I got into quite a lengthy discussion with my buddy about building an apartment and renting and such. Anybody hear ever do that? What are some of the pros and cons? I’m also looking for resources on the net, but everything that turns up is for people looking to rent, not actually owning/managing.
I don’t own an apartment, but I do rent my house.
I have to say I dislike it and I can’t wait until I sell the thing. I’ve even considered selling the house for the amount due on the morgage just to get out from the hassle of renting.
Are you interested in how much profit can be made or just the day to day hassle of it all?
My brothers and I own several pieces of rental property, but they’re all houses, not apartments.
A couple of suggestions:
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Get a good lease. Let me repeat that, just so you’re sure about what I said: Get a good lease. Have an attorney review it before you start using it. Clear, unambiguous terms. Easy for you, easy for the tenant.
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Don’t allow pets. They’re just not worth the trouble they can cause. People love their pets and their pets are never responsible for the damaged carpet and doors, the smells, the crap in the yard, etc., etc., etc. They don’t know how the carpet and doors got ruined, and they don’t know how all that dog crap got in the yard, but it sure wasn’t their Great Dane.
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If possible, start by renting to folks that you know or that have come to you via word of mouth. It makes things a little easier if the tenants are a known quanitity at first.
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That being said, don’t let the tenant take advantage of you. They have to abide by the terms of the lease. If they don’t, get rid of them. There’s usually a sizeable market for rental housing in every community, you’ll find someone to rent.
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That being said, don’t take advantage of the tenant. You have responsibilities under the lease. Live up to them (heat goes out on Christmans morning - you fix it.)
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Hire a good accountant, at least for tax season. The tax consequences of owning and maintaining rental property are complex and unless you’re an accountant yourself you have better things to do with your time than trying to figure out the tax code. Hire someone to do it - that’s what they went to school for and their mother will appreciate the fact that they’re putting their education to work.
That’s all I can think of off the top of my head.
Depending on the size of the complex, you may need to have on-site management. This is usually a retired couple that get free rent and possible a small salary for collecting rent, light maintance and such. Also the firewall to keep tenants off your back.
Find a good management team and keep them! This is critical! When all goes right, the only thing you do is watch the bank account grow. You never hear or see a thing that goes on with the property, and thats the way it should be! When you have bad managers, it is a nightmare!
No pets. Period. Stick to it. No amount of “extra deposit” is ever worth it. No exceptions! If you let the old lady have a parakeet, next someone wants a fish, then someone wants a “small” dog or a cat, then pretty soon you have a freakin’ zoo and the places all reek and carpets/drape/everything is a write-off. Pets are for homeowners. Get over it.
NO POOLS!!! I don’t even want to get into any farther!
NO KIDS!!! See the pet section, and extrapolate.
Be choosy who you rent to. Keep rents reasonable/low for the market, so you have little turnover and always many prospective tenants to pick from when the rare vacancy comes up.
NO SMOKERS!!! Hard to do, and you can’t really control it, but given the choice of two people with the same qualifacations where one smokes, he ain’t getting the apartment! Why? They stink, they make carpet/drapes stink, they litter by throwing their butts all over the landscaping and parking areas and in extreme cases they get drunk, fall asleep and set your joint on fire! Yeah, sure, anybody can cause an accident, but someone with something burning constantly in their hand is more likely.
Avoid areas with heavy snowfall, if possible. And have a good lawyer handy.
Good luck and have fun! (Screw having fun, make MONEY!)
Ask a stooped question, get a sore back.
One more thing: Don’t own rental property in California. The tenant has all the rights and can screw you and make you wish the building would burn to the ground, with them in it!
Check your state laws regarding landlord/tenant relations. Some states are better than others.
She told me she loved me like a brother. She was from Arkansas, hence the Joy!
My grandmother owns apartments, and from all that she’s gone through, I’d never even consider going into the business myself.
My advice:
First, high rent. Frankly, you’ll get a better type of renter. I have nothing against low-income people, but when Grandma raised her rent prices, her apartments suffered a lot less damage.
Second, credit and background checks on applicants. It may cost you a bit, but it’s really worth it. If an applicant has a history of domestic violence, you might want to think twice about renting to him. CALL THE PREVIOUS LANDLORD. Find out how he treated his last residence, and if he paid his rent on time. Make sure it is known that you will report any lease-breakage or money owed to the credit bureau.
Third, steel yourself into being a hard-ass. Soft-hearted people go broke in this business. Every month, you’ll hear a tragic story about why the rent can’t be paid on time. It may be hard, but you must be firm, or they’ll take advantage of you endlessly.
Fourth, learn to paint, plaster, and wallpaper. You’ll save yourself a ton of money if you can do these things yourself, and trust me, you’ll be doing them often.
Fifth, get very good insurance. If anyone gets hurt on your property, you’ll be glad you did.
Sixth, be prepared for endless headaches.
**gatopescado, ** in my state, it is illegal to refuse to rent to families with children.
I own a small professional property management firm, and have been a licensed property manager in my state (SC) for almost fifteen years (as a newbie I am uncertain how to do this but I’m trying to set myself up as an informed contibutor whose professional experience can qualify as a cite). At any rate, first before a lease or lawyer…become aquainted with federal and state fair housing laws and second become just as familiar with your state’s landlord/tenant act (or resolutions, or laws or whatever they happen to call them). This increases your chances of delaying the inevitable law suit. Always remember, anyone can sue anybody for any reason.
In this state, you are required to comply with all of the above so long as you own or manage four or more dwelling-spaces; Grandma who owns two duplexes is responsible for following all of these regulations and laws to include maintaining a separate escrow account for deposits.
Sorry to sound like Linus the Lecturer but I felt compelled to contribute.
That’s ok, that’s what I’m looking for.