There’s a 3 bedroom house near me coming up for foreclosure auction. minimal damage, 8.5 fenced acres. I should be able to rent it pretty easily, especially since there’s a large college with an equestrian program 15 minutes away. I’ve been thinking of buying it if it goes cheaply enough (so the PITI is about $200 less than the rent should be,. to save up for repairs that will come in the future).The house is only 15 years old, so many of the systems should still have a lot of life yet.
My thought is, the house should be paid off around the time I’m thinking of retiring, giving me a nice little secondary income. But what do I know about being a landlord? Not much. So educate me.
If you have decent renters, it can be a great idea. If you have bad renters (or even just one) your life could turn into a living/financial hell.
We had some renters. They turned a new refurbed house into a meth lab apparently. Had to refurb IT AGAIN personally. They did SO much damage and so much had to be redone the realtor told us we could actually change the build date on house title. It took many thousands of dollars in material and about six to eight man months worth of labor to fix that house. That was one long unpleasant year for me. It almost ended my and my SO’s relationship.
I’d look for some local “renters club”/association to find out how strong or weak your local renters laws are when it comes to protecting the rights of renters vs those of the landlords.
If you can’t be a hardass when required when it comes to late rent or kicking out bad tenants regardless of their sob stories then I would suggest being a landlord is not a good idea. And I would also suggest that you better have some deep pockets to fix things should things go poorly. You might be able to recoup those losses, but if you can’t afford to fix em now and recoup the losses later you’ll be in a world of hurt if the shit hits the fan.
Check out your local apartment association. You might also consider starting with a management company. If you do it your self remember it is your future, do not give it up because your tenant has problems.
Renting for $200 more than the mortgage doesn’t leave much room to cover problems. (Do you have a few thousand dollars at hand in case the air conditioner needs to be replaced? Do you have the financial discipline to plan on and start saving for a new roof in 5-10 years?)
What’s the nature of that 8.5 acres, and who will be responsible for maintaining it? Your prospective tenants will probably not be farmers or landscapers. It’s one thing to require someone renting a house on a 1/10 acre lot to keep the lawn mowed and the hedge trimmed, and something entirely different to keep 8.5 acres in good shape.
I am a collector for a living, so I think I wouldn’t have a problem asking for rent, insuring it’s on time. Of course, I don’t know what rights tenants have in my state to stay if they stop paying.
I know $200/month isn’t much for catastrophic repairs, but I don’t foresee (of course, no one does) those coming. And realistically, I think the asking rent could be more like $400 more than the PITI, but I tend to think conservatively. The roof is tin and will last for many, many years. Certain things I can repair myself, being somewhat handy. A new heating and A/C unit would be the biggest expense I could foresee in the next 5 years or so.
The land is pasture, and I would hope to rent to people who want to keep their horses on it. I could increase the rent to cover the livestock board. I live a couple miles away and have a tractor for my own farm. I would expect the land to be mowed a few times a year. The yard upkeep would be the responsibilty of the tenant.
purplehorseshoe - I would mow the fields with my tractor or hire it done. It’s only 8 acres. Since they’re fields, they don’t have to be manicured, just kept from overgrowing. The cedar trees are sneaky. I would definitely have a lease. I believe in spelling out exactly what each party can expect.
My hope would be to rent to college girls who want to bring their horses in from out of state. But I don’t care as long as the money is green.
The county I live in specifically has a “landlord/tenant relations” office. They came in very useful when I had to evict a tenant for non-payment of rent. They described step-by-step how to do it.
There are very specific laws involved in my county, and most of them are in the tenant’s defense (to prevent getting stuck in a questionable lease by the evil landlord).
My two cents is check with your local government. And make **sure **your tenant signs a lease. If they don’t, I wouldn’t think you’d have a leg to stand on if they do something to damage your property.
I agree with gotpasswords; $200 is not much a margin. It means the loss of a single month of rent, or one semi-major repair will eat much of your year’s profit. And what kind of reserves do you have if you have a disaster?
Mind you, I’m not saying the whole thing is a terrible idea. It depends very much on what kind of area you live in, and what your tenant pool is like. I have a three-family house in a decent area, as well as a three-family house in a not-so-decent area, and believe me, it’s like night and day in terms of getting good and dependable tenants. If you have decent tenants, you might not even have to think about the place from one year to the next. But if you have sketchier tenants, the thing will be constantly on your mind.
And of course, with only one unit, you have all your eggs in one basket – though admittedly that works both ways.
By all means, look into the legal framework – tenants’ rights, landlord’s rights, zoning, inspections, etc. Again, how much of a hassle the bureaucracy is depends entirely on where you live.
And by the way, are you buying this place with cash? Because if you have to finance, be prepared for a major hassle over that alone.
When a tenant filled out the application. I wanted them to list at least the last 2 places they lived. If they are bad tenants, the present landlord will tell you they are great so they can get rid of them. The earlier landlords are more likely to tell the truth.
One house is risky. You have to keep it rented all the time. But when you have a good tenant, it can be easy money.
By the way. they are paying off the note plus giving you some extra. When you retire ,it will be paid off and all the rent ,minus expenses will be profit.
All good points. But our meth lab renters had perfect references and a good credit score. It appears their interest in meth did not appear until after they moved into our place.
Also, I think one should keep in mind real estate may no longer be the growth investment it used to be. Yeah, the other folks may still pay it off for you, but the real estates relative worth may not go up many times its original worth like real estate has done for so many years in the past. Heck, in many markets it looks like value growth may stay flat or even decrease over time.
If you want safe renters, you want military folks. The military doesnt want their people running around renting places and screwing over landlords. Its been my understanding that if you rent to a military person and they try to screw you over, if you complain to their command, with a legit complaint, you have a darn good chance things will be fixed.
Not that I speak with any expertise here but that seems like a pretty small population of renters . It it common practice for equestrian students to rent out an entire property for themselves? I would think students of means would board their horse and live where the action is on campus (or near campus with other students).
For students with more time than money, self-care is ideal. Not everyone involved in horses is rolling in cash. I know lots of college kids with horses and not one of them is “of means.” They pay horse bills out of their pocket, and make a lot of sacrifices along the way. In My experience, competitive riders don’t take a lot of interest in traditional campus party life anyway.
I’m probably the worst person to answer this question, because I had a rental property for a while and always had great tenants. I really had no problems at all. It was like printing money.
However, I think of buying rental properties again every once in a while, and I always decide against it. The exchange-traded funds I buy instead of rental property will never call me on a Saturday with a busted whatever. I would need to make a shitload of money to justify risking my time with my daughter every weekend, and I don’t see that kind of return in real estate.
I’m not expecting to make a huge profit, and don’t really hope for much more than that the property will pay for itself until it’s paid off. I have enough money to cover several months of unoccupied time or some pretty major repairs, if things don’t go my way. As I said earlier, my expectation is to use it as supplemental retirement income in the future. My own mortgage will be paid off in about 8 1/2 years, and I carry no other debt. My $200/month estimate is very conservative
As far as tenants, the reason I wanted college equestrian girls is because (as Hello Again said) they usually are so busy between care, training and school that they don’t have time for partying. I would also guess that most college students who run short of money go to Mommy and Daddy, not stiff their landlords. I really don’t care who it is, though, as long as they pay. And cook meth in the 3 car detached garage instead of the house. The house is about 2 miles from house adn I pass it on the way to work, so I can keep an eye on it.
Still, the idea of extra debt is not attractive. Nor are the 3:00 am calls for repairs.