Investment Property: Need Advice

Sounds like you have some fun stories, Nords...
Hopefully your landlording experience will be better. But you don't have to volunteer for this duty.

It was darn hard to find an affordable rental in the summer of 1994. 4627 Biona Drive, right off Route 15 and only 25 minutes from Point Loma, three blocks from the library/playground and the Kensington Coffee Co. Built in the 1920s & 30s, Kensington was supposedly one of the nation's first planned-housing neighborhoods and one of its first homes was bought by Buster Keaton. It was a good neighborhood to raise a toddler (Buster wasn't around by then) but luckily we moved out before she was school-age.

- Rainwater leaking into the attic because the stucco had pulled away from a drip-edge joint. Ruined attic insulation and a collapsed first-floor (plaster) ceiling. Owners couldn't find the leak because roof guys wouldn't go up there during the rain. I found it during San Diego's annual rainstorm by spending an hour in the (unheated December) attic with a flashlight.
- Rotted (cast-iron) drain piping in the crawl space. Much of it had to be replaced during our lease with PVC and pipe-clamp joints.
- Lamp cord electrical wiring all through the crawl space from 1970s home-improvement projects. (Hint: this is not up to anyone's code, not even in the 1970s.)
- Gas-furnace ductwork had literally fallen apart. The gas furnace (whose gas bills we were paying) was putting more heat in the crawl space than in the house. The bonus when I investigated this problem was finding a 1966 Playboy magazine tucked in the frame bay along the crawlspace entrance.
- The gas furnace just needed to be ripped out and replaced. It was a pilot-light mishap waiting to happen. New ductwork wouldn't have hurt either. We finally gave up and put an electric wall-mounted heater in our kid's room while we grownups used an electric blanket.
- 2nd-story deck with the ledger board just nailed onto the siding. Felt kinda bouncy, but at least when it fell off the wall it would've splashed down into the pool.
- Tree roots (silver maples) tearing out the PVC sprinkler lines. We were responsible for maintaining the landscaping.
- Clogged municipal sewer drain (tree roots). Spouse looked out into the backyard one morning and noted a new swimming pool by the swimming pool. Turned out we were at the bottom of the entire street's worth of sewer drains.
- Flooding garage from rainwater coming down the driveway and a clogged floor drain. Collapsing garage from decades-old trusses.
- 35-year-old washing machine. 25-year-old refrigerator. We were paying the electric bill.
- Swimming pool leaks (we were paying the water bill).
- 30-year-old fence around the [-]toddler magnet[/-] swimming pool.
- Every door was racked. Two doorframes had to be replaced. When we moved in, one of the doors had been inoperable for two years (operator ignorance).
- Every single freakin' 1920s casement window in the house needed, at a minimum, caulking. Most of them needed overhauling. If you ever watch Tommy Silva do them on "This Old House", he makes it look easy because he's done a couple thousand of them. The first couple dozen go considerably [-]bloodier[/-] slower.
- The house was full of fleas. Three sprayings worth, luckily all better before we moved in. You never want to see an exterminator raise his eyebrows on the third visit and mutter "I'll be darned. I better go get the stronger stuff." The neighborhood dog/cat (rat?) population was high enough that we had to keep spraying the small backyard for fleas for three years.

Lead paint had been fixed, as had the asbestos. Water had tested OK.

The good news is that the landlord was a great lady who never raised our rent because we treated that place like a three-year home-improvement experiential-learning project. One of the first things we learned is that we're never buying or renting an old house ever again. Ironically her land & location are worth at least $600K today while the house is a teardown.

I might age in place in our current home, but I'm going to be supervising regular overhauls & upgrades.
 
Honobob:

I've been thinking a bit more about this. One strategy for the owner would be to invest the money I give him (be that at 0% or some other WAY low %) in a CD or other extremely reliable device. Then he makes the going CD rate, and has a nice predictable income from me for the next twenty years to grow. Yes, all the money now would be better for most buyers-but this doesn't seem to be a high priority for him.

Don't see how this matters much... doesn't change the fact of him locking up $145k of equity into a 0% loan over 20 years. In other words, he would either need it ALL now or that "promise of payment" is earning nothing while he is waiting to put it into a CD. He has equity in the house, he wants it or a return for forgoing it when he sells it. Or he's incredibly nice.
 
Keim, From reading your posts it sounds as if you have the fire in your belly and are not afraid of being a landlord - many are. It sounds as if you can do your own repairs - a big plus.

Whether this deal works out for you or not - don't give up on this idea! You are young and real estate is once again starting to look really attractive for beginning investors. Good luck to you.
 
If you have the $$ for a down payment,maybe consider getting a deal elsewhere if he cant/wont offer a 0% loan. There's deals to be had around here.....I'm sure it's the same by you...
 
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