real estate, 3) become involved in some banking gig, 4) join the government, start putting in your 25 years as early as possible, and retired on a COLA-ed pension in your mid forties or early fifties. I would think that path one and path two both involved the same headache. My sister owned her own title business for ten years, and she couldn't stop complaining about her idiot clients, and path three seems to involve lots of long hours and Maloxx, and path four probably wouldn't mean that early of a retirement for me though a nice steady job would be a nice change of pace. So out of all these possible paths to early wealth or a secure retirement, is landlording still a bad gig?

 

[mathjak107]

it really depends on whats involved in the dealings you have to go thru in your local area in regards to tenant issues and the courts.here in new york city it can take 5 months to get a delinquent tenent out....if the tenent declares bankruptcy so they dont have to pay you the back rent it can take even longer to get them out.theres issues here where you may never get your rent...dont give a tenant a lease and you cant even prove what the rent is supposed to be that they owe....after 19 years as a landlord here i can tell you issues you never dreamed would be a problem......

 

[Arif]

If you have the time, drop by the county courthouse (or wherever the judge hears tenant evictions) and listen to a case between a landlord and a tenant. Pretty interesting stuff. You'd be amazed at what can come out of the tenants mouth. If you hear a lot of cases going against landlords for stupid things then your county MIGHT be pro tenant. IMHO I would prefer just a level playing field without a slant to either landlords or tenants.
I've only been to court one time and that was after I bought a duplex and had to evict the tenant that came with the unit for nonpayment. She was out in less than 2 months but it would have been less if the previous owners had taken care of her requested repairs. By the time I bought it she decided to stop paying rent.

BTW- You can read the landlord/tenant law for your state here: http://www.mrlandlord.com/html/frametop.html

Be warned that your county and city might have applicable laws as well.

Also to read about the life and issues of a landlord visit this site:
http://bbs.mrlandlord.com/qanda/index.mgi

 

[mathjak107]

my sons an attorney here in nyc and the stories he has are amazing...do you know you cant even take a tenant to court unless you have meticulous records and proof the rent wasnt paid..the judge cant say to the tenant"okay mr tenant show us your proof you paid mays rent...nope! the landlord has to bring in enough proof so the judge can open the case.you need copies of checks to show a pattern ,look heres feb,march,april, no jmay....now the landlord could have just not presented may as silly as it sounds but some structure or evidence is needed to get the case open..if you get the rent in cash you cant even get the case going.....

 

[BunsGettingFirm]

Mathjak, thanks for your reply, and Arif, thanks for the links! It would appear that whether landlording is pleasant is very dependent on the location, but in general, how often do you have to deal with problems given the number of units you own? Is it one major issue (non-payment or willful damage to the rental unit) per unit per year? Is that overstating the problem?

 

[mathjak107]

biggest issue is falling behind on rent.....last tenent i got out out had about 8,000 in damage in the apartment and no money...wasnt worth the expense of going after her