Thinking about getting a rental property...

Steve_Kibbe

Steve_Kibbe

Well-Known Member
Joined
Oct 26, 2005
Location
Spartanburg, SC
My wife and I are considering getting into a few rental properties.
Who here has rental properties?
What should I look for?
Any tips would be appreciated!!
 
Do you have a budget in mind? Financing with your own savings/Ira/equity/loan? Right now we're kind of in a housing peak as far as prices in the last decade so it's tougher to find deals but that's the only way to make it work. Find something that can be rentable for 35k and you shouldn't have any problems.
 
Braxton is right it’s not a great time to get houses unless you already own them or are getting them dirt cheap. My house will be a rental in the next 5 years, it’s in a flood zone so harder to sell but in a great place to rent


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The first I have in mind would be a owner finance from a friend of mine who drives a truck now and can't manage from a distance. Rent would cover the payment. Its a doublewide one 1/2 acre with a well.
 
Trailers go down in value. It's a net loss, if rent is just covering the payment. I've owned a few low budget rentals. Never will own another.

@Ron has been pretty successful at residential rental properties.
 
Only thing I would say about that is--trailer aside because there's nothing inherently bad about owning a trailer rental--never buy a rental on well and septic. Maybe if you get it for virtually nothing it would be worth it, would have to know what your friend's terms are.
 
Good luck is all I can say.
I make a living with rental properties.....can't say it's fun but it's a living I guess.

I can give you all kinds of tips. But the bad thing is nothing is ever consistent. And the preachers son or you best friend if they are your renter will eventually become your mortal enemy in the end.
Been doing it twenty years. I'd be happy to talk to you.
 
I have one small property making its on payment.
lockedup5 is spot on. Keep it professional. I have fella, somewhat friend who help me with cash jobs several years ago. He is a one man contractor remodler type. He take care of the place. However he is constantly behind. Now is always worse when he seems to slow down.


He's now 3 months behind. I am afraid I'm gonna loose this friendship.
 
I picked up 1 rental, once. Was to be "My ship is coming in" deal! My ship Sank! The "Deal" never happened. But as a rental, there were Constant problems I had to address, & had several tenants, over a 15 month term. After the Last tenant moved out, I had to Totally remodel the house. At least they didn't ask for their Deposit back. The Worst problem will be getting someone that takes any care of the rental. From what I've been told, you might make some profit having multiple rentals, & a management company collecting the rent for you. but to have 1 or 2 rentals, you handle, will be a loss & Headache!
 
I own a duplex. I make $0 from it now. It pays for itself and has some tax write offs. It will be paid for in 3 years. That is when I will finally start making some $$.

IMO, you need a few properties to make decent money (relative term). But the more properties you have, the more time you will have to spend on them.

I anticipate getting away from residential rental property in the next 10 years. I may look into building a mini storage facility to supplement retirement income. We shall see what the next 10 years brings.
 
lockedup5 said:
Good luck is all I can say.
I make a living with rental properties.....can't say it's fun but it's a living I guess.

I can give you all kinds of tips. But the bad thing is nothing is ever consistent. And the preachers son or you best friend if they are your renter will eventually become your mortal enemy in the end.
Been doing it twenty years. I'd be happy to talk to you.
Click to expand...


This .... unless you have enough rental property to live off of , it's NOT worth it.
Grandpa died leaving my Mom & Aunt with 3-4 pieces of rental property.
Best day of my life was when they sold it.

Matt
 
Have a friend with 4 rental properties and a full time job the renters work the guy to death. Like anything else it’s about how invested you want to be I have enough people bothering me as it is.
 
I have wondered a lot recently, if you had some $$ to play with as an investment, and/or were will to take on money-making debt, if it was better long term (e.g. 20+years) to do it in property investment or to put in more of a conventional market manner like IRA mutual etc.

Owning a relatively inexpensive rental seems more safe in event of an economic turndown/market falloff b/c there will always be people who need a place to live, and in fact renting goes up when the economy is worse.
 
If you're talking long term then the market is most certainly safer. There are plenty of different ways to calculate your roi for an investment propery but If we are comparing apples to apples then you would be looking for dividend paying stocks and you won't come close to touching rental properties with dividends.
Truthfully, in my experience the people with problem renters either have shitty properties or shitty tenant screening procedures. If you're a nice guy and treat it as a hobby that is all it will be, if you treat it as a business then you can most definitely make money.

That being said, I own over a dozen houses and a small lot rent trailer park, have an llc in an obscure name and I give a guy 10% to take care of everything. I'm just the "maintenance guy" and don't deal with renter's at all..
IMO the best but not easiest way to get into it is buy shitty houses in decent areas with cash or owner financed and put the sweat equity into making it something a non white trash asshole would want to live in.

Mortgages are harder than ever to obtain and rental prices are going up, it's not a bad business as long as you treat it like a business.
 
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I have a dozen properties. They all have positive cash flow. I put all the profit into paying down the mortgages. Get a bullet proof lease. Have it updated annually. I have one property with 6 units that rent for less than $350 a month. They are great tenants. I just realize each person has their own special problems and work with them. Most have been there many years.

Here's a golden nugget for you. All my leases expire in December. I don't care what month you rent it expires in December. That way I can renew them all in December. Nobody wants to move that time of year.
 
Like @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.
 
Did it with my old house....rented to a life-long church "friend"

I wouldn't piss on them now if they were on fire

I'll NEVER have another rental property.

My friends who are successful, found a niche in the "Section 8" crowd, as the gubment is never late, never has excuses, and direct deposits. The clientele vary, but for the most part, are decent, as these are condos in a mid-class area, and not hood-ratt apartments or track houses. And these folks are usually life-long tenants and not high rollover.
 
I don't own any properties, although I've thought about it.

My sister is a property manager for rental properties, and the stuff she puts up with is nuts. I would definitely use her if I did. She's much less non-confrontational than I am. :lol:
 
incase you havent read between the lines, something everyone is saying but not spelling out is that 1 property isnt going to do you any good.

from speaking to those who are in the business, and the folks above may debate this if im wrong, but you dont start seeing any real income until you have 5 properties under your belt. the first 4 cover expenses and the 5th is your extra spending money on top of your day job paycheck.
 
It all depends on what you want your ROI to be.

Mine will be paid off in 3 years. When that happens, my LLC will use the income to buy some land to rent for farming. When I retire in 10 years, the LLC will sell the duplex and use that $$ to build a new house on the farm land. I will then sell the house I’m in now. Then I will “rent” from my LLC.

Or something like that.

I’m using mine as a way to fund my retirement house. A couple years after I retire, I will have no debt. I can live off my retirement pension (military).
 
@Ron @GubNi

How did y'all build up to these amount of properties? How long did it take? Was this with dual income or single income house hold? How much did y'all budget out of personal income to start?
 
@Steve_Kibbe

I knew I had this and its bothered me all day until I pulled some emails up to find it.
Last month a friend who is a birddog/ wholesaler called me on a duplex in Spartanburg. Could be bought for $60k, needs some updates ~$15k max, but should rent around $550/side. On the surface it seems like a workable deal.

But...
$60k @ 5% for 15 is a about a $500/month payment principle and interest only.
Assuming $1,100 rent income that leaves $600 month.
Take my capex comment above..capex I calculated at $125/mth
$475 left.
Insurance runs about $150/mth
$325/mth left
Vacancy at national rate 8% takes $88/month out
$237/month left.
Now property taxes....this is the killer here.

Property Tax

Year Taxes Land
Additions
Total Assessment
2016 $473 $21,000 + $85,100 = $106,100
2015 $428 $21,000 + $85,100 = $106,100
2014 $2,538 $21,000 + $85,100 = $106,100


Look at the 14-15-16 number. Know what the diff is? 15 and 16 were owner occupied. 14 was investor owned. This is an extreme state example...6x the taxes charged to an investor.

$2,538 /12 $211.50

That's $25/month if I dont have to make any repairs that month.

In SC know your taxes. They can KILL you.
BTW I offered on the property and my offer was rejected....its still for sale if you are interested....
 
Futbalfantic said:
@Ron @GubNi

How did y'all build up to these amount of properties? How long did it take? Was this with dual income or single income house hold? How much did y'all budget out of personal income to start?
Click to expand...

5 years
Wife hasn't worked in 13 years.
I know some here disagree with my next answer but initially I financed every property I have. I have moved some money around and structured some stuff to where not all have mortgages today but that was my acquisition strategy. In fatc it is what slowed me down, current fedderal regs make it darn near impossible to hold more than 10 mortgages at a single time.
 
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