FIRE and Rentals

[Markola]

Ha, the horror stories in this thread are curing most interest I might have had in land lording. The only way I might ever consider it is buying a duplex and living in half in order to keep an eye on things.

 

[OldShooter]

Ha, the horror stories in this thread are curing most interest I might have had in land lording. The only way I might ever consider it is buying a duplex and living in half in order to keep an eye on things.

That's how we started out. SFH converted to a duplex, tenants upstairs. It worked great. I don't recall that we ever had a tenant problems. For permanent residents in snowbird territory, renting half the house to snowbirds might be really lucrative.

 

[meridiver]

Our experience with rental property (a mixed use building with one commercial and 3 residential units), has been rather unique, so I would hesitate to recommend any course of action to anyone else, based on what we've dealt with over the years. It can have great rewards, but it's also a serious PITA and not something to go into lightly. When we were younger, we had a lot more energy, both mental and physical, and an ability to roll with the punches. Now that we are ER (thanks mainly to this property), the costs are starting to outweigh the benefits.

Whatever you do, DO NOT buy a property that is not cash flow positive right from the start, including budgeting for vacancies and a (very) healthy repairs budget. If your plan is to invest a bundle of cash to lower your mortgage, rental property can still pencil out in the current market, but otherwise, it will be hard to break even unless you are in a LCOL area, or plan to buy a wreck and put in a lot of sweat equity.

Regarding property managers, we finally got one after 15 years of ownership. Ours isn't great, but they are good enough, and absolutely worth it just so that we can leave town and not worry about a water heater breaking while we are gone (this actually happened while we were on our honeymoon ).

 

[ScoopKona]

Our experience with rental property (a mixed use building with one commercial and 3 residential units), has been rather unique, so I would hesitate to recommend any course of action to anyone else, based on what we've dealt with over the years. It can have great rewards, but it's also a serious PITA and not something to go into lightly. When we were younger, we had a lot more energy, both mental and physical, and an ability to roll with the punches. Now that we are ER (thanks mainly to this property), the costs are starting to outweigh the benefits.

Whatever you do, DO NOT buy a property that is not cash flow positive right from the start, including budgeting for vacancies and a (very) healthy repairs budget. If your plan is to invest a bundle of cash to lower your mortgage, rental property can still pencil out in the current market, but otherwise, it will be hard to break even unless you are in a LCOL area, or plan to buy a wreck and put in a lot of sweat equity.

Regarding property managers, we finally got one after 15 years of ownership. Ours isn't great, but they are good enough, and absolutely worth it just so that we can leave town and not worry about a water heater breaking while we are gone (this actually happened while we were on our honeymoon ).

The first two sentences I underlined I agree with 100%.

As for the property manager, I think it's fair to say that the best ones out there are at best, mediocre. (Maybe this aligns with your assessment.)

Being a landlord is not for everyone, despite the fact that when things are running smoothly the only easier business is running a lemonade stand. But because most humans are difficult, when things don't run smoothly it can be an absolute nightmare. I think it's a dandy way to springboard up the financial ladder. But it's also a dandy way to lose faith in humanity and become a cynical, grouchy person.

 

[CO-guy]

I was raised by a single parent who worked long hours and was able to acquire two duplex rentals. By 13 I had become the "on-call" handyman and by 15 I was fully managing the properties; turning over the apartments, posting ads, hosting open-houses, running background check, and preparing leases for my parent and the tenants to sign. The worst tenant we ever had (before I took over showing and leasing) was arrested for drug trafficking and, after police found drugs in the wall of a closet, well, it was a wonderful initiation for me into the world of drywall repair.

During grad school I started managing "owner managed" properties in the DC area as a side hustle. For a fee, I would handle all aspects of tenant turnovers ranging from eviction to obtaining a CO and listing/showing/qualifying/leasing the property to the next tenant. Though I handled some nicer places in the Cleveland Park area of DC, most were Section 8 apartments on the East side of the Anacostia river, which was a deep dive into the world of truly awful tenants.

I'm a little over a year away from retirement and currently have two rentals on our property (one long-term and one short-term). The rental income covers all carrying costs on the property (mortgage, tax, insurance) as well as maintenance. Not having housing expenses has allowed us build retirement savings and the rental income is part of our near-term retirement plan. In addition to the benefits described by others, rental property seems like a great hedge against inflation. This year alone, rents in our area are up over 20% on average.

 

[l8_apex]

Really not that big a deal - between sites likes Angi's list and TaskRabbit, its pretty easy to find someone to fix something on a rental

You really should add some kind of caveat to this statement since it's far from a universal truth: it's completely false for my city.

 

[Letj]

Agree. It’s very easy to lose faith in humanity after dealing with some truly awful people. I rented to some tenants both section 8 and non section 8 and I was so shocked by what I saw and the condition they lived in (the stories are so bad I won’t even mention them), I just couldn’t fathom any human being living like this. Once I stopped taking it personal and viewing it just as business, it got a bit easier. I always provide a beautiful place for the tenants and when I saw what they turned it into, it was hard to watch our hard work destroyed. Luckily for us, we did a lot of it ourselves. It’s not so much about income as it is about upbringing although I have to say for many, the lower on the income and education scale, the tenant problems.

 

[clifp]

I guess one beauty of a property manager is they shield you from the uglier side of being a landlord. I see my Vegas properties less than once a year (a convenient way of making most of my Vegas trip tax-deductible), and I spend 10 minutes talking to the tenants.

The Kansas City properties are even more turnkey, never been to the property, never meet the property manager, much less the tenants. Well worth the 10% I pay her.

 

[Another Reader]

I only buy in middle and upper middle income locations. I don't do Section 8 and my property manager vets tenants thoroughly. Minimum 700 credit scores. I don't have zero problems, but many fewer than when I had managers with lower standards.

 

[CO-guy]

Agree. It’s very easy to lose faith in humanity after dealing with some truly awful people. I rented to some tenants both section 8 and non section 8 and I was so shocked by what I saw and the condition they lived in (the stories are so bad I won’t even mention them), I just couldn’t fathom any human being living like this.

The section 8 properties I managed in DC were all square, brick 2-story 4-plexes. It was a win if we could salvage any kitchen appliances after evicting a tenant. Typically in this area, tenants would simply throw their trash out of the windows which created a massing rodent problems. So if you can imagine, just dozens of square blocks of identical buildings, all section 8, with trash heaps on both sides.

During turnovers we would hire someone with a bobcat (and a strong stomach) to load a 30 yd dumpster full of rat infested garbage to make it the one property on the street without trash heaps and get the CO. It absolutely horrified me that people lived like that, but the work itself was just a job for me to manage. From a logistics perspective, the most difficult part was that you couldn't leave any vehicles unattended on the streets in that area, so materials, equipment and crew had to be dropped off and picked up every day.

 

[Letj]

The section 8 properties I managed in DC were all square, brick 2-story 4-plexes. It was a win if we could salvage any kitchen appliances after evicting a tenant. Typically in this area, tenants would simply throw their trash out of the windows which created a massing rodent problems. So if you can imagine, just dozens of square blocks of identical buildings, all section 8, with trash heaps on both sides.



During turnovers we would hire someone with a bobcat (and a strong stomach) to load a 30 yd dumpster full of rat infested garbage to make it the one property on the street without trash heaps and get the CO. It absolutely horrified me that people lived like that, but the work itself was just a job for me to manage. From a logistics perspective, the most difficult part was that you couldn't leave any vehicles unattended on the streets in that area, so materials, equipment and crew had to be dropped off and picked up every day.

This is exactly my experience. All the appliances were either destroyed or too nasty to salvage. There was always some evidence of violence - kicked in doors, punched holes in the sheetrock, broken windows, etc. They simply left all their garbage piled high in the house when they or used the alley or yard as dumping ground. I once had someone dump dozens of tires behind my rental. I typically hire a trash out company and asked them to clean and disinfect before I enter. As you know, always seem to be infested with roaches and mice literally running around and falling off the ceilings. And of course there are always the crazies who keep dozens of animals in the house with them and don’t clean up after them. I once had to completely tear out sub floor since it was the only way to get rid of car urine.

 

[frgo0629]

Have 40 units made up of various types of property. SFH’s are probably easier to manage with less turn over and more upside of appreciation but cash flow is less. Multi family has continuous turn over and requires more attention but cash flow is greater and less odds of being out of pocket monthly. Multi family is simply all about the #’s. Never been out of pocket on a monthly basis besides money down on purchases in last 8 yrs and now in mid 30’s. I personally enjoy the challenge most days but things will happen at inconvenient times.
I was told by a mentor a property manager will manage the property at about 75% of your capability. It’s definitely a life style though. I’ve noticed most sellers of multi family sell 2-3 yrs too late as they’ve lost interest and property reflecting that

 

[kgtest]

Ha, the horror stories in this thread are curing most interest I might have had in land lording. The only way I might ever consider it is buying a duplex and living in half in order to keep an eye on things.

Then you are simply closer to the wife-beaters and convicted felons. Sure the person you signed the lease with was clean as a whistle...but then all of a sudden the "boyfriend" starts coming around.

Or if you can find that unicorn tenant, single, with a 6 figure annual income while you scratch your head asking yourself 'Why don't they just buy a home?"...oh wait, they will in 3 months after breaking the lease with 0 notice when they move out.

I've seen it all. No smoking, means they will smoke anyways. No pets, and I swear they go out and get 2 kittens and a puppy less than a month after moving in. After owning rentals I've lost all faith in humanity. Even out property manager was committing fraud. Telling us they hired a contractor for X and in reality it was Cousin Vinny who cut them a side-deal after invoicing them/us higher than the actual cost. I swear some people will take advantage at every corner. It's not all bad, my DF had 2 sets of long term tenants in one of his rentals....one, the ol man moved out and his son just kept renting from us. They stayed for over 20 years between the two of them.

I've had tenants move in to the six plex we used to own in town next to the world-renown Mayo Clinic, hoping, praying, waiting on 'the list' for transplants that never came, only to have the parents break the lease after DD or DS passes while waiting. Heartbreak and insult constantly. But it's all about cash flow.

6 plex just means 6x the problems, 6x the calls. I will still RE on an IT salary and a single rental. I MIGHT buy another one but there aren't any deals. I can only imagine what kind of a location comes with a 40k price tag...no thanks.

Bangig on a computer dealing with incompetent leaders is WAAAAY better than dealing with the wife-beaters and felons, the courts and the 'boyfriends', the damage and the rehab after a move-out.

Cars, boats, fish tanks, mattresses all left behind. Better have a dump trailer , some thick skin and a N95 mask or two...it's gonna be a gross day of cleaning up after the tenant destroys the place. Holes in every door, every wall. City licensors, inspectors hassling and haggling.

but that sweet, sweet cash flow. Don't ask questions where the cash comes from, just sock it away for your early exit.

I never once have had to get rid of a mouse problem while buying ETFs and Stocks. Maybe it's the slower route, maybe not.

Full disclosure, I own a rental...but its no picnic.

 

[Magus]

You really should add some kind of caveat to this statement since it's far from a universal truth: it's completely false for my city.

I have or have had rentals in 6 cities with no issues finding someone to repair things fairly quickly in over a decade on a number of rentals. I imagine small /rural towns this may not be the case but most medium and larger towns/cities will have one or more app or website that is commonly used (plus you can always google). Which city or area are you referring to out of curiousity?

 

[Magus]

I only buy in middle and upper middle income locations. I don't do Section 8 and my property manager vets tenants thoroughly. Minimum 700 credit scores. I don't have zero problems, but many fewer than when I had managers with lower standards.

Bingo

 

[bobbyr]

I'm a small time landlord with 3 tenants.

I don't get calls at late hours. No Barbie's in the plumbing.

I did once have a murder at a unit. Re-rented it 3 days later.

Landlording is not for everyone.

I'll happily continue to cash my $5000 in rent checks until things become a burden. Landlording has mostly been a delight for me. And lucrative.

++
same here

 

[CO-guy]

For my own properties my approach has always been to keep the property well maintained, keep the rent (slightly) below market, and thoroughly vet my tenants. My goal has always been to minimize turnover and make up for slightly lower rents by maintaining 100% occupancy. Growing up I was able to keep some tenants for 8-10 years, but anything over 2 is a win in my book. However, other landlords tell me they try to do as little as possible and keep rents as high as possible, and that my approach is just throwing money out the window.

Managing Section 8 properties for absentee landlords really illuminated the financial benefits of the do as little as possible approach, but I still wouldn't go that route with my own assets. Much less demoralizing when your only job is to take photos of the destroyed apartment and put together an estimate to bring the unit back up to code. Especially when, regardless of whether there's a bloodstain in the middle of the room or someone used the corner as a urinal, there's just a line item to replace the carpeting.

Oh, and from one of the first Section 8 places I turned over, I learned that linoleum flooring under the industrial carpet and padding will help to protect the sub flooring from animal (and human) waste.

 

[Letj]

For my own properties my approach has always been to keep the property well maintained, keep the rent (slightly) below market, and thoroughly vet my tenants. My goal has always been to minimize turnover and make up for slightly lower rents by maintaining 100% occupancy. Growing up I was able to keep some tenants for 8-10 years, but anything over 2 is a win in my book. However, other landlords tell me they try to do as little as possible and keep rents as high as possible, and that my approach is just throwing money out the window.

Managing Section 8 properties for absentee landlords really illuminated the financial benefits of the do as little as possible approach, but I still wouldn't go that route with my own assets. Much less demoralizing when your only job is to take photos of the destroyed apartment and put together an estimate to bring the unit back up to code. Especially when, regardless of whether there's a bloodstain in the middle of the room or someone used the corner as a urinal, there's just a line item to replace the carpeting.

Oh, and from one of the first Section 8 places I turned over, I learned that linoleum flooring under the industrial carpet and padding will help to protect the sub flooring from animal (and human) waste.

Using the corner as a urinal? Is that common? I had this happen because the tenant had their water turned off and removed part of the wood floor to do their business after flooding the basement with sewage. They never called because apparently they didn’t want us to see the condition they lived in with 4 kids.

 

[livingalmostlarge]

I don't even want to think about that subfloor. Okay you guys are chasing away rentals.

 

[freedomatlast]

I've never owned inner-city properties, always kept rents a little below other comps in the area to retain good tenants and my main philosophy has been to always buy and maintain properties that I wouldn't mind living in myself. This has worked well for me so far, with none of the horror stories outlined in the other threads.

 

[calmloki]

I've never owned inner-city properties, always kept rents a little below other comps in the area to retain good tenants and my main philosophy has been to always buy and maintain properties that I wouldn't mind living in myself. This has worked well for me so far, with none of the horror stories outlined in the other threads.

My emphasis. We went with would or would have lived in the place at some point in our lives. We have our own horror stories after 30+ years and over 50 doors at our peak, but still own 19 units. Can't have been all that bad.

We bought cheap, when interest was crazy high and self managed in the main. I wouldn't be buying now.

 

[SheitlQueen]

I retired seven years ago and sold both of my rentals this year. Was tired of dealing with issues, the landlord laws are getting more and more oppressive in my area, I am considering moving out of the area and I want to do a lot more traveling. Prices are up and it's easy to sell, so I figured this was the time to do it.

 

[CO-guy]

Using the corner as a urinal? Is that common? I had this happen because the tenant had their water turned off and removed part of the wood floor to do their business after flooding the basement with sewage. They never called because apparently they didn’t want us to see the condition they lived in with 4 kids.

As another member said, my own rentals are maintained at a standard that I would feel comfortable living in. I've never owned more than four units and currently only have two.

One owner I assisted in DC in the early 2000s had (at least) four fourplex units which I turned over for him around 25 times in five years. He had bought them as abandoned homes as part of one of those "house for $1" programs or at a similarly reduced cost back in the mid-90's. All were Section 8 and if I recall he was earning $850/mo per unit ($3400 per building).

The properties were within a block or so of each other with more identical units under similar use covering an area of a few square blocks. To the East and South, were similar properties and some mid-rise buildings, but all were abandoned and occupied by homeless addicts. Most vehicles on the streets were not operational, and on some of the blocks, abandoned vehicles were used to barricade the streets to prevent police vehicles from easily approaching.

I never saw the inside of some units, but others turned over every year or even less. Every single unit that I rented went to a single mother. However, as I think another member mentioned, there's always some drug dealing boyfriend. Far too often, these situations ended with a drug bust, mom getting arrested, CPS collecting the kids, and the Section 8 payments being suspended since the person on the lease is now in jail awaiting trial. That's when we begin the eviction and prepare to turn the unit over to the next tenant.

However, folks in the area learn of the arrest and the resulting damage to the apartment is somewhat predictable. Corner used as a urinal is uncommon. More common to find urine and feces on the walls and floor, signs of violence (broken doors, walls, windows). Garbage piled in rooms or hallway which is sadly often comprised of a lot of dirty children's clothing. Almost universally, the door has been ripped off the oven and often appears to have been used for some time in a doorless state.

Whether it's just people abandoning the property in a hurry or things were done maliciously (or some combination), it's just not that expensive to replace a few interior doors and carpets, patch some holes, replace some window panes, and install a new galley kitchen. Even the rat infested trash piles in the back yards were there for an understandable reason. Sure, there was a 3-yard dumpster in the alley, but who in their right mind was going to risk being attacked by rats (or people) going outside after dark in that area?

FWIW, I just looked at the area on Zillow and, those properties are each worth a fortune now.

 

[Sunset]

I guess one beauty of a property manager is they shield you from the uglier side of being a landlord. I see my Vegas properties less than once a year (a convenient way of making most of my Vegas trip tax-deductible), and I spend 10 minutes talking to the tenants.

The Kansas City properties are even more turnkey, never been to the property, never meet the property manager, much less the tenants. Well worth the 10% I pay her.

Some hands off investor landlords just got burned in Canada.

"Epic Alliance controlled 504 properties in Saskatoon and North Battleford — valued at a combined $126 million — when it fell apart."

https://www.cbc.ca/news/canada/saskatoon/epic-company-collapses-real-estate-500-homes-1.6399770

I'm sure they partially blame the eviction ban

" Alisa Thompson, co-owner of Epic Alliance Inc., a company that manages rental properties where investments have been made, said the company has accumulated $40,000 in arrears since the pandemic.

With arrears coming from tenants who rely on social assistance, she knows she isn’t going to recover that cash.

“There’s no recourse,” Thompson said. “It's not like they work and I can go to a collection agency or put liens on things, that’s not an option.” In May the province imposed a moratorium on evictions to prevent tenants from being kicked out of their rentals because of lost wages and financial hardships brought on by the COVID-19 shutdown."

https://saskatoon.ctvnews.ca/there-s-no-recourse-saskatoon-landlord-out-40k-from-unpaid-rent-during-eviction-ban-1.5107848

 

[Magus]

Some hands off investor landlords just got burned in Canada.

"Epic Alliance controlled 504 properties in Saskatoon and North Battleford — valued at a combined $126 million — when it fell apart."

https://www.cbc.ca/news/canada/saskatoon/epic-company-collapses-real-estate-500-homes-1.6399770

I'm sure they partially blame the eviction ban

" Alisa Thompson, co-owner of Epic Alliance Inc., a company that manages rental properties where investments have been made, said the company has accumulated $40,000 in arrears since the pandemic.

With arrears coming from tenants who rely on social assistance, she knows she isn’t going to recover that cash.

“There’s no recourse,” Thompson said. “It's not like they work and I can go to a collection agency or put liens on things, that’s not an option.” In May the province imposed a moratorium on evictions to prevent tenants from being kicked out of their rentals because of lost wages and financial hardships brought on by the COVID-19 shutdown."

https://saskatoon.ctvnews.ca/there-s-no-recourse-saskatoon-landlord-out-40k-from-unpaid-rent-during-eviction-ban-1.5107848

Important to note cap rates in Canada are a lot lower (less margin of error) and eviction rules are significantly worse for landlords than the vast majority of the US. I personally would not own any rentals a state or area with less than a 5% cap rate AND reasonable eviction laws (so no CA, NY, NJ for me). That said, I would trust but verify my property managers just like my tenants, which is one reason I won't go completely passive (the other being is massively easier to locate and screen tenants than before and its much easier now to find help on repairs online/apps)