Rental homes: how to do it the right way

[Spear Dane]

Thanks for the advice. I wonder if commercial is the way to go rather than residential.

i work 28 hours a week so I have some time to play with

Why can't you be like all the other docs and just open a Subway?

 

[hoosierdoc]

TWENTY EIGHT???



Gee, I hated my job before. Now....

hehe, work hard, but for short durations . Our full time hours is 1460 per year. Technically I work 56 hours one week then off for 7 days.

Why can't you be like all the other docs and just open a Subway?

I thought about that concept, franchising something. I don't really have cash to spare for a few years yet but want to learn about what I'll move into when I can.

 

[churchmouse]

Doc, best to pay cash, of course.
Don't get into rentals if you don't want to deal with people who are always trying to get one over on you.
Make sure you get a good lease agreement and know it forward and backward. Any clauses I want tenant to pay special attention to, I have them initial next to it. They can't say "I didn't know", not that it really matters.
include in the lease how tall the grass may be, how often it must be cut, how the trash cans must be stored, etc.
Make sure the tenant knows ALL complaints/communication must be in writing! Cover your ass!
You can NOT be friends with tenants! You can be friendly, but never give an inch!
Have late fees in the lease and enforce them! If you let them slide once, they will always expect it.
Run a credit report, criminal background, and eviction report on every tenant over 18yo(which they pay for at time of application) and they all sign the lease.
Inspect (quick walk through) each property every month or two.


....just to get started!

This is a good start. Also Insurance will be a consideration. Rental property requires coverage as such depending on the lending organization.

Take pictures before the lease is signed and show them to the tenant. Have this be initialed as well. Cover your butt because nothing party's like a rental. I know this 1st hand as we had several in the mid 90's.
We bought used up shells locally. People who had owned them since new and lived in them until they passed or the retired and moved south. Houses were used up. Needed everything. We did most all of the work except the drywall/paint as we had friends in that business. New windows roofs kitchens HVAC systems you name it. Turn key. We flipped several on contract. That was a money maker. If they miss a beat it is like a buy here pay here car lot. Repo, reset, resell.

Yes it is a serious pain depending on who you rent to. You will need some good contacts in the maintenance area such as plumber/electrician/HVAC or find some one adept at all of this work.

 

[Kirk Freeman]

I'm considering getting into the rental home market and am seeking advice from those on here who do it/have done it.

do you have a particular ratio of rent to purchase price you look for? Where do you look for deals on purchases?

i have looked at sheriff sales but i don't understand how you can show up with a cashier's check for a property when you donMt know what bid will be. Are these sealed bids?

how often are you inside the home inspecting for damage? Curious as to the amount of busywork it will take beyond rent/repairs

Please tell me you have partners and an LLC.

 

[Kirk Freeman]

So DO NOT BE AFRAID TO INSULT THE BANK! I have seen them offer $20k on a home the bank is asking $85k for! They do not care about the banks feelings, because the bank doesn't have any. They are fully prepared to walk away from the home with no problem. This is business, nothing more. In this case you must be cold and heartless with the money.

Behold the power of no.

 

[Leo]

High rent properties are generally less problem than low rent. Do not keep rentals too log, even if you have good cash flow, unless you want to keep them forever. Capital gains tax is no friend for the long term landlord. After the depreciation advantages have maxed out, sell it and buy something else.

 

[hoosierdoc]

Please tell me you have partners and an LLC.

It would be some sort of corp but no, no partners. I don't like partners

 

[Ericpwp]

Maybe try farming? The ROI is less, but so are the expenses (once you own the land), as well as the stress level it would seem. I wanted to rent out my house, life happened and I'm a gentleman farmer now.

I get a bill for the crop insurance, half the seed, half the chemicals, and a check for half the yeld.

It won't do much for your idle time, except you can shoot on your new range.

 

[junk]

people who rent over owning usually have had credit problems in the past . I have 1 property . Bought it to keep the kids from moving home all the time .Now I have a renter . Patience is good . buy up a small parcel of property where shallow graves won't be noticed . It helps

 

[Dirtebiker]

Doc, check out Mr.Landlord.com
great site!

 

[churchmouse]

people who rent over owning usually have had credit problems in the past . I have 1 property . Bought it to keep the kids from moving home all the time .Now I have a renter . Patience is good . buy up a small parcel of property where shallow graves won't be noticed . It helps

We did the same thing. My good friend and next door neighbor was moving out past the limits and wanted to sell. We bought the house (right next door) as we could not get the kids to move out so we did. It has worked out well enough. The little terrorists in my avatar live there with the 10 year old sister. The kids are a blessing and the daughter and significant other really help a lot.

 

[ruger1800]

It would be some sort of corp but no, no partners. I don't like partners

Yes you need partners

 

[Bennettjh]

My folks had one. A lady lived there quite a while and always paid on time. They didn't have the best agreement and didn't do walkthroughs nearly enough. When she moved out, we had to take it down to studs and dirt. Luckily we could about 90% of the work ourselves. Got it done and sold, said never again.

If you can do most of the maintenance and upkeep yourself, that'll help your bottom line tremendously. Definitely have a good agreement and keep a close eye on the place(s).

 

[hoosierdoc]

Yes you need partners

Why? Have you done this before? Why is a partner better than an employee? Seems like way more headaches to me

 

[Jeepster48439]

Why? Have you done this before? Why is a partner better than an employee? Seems like way more headaches to me

Doc. I agree. No partner.

 

[Rookie]

At one time (30 plus years ago) my grandparents had over 100 rental units. They sold all of them within a year and never talked about doing it again. It was a MAJOR headache.

He was a doctor also.

 

[hoosierdoc]

Wow, 100 rentals? That is impressive. This thread has made me think a lot more about commercial

 

[Rookie]

I had a friend that has residential and commercial rentals. He said he liked the commercial rentals better because the tenants were more reliable, but the costs for upkeep could really suck.

All I remember about my grandparents rentals is that maintenance was a full time job for my dad.

 

[bwframe]

My dad had rental property for years. I learned quite a bit from his experience. My recommendation, don't do it

My mother did the same. I would recommend the same.

 

[drop45]

Doc, I have two commercial properties and one residential. I consider myself small time. The commercial are triple net, they take care of everything. The residential was taken down to the studs and redone as new so there won't be any maintenance issues for a while, plus the lady in there has been a friend for the past 20 years and is clean. I've been thinking of buying another rental for a year now and probably won't.
Some people swear by them others swear at them. Take pride in the property, if you wouldn't live there personally don't expect others to take car of it and to respect the house.
As someone else earlier said, take a hard look at storage units, I am. Good luck.