I've been thinking about the possibility and I was wondering if anyone here has investment property. If so, what is a good resource for information? I know there are plenty of ups, downs, risks, and rewards. SO what do you like and dislike about it?

 

i guess it depends what state you live in? here in the peoples republic of Massachusetts the tenants have all the rights and the landlords have to be very careful, there are several good guide books out with all the rules and laws, make sure you get one that has the laws and rules for your state, i stopped renting a few years back, got tired of having to go to housing court just to get my money!
i actually had to give back a renters security deposit, despite them owing me 4 months back rent and court costs.

 

The pluses: If you structure it properly financially (that is, rent in versus expenses out), you get just about the maximum return on investment of anything with such low risk. You put down 25%, your tenants pay down the mortgage, often there's a little extra cash flow on top of that, plus when the market goes up x%, you earn x% on the whole value of the unit even though you only put in 25% of that. And, when things are going smoothly, it's an investment that just sits there and makes you money while you sleep, unlike, for example, investing in your own business. Further, once you start to gather some serious equity, the banks will love you and court your business and help you leverage that unit into more units. Finally, there are all sorts of accounting methods available to reduce the tax payable on any cash flow, and for the capitalgains part, tax on capital gains is always less than tax on income, and you pay it only once you liquidate - your equity compounds on the unt-taxed total value, unlike income which gets taxed first and then you get to do something with it.

Minuses - Renters (of which I was personally one for decades) are not the cream of society as a group. You have to either take the time (and the loss if a unit is sitting empty) to search out that minority of quality renters or take a risk. If you get a bad one, it can be a nightmare. You're covering a mortgage you didn't really budget to cover when they don't pay rent, which throws your personal finances into a mess. IF you use trades for repairs, it can bite deeply into your profits, but if you do it all yourself it means you basically become a jack-of-all-trades if you have difficult tenants or a place that needs a lot of repairs. It's not a job for those easily stressed out over uncertainty.

 

Not always true. Most of my tenants are people who get job transfers every couple of years, or young couples just starting out in the world. Renters, as a whole, are not bad people. I manage between 85 and 90 units right now, with a handful of deadbeats.

Yes, there are a number or people out there who play the system and screw us over. However in my experience, quality renters are, by far, in the majority.

Keep in mind when you're looking for property that the quality of the building(s) and location(s) are EXTREMELY important to having a successful investment. If you've got a run-down building in a bad neighborhood, you're not going to be able to get/keep the kind of people you would want to rent from you. Location should be the #1 factor in buying real estate. It's easy to fix up a building... rehabbing an entire neighborhood is next to impossible.

My best advice would be to find a Certified Property Manager (CPM) in your area and talk to him about the ups and downs of investment property. He should be able to help you find property that would suit your needs. He'll want to manage the property for you, but that's your decision. Best way to find a CPM would be to go to www.IREM.org (Institute of Real Estate Managers), search for a local Chapter, and get in contact with the Chapter office.

 

My neighbors recently moved to New Mexico, and decided to rent out their house here. Well, it turns out that they are having trouble finding someone to rent the house. Also, due to a high interest rate on the mortgage, even if they do find someone to rent to, they will be losing money on the property.

As long as you get your ducks in a row, its a great thing. However, it can take a bit of work to get everything lined up.

 

One determining factor should be the demographics of employment. Where I live the economy is not that good. Most jobs that are left are paying less than three years ago. The higher paid people have been laid off and have moved, or taken lesser paying jobs.

Houses are usually on the market for six months or more. You can buy older houses in the old mill towns cheap enough to rent, but getting the money out of the tenants and repairing the damage is the hard part.

A lot of former rental houses and mobile home parks are on the market right now, and some have been for quite a while.

It all depends on the market, and most of all, the location of your property. I have two commercial rentals. Much less headache, easier to get the money, not as many tenants rights, meaning you don't have to let them stay rent free, and sometimes end up paying them to leave.

A close friend has half of her stuff empty because she got tired of not getting paid while at the same time people were destroying the property. She would try to make them move, they would file a complaint. She had to let them live there rent free until it the complaint was resolved. After months of this, and IF she won the complaint, she got to start the eviction process.

The whole time, up to six months or more, the people are living rent free.

It is not like this everywhere, and some upscale rental property does good. It's just too much of a problem for me to do residential rental.

Buy a small strip mall that needs some repair, but in a decent area. Just be sure to do a realistic expense to income ratio. You could end up paying out more than you take in, even if things go perfect, which they rarely do.

I don't mean to sound pessimistic, but I try to be a realist. Things are not that good in my area right now.

 

If you’re serious about rental property, I would suggest a rental property manager for your property. I used one on one of two occasions, when I rented my lake property. They take care of the legal stuff, evictions, etc. as well as having a vested interest in keeping it rented.

The second time I handled it myself and found just how easy it is for seemingly respectable people to lie to you knowing you knew they were lying. Every month was one tragedy after another in that family. If it had all been true, they could have sold their story to Oprah and had more enough to buy the house. If I had known how much damage they had done to my place before leaving, I would very likely have wound up neck deep in do-do because I know I would probably would have done something that would have been deemed correct in the eyes our court system. Research ‘renter’s rights’ if you need something to read that is really scary.

I would never rent again unless there was absolutely no other option including selling the property.

 

At the very least, consult with a lawyer. You don't have to hire a lawyer, just consult with one.

What my cousin does is charge his rent in cash. No cheques, no pre-payment. Cash on the 15th, every month. It's in the contract drawn up by his lawyer. Late payment doesn't get a late fee, but if it's more than a week, there's a moving van out front, either waiting to load, or waiting for the cash to stay. That's in the contract too. And he balks at the tenants rights. The contract he has is stronger than any tenant court. All his tenants are hand picked too. Background checks, previous land lords, etc. The cash thing is to prevent NSF charges for both parties. He claims everything, never had a problem with Revenue Canada. The tenant gets a receipt, so if anything goes down, everybody's covered. And keeps everybody honest.

 

Sounds like everyone talks about the headache. There is a good side to investements too!!
Good resource point, www.thelpa.com

 

you have to have the right personality for it, which i did not have and i don't think i would ever do it again. the worst tenants we had was my wife's cousin, and the softy i was i didn't make them sign a lease agreement our lawyer had drawn up because they were related,what a mistake that was.

 

We still have two of our own apartments, and handle 8 for my dad.

It can be very hit and miss. We bought our building when the previous owner declared bankruptcy and went into the wind. We had a long standing relationship with the bank holding all the paper, so the purchase price was right, and many of the financial/legal issues were handled with a minimum of fuss.

My first piece of advice to a new/perspective landlord is: DO NOT ACCEPT ANY TYPE OF GOVERNMENTAL RENT ASSISTANCE. None, not even once. These are the worst type of renters. They have absolutely no financial intrest in even basic cleanliness issues with YOUR building. Plus, the HUD, or state or local body distributing these payments will ALWAYS side with the tenant in disputes.

The last one we had actually got me drug into a property seizure hearing. The a-hole was dealing drugs, and claimed I knew about it. Well I did know, and I reported it to the HUD office, and the police. The HUD agent lied in court, said I never contacted them. The local police showed logs of my calls and visits with them.

Other than that, pick your renters very carefully. A month or two of tight personal budgets can eaisly be dealt with. 5 or 6 monthes to get legal evictions, with no income can lead to personal disaster.

Always budget 30 % more for any expense than you think is necessary. You may not know the previous owner's maintence ideas. These can lead to major problems.

Finally, contact local professionals. I would start with a real estate agent that sells investment properties. These people know your local market, and can help steer you in the direction of other professions whose advice you would need. A good real estate attorney is worth their weight in gold.

 

Finally, contact local professionals. I would start with a real estate agent that sells investment properties. These people know your local market, and can help steer you in the direction of other professions whose advice you would need. A good real estate attorney is worth their weight in gold.[/QUOTE]


This is TRUE! I work for a commercial real estate investment company and we know a lot more than property managers and residential real estate companies. The people I work with all make minimum 250K a year. Once clients work with my company they almost always stay loyal. You put a lot of money in someone's pocket from knowing the market then you will reap the rewards!!! I am learning for now....working for my cousin. Quit my job in Colorado and came out to California. Selling and Buying Apartment buildings!!!

 

Tell me about it.

I have friends that are landlords that go through all kinds of ca-ca with some of these terrorists, I mean tenants.

There is a strong tenants union here; but also have a Small Properties Owners Association too.

We even have this P.O.S. (can't name him due to legalities) who thinks tenants should live rent free at the landlord's cost.

 

Got any job openings?

 

Yeah, send me an application too.