Any real estate guys on here or renters?

[747mopar]

I've been tossing around the idea of creating some extra income both for now and for retirement and am looking for pointers, advice? Over the years I've developed the ability to tackle any part of a renovation including building entire homes and have all of the tools including a full woodshop. My questions are more about renters, any input on how to weed out the worst, keep them in check as far as respecting your property, dealing with them legally, etc.

My thoughts are to stay out of town, focus on homes that will fetch a better price (eliminating the bottom feeders) and avoid all of the associated red tape that comes with city limits. I've never bought a home only built my own so lots to learn but it seams like a good fit for my abilities.

 

[super-bee_ski]

Hi
For what it's worth
"We" own 3 rentals plus our house
I do almost everything BUT I have to admit, I am slowing down.

Now, on Renters:
I live close to Edwards AFB
So: I advertise on a website that specifically targets Military/Government civilians
Are you near Wright-Patterson?

 

[texas69bee]

I rented out my house in Wisconsin before moving to Texas. We hired a property manager to take care of everything. We thought he was great until someone contacted my wife on Facebook and asked if we were interested in selling. We were... when we told this to the property manager, he decided to keep the last 2 months rent. I had to hire a PI to find him and take him to court.
The tenants were allowed to have one pet, they had 4 cats and also found out they had additional family living in the basement.

Long story short... I don’t think you can find enough info on someone to know how they will treat your house.

I would also do a search on your state laws for tenant rights as well as your rights as a landlord. Sometimes an eviction process can take a while.

 

[747mopar]

Hi
For what it's worth
"We" own 3 rentals plus our house
I do almost everything BUT I have to admit, I am slowing down.

Now, on Renters:
I live close to Edwards AFB
So: I advertise on a website that specifically targets Military/Government civilians
Are you near Wright-Patterson?

Thanks, we're several hours from there but I can see how that would be a nice fix for tenants.

 

[YY1]

Write as iron clad of a lease as you can.

Research your state's statutes to find out what is and is not legal for both owner and tenant, and what can and cannot be in the lease, esp with respect to deposits, and make sure you follow it to the letter with the possible exception of interest to be paid to the tenant, which seems to be universally disregarded.

Include specific language for anything that triggers an eviction.

Also include a line that states that the remainder of the lease is still binding in the event that one clause is thrown out in court.

We are on tenant #5 since 2006 in house #1 (which was my wife's house before we got married), and in year 3 of tenant#1 in house #2 which is right across the street from #1.

They are a 15 min drive- far enough not to be in each others day to day business but close enough to get there periodically and/or in a hurry.

Figure on at least a 50% profit margin after elevated property tax (with no homestead) and insurance, plus a maintenance and repair budget, but do your research on what comps are renting for so you can slightly undercut.

We would love to get another, but the market is not good for our numbers.

We paid 77K for #2 "in distress" and put 5K into it in rehab. doing 95% of the labor ourselves.

The last 3 we've monitored in that neighborhood "in distress" have gone for 95K - 105K, and needed about 10-15K in work. No way to make those number add up.

Don't get too much house, or too small. 3/2 at 1000-1500 sq/ft is the sweet spot.

You are right about weeding out the "$400 a month" crowd, but you also want to weed out the "white glove" crowd.

Ours are 5 mi from an interstate between 2 fairly large cities.
They almost rent themselves. 3.5 weeks is the longest turnaround we've had.

Be prepared for ups and downs and don't get emotionally attached to the house or the tenant.

Be prepared for capital outlay for big things like roofs and a/c units.

 

[747mopar]

Write as iron clad of a lease as you can.

Research your state's statutes to find out what is and is not legal for both owner and tenant, and what can and cannot be in the lease, esp with respect to deposits, and make sure you follow it to the letter with the possible exception of interest to be paid to the tenant, which seems to be universally disregarded.

Include specific language for anything that triggers an eviction.

Also include a line that states that the remainder of the lease is still binding in the event that one clause is thrown out in court.

We are on tenant #5 since 2006 in house #1 (which was my wife's house before we got married), and in year 3 of tenant#1 in house #2 which is right across the street from #1.

They are a 15 min drive- far enough not to be in each others day to day business but close enough to get there periodically and/or in a hurry.

Figure on at least a 50% profit margin after elevated property tax (with no homestead) and insurance, plus a maintenance and repair budget, but do your research on what comps are renting for so you can slightly undercut.

We would love to get another, but the market is not good for our numbers.

We paid 77K for #2 "in distress" and put 5K into it in rehab. doing 95% of the labor ourselves.

The last 3 we've monitored in that neighborhood "in distress" have gone for 95K - 105K, and needed about 10-15K in work. No way to make those number add up.

Don't get too much house, or too small. 3/2 at 1000-1500 sq/ft is the sweet spot.

You are right about weeding out the "$400 a month" crowd, but you also want to weed out the "white glove" crowd.

Ours are 5 mi from an interstate between 2 fairly large cities.
They almost rent themselves. 3.5 weeks is the longest turnaround we've had.

Be prepared for ups and downs and don't get emotionally attached to the house or the tenant.

Be prepared for capital outlay for big things like roofs and a/c units.

Lot's of good advice. Thanks

 

[YY1]

...and either install tile, or budget for new carpet on every turnaround.

 

[YY1]

Just like cars, the money is made on "the buy".

In this sellers market, it's going to be tough.

I've got fairly detailed spreadsheet that calculates payments and income based on interest rate, sales price, down payment, estimated tax and ins, rental price, repair budget, time to recoup, cash at closing and a few other things for several different purchase and financing scenarios.

Remember that property tax will go up, possibly significantly (in addition to losing the homestead exemption) if it's been on an increase cap, and suddenly sells for a big profit versus the last sale.

Most county property appraisers have an online database with the current rate plus previous sales. This is gold for this type of venture.

 

[YY1]

...and make sure you have plenty of cash for the down payment.

Most banks are now requiring 25% down on investment property.

 

[monaco66coupe]

I have been selling for 25 years as a realtor, and have been a landlord for 22 years.
my take is there are only two ways to make money on rentals. By the month,or by the Decade. Some people like to own cheap houses and make as much as possible by the month, and take their lumps when they come across the occasional deadbeat.
others up the Home price, buy the higher quality home,and also get the better tenant. They tend to be less trouble, and they pay your mortgage down while appreciation pushes the long term value up. it isn't for everyone, but if you have a strong constitution it can be good business. Hiring a Manager cuts into the cash flow,and a large percentage of them are Incompetent, which is why they are property managers, not full time Real estate Salespeople.
Even after 25 years I learn something new every day. Just a tip for the other
Landlords here:
if you have a tenant that is a slow payer verging on late beyond 30 days and you get a hint they are considering bankruptcy, be aware. Even if you have filed for eviction and gotten permission to take back the property, if the tenant files for Bankruptcy the eviction is delayed until the Tenant is out of bankruptcy.
This could be 6-8 months, and they can occupy your home and not pay a dime in rent. Federal law treats A lease the same as a Mortgage where filing for Bankruptcy stops a foreclosure. The only difference is the tenant rights to occupy end at the end of the lease. I have a friend going through this right now.
And any Bankruptcy lawyer that assists a Tenant in this embezzlement from a Homeowner has no ethics or Integrity.

 

[furyus]

My wife does real estate, and helps find renters for landlords. Usually the charges are 1 months pay to the realtor, then 1st and last month's rent up front. Tends to keep out the bad renters. Not alot of rental property in this area. Rent is usually more than a house payment. So, you still get people who can't qualify for a home loan. Also a credit report is pulled. I personally wouldn't mind flipping a house, but I'd rather eat glass, than have renters.

 

[YY1]

Out of 5 in 11 years we've had one that I'd call "bad"- stiffed us the last months rent, tore up the carpet, left 500 pounds of trash including receipts for 3 each new macs, ipads and iphones, and the sales papers and warranties for 2 new cars and 3 disney season passes (all purchased in the past 30 days).

That's the bad.

That was the 3.5 week turn around.

This is the good-

Between those two properties, they pay 100% for themselves, plus the taxes and insurance on our primary residence, plus our electric, water and cable/internet/phone.

The only recurring bill we have left is the actual house payment on the primary.

If we could pick up another rental with the same income and expense numbers, it would take off about 80% of that.

 

[Timmayy]

I am a landlord in a lower level city in New England. It's not easy. Been doing it for 16 years. In my area it is very difficult to weed out the bad tenants. Look up housing court records. That is a good sign.
When new prospects come for an interview they always put on thier nice face. The after a couple of months the real face comes out. I make good money but I am always cleaning up messes, repairing and replacing things.
Just know that it's a second job.

 

[YY1]

We average about 16 hours a quarter between phone time, book work and going to the bank to deposit money ...plus the extra tax work and record keeping.

...and there's always potential for unplanned additional time.

I spent the better part of a whole day up on the roofs after Irma, putting in about 100 temporary shingles and taring joints.

..and if we have a turnaround, we budget for a full weekend and a couple of week nights, with the next weekend a combo finish and show.

We encourage the tenant to make "under $30" repairs on their own and give examples. Light bulb- OK, curtain- OK, punching hole in wall for any reason- NOT OK.

We had 14 applicants in one day last turnaround, and actually rented both houses that day, despite #2 not actually being ready to go.

Disclaimer- our houses are 1999 and 2000 built, so they're fairly new and reasonably well built block construction, and in a reasonably new subdivision.

We do find ourselves saying "what the F is wrong with people" on a frequent basis.
However, it's often a contractor, and not just the tenants we're referring to.

 

[YY1]

We have in the lease that we come once a quarter to change the A/C filter (to make sure it gets done). That also gives us a reason to enter the property and give a spot check with somewhat of a short notice.

 

[HT413]

Lots of great advice. I agree with the others, always background check, including criminal and court. But I’d add one other thing - don’t be a slave to the background check. Use your gut.

I had a couple apply and they were upfront that the husband was a convicted felon. But my gut said they were good hardworking people. So instead of tossing them, I researched the charges, had an interview with him and asked for 3 references. I then called and had long conversations with each reference.

Turns out he was from the inner city and when his old buddy got busted for dealing, my prospective tenant wouldn’t talk. So they convicted him of obstructing justice and some other stuff. But he had no direct involvement.

Anyway, because I took the time to look into it, I had a very good tenant for 10 years.

 

[HT413]

For me, to get them to respect the house, they gotta respect me first. So I remember their birthdays and give them like a $25 gift card for Christmas.

Never been screwed yet... except for the time that my brother handled the tenant and allowed the guy to get 9 months behind without telling me. God damn family!

 

[kiwigtx]

My wife and I were renters for a few years, and we always paid our rent/bills on time. Always left a property in better condition than when we moved in....the perfect tenants.
Sorry that doesn't answer your question much @747mopar

 

[Bb70charger500]

My sister has 14 rental properties I and her husband maintain s them hey do a background check and credit check that shows them trustworthy people he his special treatment to military police fire fighters and emt families in attempt to get them in his homes but most of the times the background and credit weeds out the most . He also looks in there cars when they come to look it it's a mess and not maintained he avoids them too. Never had any problems

 

[YY1]

...also about 20-30% of our "profit" is actually depreciation.

Not cash you actually ever get to hold in your hand.

You really have to run a lot of numbers and account for a lot of things including time, as mentioned earlier, or you can find yourself putting out a lot of fires, or losing money depending on income/expense and market rates.

If we'd have bought that 95K house and been able to rehab for 10K, the tax would have been 50% more than our other 2, plus a higher bank payment, and more up front cash out of pocket.

We would have had to rent a 995 sq/ft house for $1350 a month to be in the same I/E ratio (the others are 1100 sq./ft at about 950/mo ).

Probably wouldn't happen, however comps in the 1200 sq.ft are being advertised for 1200/mo.