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Landlording/Owning rentals
Old 08-02-2010, 12:52 AM   #1
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Landlording/Owning rentals

I have been thinking about buying a rental (or a 4-plex) for several years. People who have done it, how did you learn, and what is your advice? I know at this time I am very uneducated about it and I want to learn before I decide if this would be a good idea for me. I don't feel in a big rush b/c I think I have some time before prices start increasing dramatically. I am in Albuquerque and am planning to do it either here, or possibly in San Diego. I see Abq as an obvious choice for convenience (and easier to navigate laws), but I expect San Diego has a better chance for higher appreciation over time.
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Old 08-02-2010, 01:01 AM   #2
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I recommend you get several books on landlording/real estate investment & read them cover to cover. It also best to puchase rentals (especially your first ones) in neighborhoods close to you, perhaps a 40 minute drive maximum. Finally, start slow & see how you like being a landlord before jumping into a lot of rentals. Some times it is not a good match or dealing with the bad experiences are move than one can take emotionally or financially.
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Old 08-02-2010, 09:46 AM   #3
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If you will be doing a smaller number of units it is very important to own them locally - ours are all within a 15 mile/20 minute radius. You will be showing vacant units /dealing with complaints/doing maintenance and that drive time is a huge waste. If you want to make money and don't have a bunch of units you can abandon hope of having a management company and passive income.

While rental return has a potential for steady income that should make the current stock market blush it is not without it's little surprises: after getting a huge water usage bill I'm off to determine what can be done about a suspected leak under a concrete slab in the middle of a twelve unit building. May have to displace four tenants to do the repair as well as pay large sums to do the repair and redo the unit(s). $$$.

I would not want rentals in California; that said, Oregon laws are moving quickly toward Cali's tenant friendly position. Really a pisser when a judgment-proof tenant can busily destroy your unit, drive off your good tenants, and the law says you must tread with due consideration for their rights. Oh - managing rentals has the potential to do damage to your lightness of soul and conviction about the innate goodness of all mankind.
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Old 08-02-2010, 10:17 AM   #4
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Originally Posted by calmloki View Post
While rental return has a potential for steady income that should make the current stock market blush it is not without it's little surprises: after getting a huge water usage bill I'm off to determine what can be done about a suspected leak under a concrete slab in the middle of a twelve unit building. May have to displace four tenants to do the repair as well as pay large sums to do the repair and redo the unit(s). $$$. .
OMG Calmloki! You have my kindest simpathies... Have had my share of nasty surprises as well....

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I would not want rentals in California; that said, Oregon laws are moving quickly toward Cali's tenant friendly position. Really a pisser when a judgment-proof tenant can busily destroy your unit, drive off your good tenants, and the law says you must tread with due consideration for their rights. Oh - managing rentals has the potential to do damage to your lightness of soul and conviction about the innate goodness of all mankind.
Hear Hear!! So far Washington state has been a reasonably good place for rentals -- have been able to legally remove problem tenants in 30 - 45 days on average (w/good attny!). OP - you should investigate the laws in your state regarding Landlord/Tenant Law. RE Attorneys can be helpful in giving the courtside view of things as well as Rental Owners Associations in your area.
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Old 08-02-2010, 10:23 AM   #5
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As a rule, renters are totally clueless about fixing anything, and expect you to fix everything. Unless you live nearby and love dealing with endless piddling stupid things that they complain about, there are other better ways to make money. I have a renter in a property that I need, not for profit, but to pay the mortgage until I retire there. They are very nice people but they are totally clueless, and this cluelessness can be a problem. For example they complain about the high cost of propane to heat the 2400 sq ft house, and then it turns out that they leave their windows open a crack in the winter "for ventilation." The propane units use outside air for combustion and they are totally vented so there is no issue with carbon monoxide.

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Old 08-02-2010, 10:36 AM   #6
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I personally don't care for the stress of turning over a rental between one tenant and the next.

A shipmate is staying with us while her townhouse is on the local market. The first week wasn't so bad while we were fixing the plumbing, having the place cleaned, and taking care of other minor repairs. That was all finished by the 23rd. But now that we're in the 11th day of "waiting for the phone to ring" (after a few near misses) we find ourselves sitting around discussing all the various parameters we could tweak to get more phone calls. The pressure builds to the point where you're ready to drop the rent just to feel as if you're doing something.
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Utility question for you Landords/ladies
Old 08-02-2010, 10:40 AM   #7
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Utility question for you Landords/ladies

Sorry if this is a bit off topic, but it's not worth its own thread and I was curious...

My Son ran into an interesting situation where he and his wife rent (1st floor of a Chicago 2-flat). One day, the gas company came to turn off the gas upstairs. Turns out the previous renters had skipped out on a $900 gas bill.

So of course, the LL had to step in and pay the bill - he's not going to be able to rent a place that can't have the gas turned on due to previous bills owed.

From what I recall, LL always stayed out of the loop on utilities. The renter made the arrangements and paid the bills. But as in this case, that seems to leave the LL at risk. How is this best handled? I would think the LL would want to be 'co-signed' on the utility or something. That way, he could see that the bills were current or not, and get after the renter, or at minimum have more warning if the gas was being shut off.

The LL seems like a good guy, I'd pass on any advice. It's a shame he got stiffed on the $900, and maybe there was more than that.

-ERD50
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Old 08-02-2010, 10:59 AM   #8
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As a landlord it's your responsibility to fix stuff and deal with the renters questions and issues. It's a commitment and responsibility. You can't just say "here's the key get on with it" you have to maintain the place and comply with the local laws and regulations.

I suggest starting out small to see if you like it. maybe find a duplex and consider living on the premises. I did that, I have a 2 family house in Boston. I live upstairs and rent to a young couple who are very nice. Still there are lots of things to deal with.

You could employ a management company if you don't want to deal with the renters, but it will cost you 10% of the rent and you'll still have to pay for any repairs.
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Old 08-02-2010, 11:18 AM   #9
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I've been reading books like 'Mortgage 101'; etc. Then moving into books about being a landlord and what it takes to keep a property well kept. I have a bit of personal experience though; which is making it less scary.
I asked for book suggestions in another thread; maybe some will show up here?
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Old 08-02-2010, 11:41 AM   #10
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Things that you would tolerate as a house owner living in the house, renters will never tolerate. Every renter thinks that you are a very rich landlord and that you are making a mint off the property. They never never understand that with taxes, insurance, the mortgage on the property, and the continuous flood of things that they want fixed that you might be taking a financial bath on it.

They have no end to the complaints, and often you cannot satisfy them. And you never know when the next problem is going to kick you in the stomach. Having a rental agent is often a good way to go even if they take 10%. I have renters who are hyper about mold. At one point the renter complained to the agent that the marks on the edge of the refrigerator were mold. Calmly she said, "No, thats not mold, that's just discoloration from use and food." They didn't ask about that again. If you pay for services, and you get a good agent, it can be a God-Send. I also had a bad agent who was trying to sell my renters a house on the side, and so constantly failed to fix things and told the renters they could get out of the lease because of things that were wrong, which actually he failed to fix, but charged us anyhow.

And then there is the problem of the damage that they do to the house that doesn't seem to bother them in the least.

My brother is a real estate broker and the largest rental agent in Greensboro, NC, handling more than 500 properties. He has three construction/maintenence crews on retainer that go from house to house to house fixing things endlessly.

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Old 08-02-2010, 11:54 AM   #11
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Things that you would tolerate as a house owner living in the house, renters will never tolerate. Every renter thinks that you are a very rich landlord and that you are making a mint off the property. They never never understand that with taxes, insurance, the mortgage on the property, and the continuous flood of things that they want fixed that you might be taking a financial bath on it.

You don't sound like the sort of person who is cut out to be a landlord. Renters expect, and deserve, to live in a well maintained place, that's the landlord's responsibility. Of course the tenants have responsibilities too which is why there has to be a rental agreement.

Being a landlord isn't a way to get rich quickly, but if you get good tenants and like people over the years it can be very rewarding and as you payoff the mortgage it can become a very nice income stream. In ER I'll have the mortgage either paid off or refinanced to a few hundred dollars a month and I get $2000/month rent
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Old 08-02-2010, 03:53 PM   #12
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I've been reading books like 'Mortgage 101'; etc. Then moving into books about being a landlord and what it takes to keep a property well kept. I have a bit of personal experience though; which is making it less scary.
I asked for book suggestions in another thread; maybe some will show up here?
OK. You want to learn about being a landlord in your area, go to bbs2.mrlandlord.com , click state specific questions, click the state your interested in, then start reading. You want books written by landlords, about landlording, instead of clicking state specific questions, click on books in the box list on the right. Happy reading.
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Old 08-02-2010, 05:14 PM   #13
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Originally Posted by ERD50 View Post
Sorry if this is a bit off topic, but it's not worth its own thread and I was curious...

My Son ran into an interesting situation where he and his wife rent (1st floor of a Chicago 2-flat). One day, the gas company came to turn off the gas upstairs. Turns out the previous renters had skipped out on a $900 gas bill.

So of course, the LL had to step in and pay the bill - he's not going to be able to rent a place that can't have the gas turned on due to previous bills owed.

From what I recall, LL always stayed out of the loop on utilities. The renter made the arrangements and paid the bills. But as in this case, that seems to leave the LL at risk. How is this best handled? I would think the LL would want to be 'co-signed' on the utility or something. That way, he could see that the bills were current or not, and get after the renter, or at minimum have more warning if the gas was being shut off.

The LL seems like a good guy, I'd pass on any advice. It's a shame he got stiffed on the $900, and maybe there was more than that.

-ERD50
Different utilities and locations handle it different ways. Most of the larger power or gas companies will eat the bill of their customer/our flake tenant if I call and advise that said tenant is gone and a new tenant is installed. A local PUD (Monmouth Oregon) will charge the property owner for bill skips. I really love that - especially since the tenant can have a substantial amount of water or electricity used, be current on their bill, skip town - and we refund deposit within the legally mandated 30 days before the tenant's bill is past due and charged to us. Of course the PUD and most other utilities can't let us know the bill amount or that it's past due - privacy issues. I currently have allowed the city of Monmouth to put a lien on a house for the bill skip of a couple tenants. Monmouth can get paid when we sell the house. snarl.
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Old 08-02-2010, 05:41 PM   #14
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Here in NC I am pretty sure that utilities can go after landlords. It doesn't seem right to me but what choice do we have?

I have 2 rental houses that I inherited. They are simple country homes that I rent for about 15-20% below market value so that I can be very picky about who I let in. Honestly, I have had really good tenants for the most part and never had a house sit empty for more than a week. However, if I had a mortgage on the place, I really don't see me making much money. With Insurance, Taxes and maintenance issues I don't have a huge profit.

I live within 10 minutes of the houses but never do any work on the places myself. I am not handy and don't even do any work on my own house. This probably is a major losing point for me as I seem to get ripped off by service workers. There are some things I will put off in my own house, but renters want stuff taken care of "yesterday".

If I could sell the houses for a half-way reasonable price I would. I really don't like being a landlord, there is better ways to make money IMHO!
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Old 08-02-2010, 07:24 PM   #15
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OP:

1. Location, Location, Location. ie. Excellent Schools, Jobs.

2. Scan, "craigslist", newspaper, and drive around. Know what a "real"
rent you can collect.

3. Figure out your monthly expenses. Very easy to do. If you cannot do
this, Do not be a landlord.

4. If more money comes in each month than goes out, the real estate
you buy may be OK.

5. Estimate, your "net" annual return. Should be much more than you
could earn in CD or other investments.

6. Paying 10% to a real estate agent, just means, you have to get a
much larger return to just break even.

7. If you are not "handy", a self-starter, can look at the larger picture,
Do not be a Landlord.

8. Buy local. Unless, you are experienced and have lots of money,
buying out of state and hiring a real estate agent is a losers game.

Just my 2 cents. Been there and am doing quite well, in Calif.
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Old 08-02-2010, 08:44 PM   #16
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Here in NC I am pretty sure that utilities can go after landlords. It doesn't seem right to me but what choice do we have?
I don't know if it is 'right' or not, but I can certainly understand the Utility wanting/needing to have the leverage they get by being able to tie the bill to the physical unit and its owner.

And as a homeowner, I support it - it would be hard to get money from anyone who skips town, and the rest of us honest customers will end up paying that bill, even though we had absolutely no involvement with the transaction.

However, this....

Quote:
Originally Posted by calmloki View Post
the tenant can have a substantial amount of water or electricity used, be current on their bill, skip town - and we refund deposit within the legally mandated 30 days before the tenant's bill is past due and charged to us. Of course the PUD and most other utilities can't let us know the bill amount or that it's past due - privacy issues.
does just seem very wrong. The LL is 'responsible' for the bill, but isn't given the access he needs to take responsibility for it? That's crazy. I think I'd be tempted to keep the bills in my name (as LL), and send a copy to the tenant to be paid in their rent. Maybe not worth the hassle if this is an occasional few hundred bucks or so, but I'd be nervous having that hanging over my head.

I should add - I realize now that I am not 100% certain that the Chicago LL had to pay the past due bill to get the gas turned on. That's how I understood it, but there might have been communication gaps along the way. But you have verified that it is true in some areas, thanks.

-ERD50
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Old 08-03-2010, 08:02 AM   #17
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In my area in Ohio water follows the property owner,electric does not.
One suggestion I might offer is to not rely on just one or two units.Extended vacancies or a good trashing would be devastating.More units make the averages better.Where units are is also important.I did great for fifteen years,but the last few have been terrible.No jobs,not much prospect of jobs and a lot of evictions have kept me at a 50% vacancy rate.My houses are all paid off and that keeps my head above water.Many of my fellow landlords are losing their properties left and right.
Tough to sell now as well because the bottom fell out of house prices.
Yet If I were 25 years younger I might just be buying houses at fire sale prices.
All my units are in mid to lower class areas,no sect 8 anymore as those folks want in the burbs ( where they feel they deserve).My rents today are lower than the were in the early 90's and I don't see that improving anytime soon.

It takes a certain type of gut to landlord and not everyone is cut out for it.It also takes learning how to make repairs yourself as well as not puking after seeing some of the damages and garbage left behind.

Above all,remember that houses are not liquid.In my case I have a hefty net worth on paper,yet my liquidity sucks,even though my houses are all paid off.Vacancies and repairs drain liquidity very quickly.I know a number of wannabe landlords that lost their own homes because of damages to their rental investments.
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Old 08-03-2010, 01:29 PM   #18
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We have one rental house and rent it at below market with the understanding that the tenant is responsible for all repairs (the only listed exceptions are the HVAC system, water heater and roof leaks). You have to have the right kind of tenant, but so far it has worked out ok.
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Old 08-03-2010, 02:10 PM   #19
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Rental

I have three rental properties. Only one has a small mortgage which is good. If I had mortgages on top of property taxes (high - and can't claim homestead exemption), taxes on the income and repair costs, would likely not be making any profit. Have been fortunate with tenants for the most part. I sometimes have made deals with reliable ones to make minor repairs, send me the receipts for materials and reasonable labor charge and deduct from the rent.
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Old 08-04-2010, 04:34 PM   #20
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No problem with left over utilities in MA - they are shared by all .... but did I tell you about lead paint ?!?

The summer has been traditionally quite. No heat issues to chase ... a day or two wo hot water in August - who cares. The rent maybe delayed a week or two for someones summer vacation; but that seems to be it.

Winter is the busy season here. Occationally we'll hit a sub-zero cold spell for a week ... THAT keeps you running. Heck I have one pipe in my own house which can't handle that week.
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