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@braxton357 and
@GubNi I too have a few rentals.
Today I have 10 properties and 18 doors. I also have 2 of those doors ( a duplex) in Spartanburg County.
I am going to give you a few important fact considerations without offering an opinion on whether or not you should get into it.
- I agree with Braxton regarding problem renters. I slightly over fix my properties and screen the hell out of tenants. I will leave a unit open for months instead of taking a bad tenant. Having the financial positon to be able to do that is huge to me.
- In SC specifically you ahve to carefully research property tax. Primary Residence is taxed at 4% and secondary/rental property is assessed at 6%. Further complicating it, many SC counties also assess a (sometimes much) higher millage rate. York county is about the worst in the state on this. I can give you some specific numbers if you care.
- If you are "covering the mortgage" you are going broke and dont know it. Unless A) the mortgage is a 12 year or less mortgage or B) the home is an A property and brand new.
- Run your numbers until they are second nature. Then run them some more. Taxes are a fixed cost. Vacancy is a fixed costs. (8% is the national average I average about 4.5% over a 5 year history and its dropped every month for the past 16...yes I have a spreadsheet). HVAC units have to be replaced every ?10 years? and costs ?$4k? to replace. That means your new HVAC unit costs you $33 per month. Roofs cost ?$5k? and last ?20 years.? That means your roof costs $20/month. If you arent budgeting for these capex items you are making a crucial error. Again I have a slush fund where I can cover these, if they are within a few years of replacement on acquisition I go ahead and change them out before I rent it because...
- Know the law. A rental property isnt like your personal residence. If the HVAC goes out at home and you are broke you can cover up, use a kerosene heater, use a fan for a week or two etc. In a rental property you will likely have a legal obligation to fix it and fix it now. There are other nuances you have to know.
- For me every property I own is held in a different LLC. Then I own a holding company that holds these LLC. It would take a while for anyone to find out Im the owner. Like Braxton says, Im just the maintenance man.
- Understand the law and always apply it. Yes I know he is your cousin, or you used to work together or you went to high school with his sister...he will screw you. He wont mean to, but he is still a renter at 40, probably not by choice. He has made reckless decisions and will continue to. Those decisions will leave him unable to pay his bills one day and if you are a friend you will be the first skipped because "you will understand".
- Specifically in Spartanburg County. Make sure a SC lawyer approves your contract. Know the FFH standards. Read them again. Understand everything you do is setting a precedent. SPBG has a magistrate that is very tenant friendly despite the state as a whole being pretty landlord friendly. If you let one tenant who is 10 days late slide on the late fee one time because his mom died. You now have to let every tenant slide 10 days without a fee every time or you are discriminating.
Beyond all that there is a ton of room for personal preference. Like Gubni all my leases expire at the same time, but I am polar opposite of him n when. My leases all expire May 1. I dont want a "Captive" tenant who doesnt want to be there. May-July are prime moving months and I want the best pool of potential tenants when I need to fill a vacancy.
I am actually considering going exclusively to month to month leases. If the tenant wants to break it they will either way and with a month to month it makes eviction easier on me.
Ive done 2 evictions, both were on inherited tenants who came with the property. I wont buy those anymore.
Ive given you a lot of the bad here, now lets try the good.
On the first of every month $8,600 is deposited in my bank account. I may or may not have done anything for that money that month. I cant spend all that money, mind you, but its cash flow.
I have a separate line for all rental property calls. I received 4 phone calls last month. 1 was asking if I knew of any properties open because a tenant had a friend who needed a place and we had such good properties...
On this point. Set expectations up front. When they move in along with the contract signing, we have a common langauge no legal terminology run down of expectations on both sides.
- If there is a water leak of any kind, call me right away.
- If something is broke it will be fixed promptly. I want you living in a nice home.
- You are responsible for general adult stuff. Light bulbs blown out, clogged toilets, or "running out of hot water after a 40 minute shower" are not repair problems. If you call the repair number for these problems you will receive a bill for the service call. Except water leaks. Those are always free. Anytime you see water leaking call us. And I give them and have posted in the house some basic info - style and wattage of light bulbs, etc. I leave a plunger in every house. New when they move in. It costs $10 well worth it. I change all my own air filters 1x per quarter. Its a free chance to get inside and inspect the property.
I may think of more later and will be glad to post up if I do. Any specific questions feel free to ask.
