How is your rental business? and for the coming future?

[retire to nature]

Hi All,

It's been a while to write a post. Meanwhile, I FIRE'd in Feb 4th this year Yay!!

My probate was ended in January, so I had spent a lot of time to questioning how long I would keep the job. And, the coworker who kept bullying at me was driving me crazy so I reported to upper management, and they don't do anything and told me to keep tolerating, so I didn't wanna tolerating even a minute more. I gave them resign letter and walked out on the day. Nothing surprise. I knew he wouldn't change any, management is useless. That's why I planned FIRE. And now I am happy with that.

Anyway, back for my post title.

How are your rental business doing? I know so many people can't make their rent but eviction can't happen etc. I have not increase rent since covid19, I am not sure if I can and how other people are doing since house price went up a lot.

My tenants are fine, the section 8 tenant has some trouble, but still up to dated due.

My original property tenant is moving out in the next month since he bought a house. The house was the one I used to live before moving into my Airbnb house. so if I get rid of all houses, still need a place to live, that was the most possibility. This house was only $43k and now $96kish, $900/month. I can increase to 1050/m if I keep renting.

But I see house price went up a lot kinda of bubble way. and I am really afraid, the high number of death will make a lot of inventory. And covid end possibility can be shorten much faster than I anticipated. on contrast, MO is really shorten in inventory even in news article.

So, I am not 100% sure for selling, I would like to know other opinions how you guys see the real estate market.

I have 11 houses now. 4 were mine, and 7 inherited. so the 7 got step up basis. the step up basis numbers were pretty high, so it is long way to go even if the last year big increase. So like credit card debt, should I sell things first which would meet the step up basis number??

I was not planning to keep the rental business long run, so I prefer with stocks. I have AA 100% stock for total stock or S&P a little over 1mil. and I don't wanna be stuck unable to sell rentals when crash possibly happen. But since the step up basis, would it better to keep for any tax benefit

Based on those plan, I have to plan how I am investing from now. What should I consider the most?? Should I hire property management company to keep them long run

Please advise me.

Thank you in advance.

 

[Finance Dave]

Wow...too much for me to unpack...but...

It is NOT true that you cannot evict during the pandemic. The mandate only says you cannot evict for NON-PAYMENT, and even then it only applies to "covered persons". If you need to evict, you need to study up on this. We have 5 rentals and have not needed to evict yet...but I know many landlords who have done so legally and successfully.

It sounds like you are concerned about your high stock allocation. Maybe sell some off each month for a year to get to a safer AA level.

Real estate market is a very "local" thing. Check your market...and if it's "HOT", you may want to sell...but realize you may have hits to your AGI by doing this.

Step up basis is ok so long as your heirs want to manage property. My DW wants NOTHING to do with rentals, so we plan to sell ours off before I reach 70...hopefully I won't croak before then.

 

[retire to nature]

Wow...too much for me to unpack...but...

Sorry, I knew I have a lot of things to ask haha. It's been a while so kept thinking all kinds of scenario. haha.

It is NOT true that you cannot evict during the pandemic. The mandate only says you cannot evict for NON-PAYMENT, and even then it only applies to "covered persons". If you need to evict, you need to study up on this. We have 5 rentals and have not needed to evict yet...but I know many landlords who have done so legally and successfully.

I don't need to evict for anyone. Pretty much every property is for month to month basis. some of tenants not maintaining well, possibly no renew.

It sounds like you are concerned about your high stock allocation. Maybe sell some off each month for a year to get to a safer AA level.

Not really, I am happy about it. I won't sell for current one. Since I have income from rental I would buy differently. That's why I was asking.

Real estate market is a very "local" thing. Check your market...and if it's "HOT", you may want to sell...but realize you may have hits to your AGI by doing this.

That's why I was asking. I see possibly hot for next year or two at least due to local issue and MO is not like CA high price, but crash can be turn down faster than I expect and nobody knows.

Step up basis is ok so long as your heirs want to manage property. My DW wants NOTHING to do with rentals, so we plan to sell ours off before I reach 70...hopefully I won't croak before then.
I am the only heir, like I said, originally, I was thinking about 5-6year max to manage before pandemic and this high increase. I would say originally the price should be about 80k, but zillow says 96k now. and the area is very hot to sell. But, thank you for reminding me to talk to CPA for AGI issue.

Thank you for the reply.

 

[Mr. Tightwad]

I only have 3 tenants. 2 fully paid, 1 a few bucks behind. The behind one has been there 15 years. I raised the rent 5% on two of them on Jan 1.

I would ask myself if I wanted to continue being a landlord. If the answer is no, start selling gradually.

Perhaps since you retired, you won't mind monitoring your investments. I spend 30 minutes a week on yard work and pocket 5k a month rent. I'm good with that.

 

[38Chevy454]

I think the bigger question is do you want to stay in the rental business? If you want to get out and just have more traditional stocks and fixed income type investments, then you should sell the inherited stepped-up basis properties so that you minimize cap gain taxes. The ones you own, can sell as they become vacant, just beware of the tax hit. Although the good thing is you have the profits from selling to pay the tax hit. In general now seems a good time to sell with still historically low mortgage rates. Don't be greedy, if you have desire to get out of rental business, do it when it is seller's market.

As for the investment of all those house sale proceeds, just invest per your desired AA. That may be a 60/40 mix or whatever works for you. 60/40 just being a very common AA for retirees as example. Your risk tolerance and timeframe will determine what is best for your situation.

 

[retire to nature]

I only have 3 tenants. 2 fully paid, 1 a few bucks behind. The behind one has been there 15 years. I raised the rent 5% on two of them on Jan 1.

Thank you for the reply. Yes, I was thinking to increase rent about 5% too, but I haven't because of shyness due to pandemic. most of mine are $100-150 lower than market now since the market is hot or no inventory even for rent.

 

[retire to nature]

I think the bigger question is do you want to stay in the rental business?

No for long run, but step up basis got in my way. I learned about myself, stock is best fit for me. I can be a concerning person, time goes by, rental business is getting not to bad, but still much headache than stock since my balance is pretty big no worry to be poor (or it can be opposite more balance more worry, but personally, I feel stock market gonna be very good for a few years, in my humble opinion)
yes, I need to see CPA asap, too.

 

[calmloki]

We didn't raise rents last year but I will this year - City water/sewer bills went up a bunch and I have one tenant milking Oregon's no eviction policy real hard and not bothering to pay rent.

Paying a management company is a great way to reduce your rental profits big time.

 

[RetireBy90]

I only have one rental, but it has been reliable first to pay off the mortgage and now for monthly check. I hired a management company from the start as it is out of state.
For your situation I would probably sell the inherited properties and hire a management company for the remaining ones. Just my preference.
IMHO

 

[retire to nature]

We didn't raise rents last year but I will this year - City water/sewer bills went up a bunch and I have one tenant milking Oregon's no eviction policy real hard and not bothering to pay rent.

Paying a management company is a great way to reduce your rental profits big time.

Thank you for the reply. I may increase this year. the gap of rent amount has been bothering. Yes, I know that fact, so I was managing myself. I am used to doing it though. actually, I had to call a company for HVAC for one of my property.

all mines are ok profit rate, and so I can keep forever to generate income too. maybe it is psychologic stuff, since I just RE'd, need to more piece and relax. Also, these days AirBnB is pretty much homeless people come and go. I have regular good tenants in Airbnb house, but I can see the trend of ppl losing job no where to go. I hope university open up asap, then I can promote better people soon.

p.s. hope you have resolve the problematic tenant well.

 

[retire to nature]

I only have one rental, but it has been reliable first to pay off the mortgage and now for monthly check. I hired a management company from the start as it is out of state.
For your situation I would probably sell the inherited properties and hire a management company for the remaining ones. Just my preference.
IMHO

Thank you for the reply. yes, I don't have any debt for all. so it can be just collecting check.

Can you tell me why the reason i have to sell inherited one first? even if the step up basis value is still high to reach? I was thinking i can wait more for those not to pay any capital gains on them. I can't understand.

 

[retire to nature]

Perhaps since you retired, you won't mind monitoring your investments. I spend 30 minutes a week on yard work and pocket 5k a month rent. I'm good with that.

Actually, too much time caused worry because my case is having 10 single family houses separately and one Airbnb with 9 rooms. yours must me fourplex or something like a building or expensive area?

my income is pretty high, so I shouldn't complain.

 

[RetireBy90]

Thank you for the reply. yes, I don't have any debt for all. so it can be just collecting check.

Can you tell me why the reason i have to sell inherited one first? even if the step up basis value is still high to reach? I was thinking i can wait more for those not to pay any capital gains on them. I can't understand.

I was thinking that with stepped up basis there would be less cap gains. That would be the only reason for me.

 

[Winemaker]

All rentals are paid n full, we've worked with one couple who had the virus and missed some work. We did have a vacancy that we put on the market in late October, just filled it 2 weeks ago. Very few calls, and the ones that did show up for appointments for showing, were absolute nutcases. Worst batch of applicants ever. But patience paid off, we have a great young couple with a young child. the key to rental property is it is an investment property, you pick who is going to pay you. (without discriminating) just like picking a stock or bond.

 

[Sunset]

We didn't raise rents last year but I will this year - City water/sewer bills went up a bunch and I have one tenant milking Oregon's no eviction policy real hard and not bothering to pay rent.

Paying a management company is a great way to reduce your rental profits big time.

One year I didn't raise rents, I was nervous folks would move out. But later I realized if I didn't raise rents each year, I'd fall farther behind and tenants would come to expect no increase.

Now I raise it every year, and they expect it. Small amounts like ~2% per year as it's a rent controlled area.

 

[jkern]

I have three rentals and so far so good. All tenants are fully paid. I do worry about future anti-landlord legislation.

 

[Livefree]

I have one Rental left, that I'm planning on selling this year. The prices are too good to pass up. Just not sure where the proceeds will go at this point.

 

[Sand101]

Paying a management company is a great way to reduce your rental profits big time.

My rental is a vacation week to week rental and the management company (I'm 5 hours away) is invaluable. They charge 22%, which is standard in the area for this kind of place.

In my case COVID hit us pretty hard last year with beach shutdowns. Sally then did a ton of damage to the place. 2020 was a big loss. Finished fixing it right before the new year. With the loss of supply occupancy in these properties is 100% and prices have gone up. Everyone wants to go to the beach - everything is packed. Barring another hurricane it should be a bumper year.

 

[FIREd]

So far so good with my rentals. I'm still getting 100% of my expected income.

 

[retire to nature]

I am checking zestimate and most of my rental is behind $150-200 range of $800-1500. for example, zestimate shows at $1045 but I am collecting $800. I was too crazily busy for my sister death and next year was pandemic so It hasn't been increased at all after move in. It is bothering me because it is too much gap. how much should I increase?

 

[Another Reader]

I am checking zestimate and most of my rental is behind $150-200 range of $800-1500. for example, zestimate shows at $1045 but I am collecting $800. I was too crazily busy for my sister death and next year was pandemic so It hasn't been increased at all after move in. It is bothering me because it is too much gap. how much should I increase?

How much do you want to keep your tenants?

I suggest 3 to 5 percent every year until you get closer to market. You don't want to outstrip your tenants' increasing income and cause vacancies. Just be consistent until you are closer to market. Also, pay attention to how your properties compare to what's available at market rent. If you would have to do a substantial amount of work to bring them up to market standards, you may want to be a little more conservative.

 

[SmallCityDave]

I am checking zestimate and most of my rental is behind $150-200 range of $800-1500. for example, zestimate shows at $1045 but I am collecting $800. I was too crazily busy for my sister death and next year was pandemic so It hasn't been increased at all after move in. It is bothering me because it is too much gap. how much should I increase?

This year I had one tenant move-out I increased the rent by 25%, I did 4 others by 5% so most of them are about where they should be except 1 it's about $100-150 shy but they lady has been there 5 years she's a good tenant and she has paid me back all the money I have into the home. I will likely raise he rent on 1 other home next month and everyone else is in a lease.


To answer your question is you are $150-200 you need to evaluate how much you like the tenant, if they are good take 3 years to get them where they need to be if you don't like them increase $125 this year and make up the difference next year.

 

[retire to nature]

This year I had one tenant move-out I increased the rent by 25%, I did 4 others by 5% so most of them are about where they should be except 1 it's about $100-150 shy but they lady has been there 5 years she's a good tenant and she has paid me back all the money I have into the home. I will likely raise he rent on 1 other home next month and everyone else is in a lease.


To answer your question is you are $150-200 you need to evaluate how much you like the tenant, if they are good take 3 years to get them where they need to be if you don't like them increase $125 this year and make up the difference next year.

I agree with you. So I am wondering if it is better to get new tenants for big jump like you did. My dilemma is I even don't know some of my inherited tenants. all are making on time payment. But I am not sure how much they are damaging my houses. On the other day, I visited one of house and I asked her move out because she is not managing house at all. Under kitchen sink was all wet because she put all plastic bags there, bleach was fell and all over, she didnt even noticed until I pointed. I knew because the wood got all twisted or bent, but she never turn on lights or open curtain. She stays in very dark all the time. she even dont know how dirty her house is. everywhere I see fungi etc. I think she had depression but pandemic got her worse.

Do you guys visit the property for inspection

 

[SheitlQueen]

I have four tenants and so far all have paid, although one always pays chronically late. I am interested in selling my units and getting out of the rental biz, but state/city laws make it very difficult and expensive. I did raise rent about 7% starting in June, but I haven't raised them in two years so they are getting off cheap. They are still paying less than many other places.

 

[Sunset]

I always inspect the house, just an informal walk in , say hello type of thing each year.
Didn't get to do it last year due to Covid., this year is a question mark as well.

I think it's better to raise the rent consistently 3% per year is more comfortable for tenants and actually pulls in more rent due to compounding than 6% every two years and is less likely to push them to move out.