Any landlords here?

[Teenwolf]

I'm considering buying a house with multiple suites, as I live in a cheap market. Our 4 bed, 3 bath house was purchased with the intention of having kids, but after recently deciding to course correct, we now prioritize income earning potential for future flexibility and early easing out of full time work... I've seen the way most landscapers age, and it's not pretty... We make less than $100K, but we're cheap and budget conscious to get by. Would love an extra $10K-$20K per year in rental income. We made about $10K in the year that we ran Airbnb out of our house, (with under 50% occupancy, so a higher earnings ceiling), but with no privacy, the stress added to workload wasnt worth it. I like that with Airbnb you aren't ever stuck with any jerks for more than a couple of weeks at a time. Most are nice, as the service incentivizes you to be.

Any landlords? Oh, specifically we paid $268k, owe $230K, not much equity, zero savings, $15K business debt, but stellar credit scores. Could likely get a 2 or 3 suite place in the $250K-$350K range. Interest rates are still low enough that a rental suite will cover 50-100% of mortgage immediately.

I wanna be in the almost 10% club like CBB, help a fella out!

[revo]

Yep. I've owned three multi-family houses (8 total units) in Northern NJ since 2003. It has its pluses and minuses. The minuses are dealing with tenants, finding new tenants, renovating apartments at a hefty expense, fixing small issues yourself, and finding quality and reliable repairmen for larger issues.

The positives are that you have people paying off your mortgage for you. You should be cash positive on a monthly basis, or you have overstepped. If you pick a good improving area, like I did (I did a TON of research), you could also see a significant price increase in addition to building equity through your mortgage payments. In fact just the other day, I was pleasantly surprised, shocked even, to discover how much houses have appreciated in my area in just the last 2-3 years. The regional newspaper even said this place was booming -- which is what I expected 12-15 years ago, but it took much longer than anticipated.

I have three mortgages (we refi'd two into 15-year mortgages) and have 8, 10 and 13 years left on them. I was just discussing this today with my best buddy -- do I sell all now/soon and make a profit larger than I had ever anticipated? Or wait the 10-12 years to get the huge annual income stream (after mortgage/taxes/expenses we break even now, but that includes our own unit and expenses that's covered by the rent inflows)? It's a good problem to have, and that's why you do this.

As a financial advisor, I recommend this to anyone if you have the stones for it.

[Gregg]

I was a landlord. I hated it. I rented two units upstairs and lived down stairs. Very often I was chasing the rent money. Those that paid on time bought a house and left a terrible mess. My best renter, neat, paid on time ended up changing jobs and had to move.

I also managed an 8 unit building for a friend of mine who was in the Military in Germany. The company that he hired to take care of the property ripped him off. He asked me to help him. It was a terrible mess. I stepped in before he lost everything. I worked hard to help him. I was even given a veiled threat when someone that I was attempting to get rent from stated I know where you live and mentioned my address. That did not go as they intended. Eventually I recommended he sell the building and found someone that had a lot of properties. He sold it a slight loss, but far from where it was heading.

The people that bought the building said that it was a business and you have to treat it as such. NO hardship stories, very little tolerance and learn how do do things on the cheap.

I would never do that again.

Maybe some in here will share good stories. I wish you best if you decide to try it.

Revo was posting while I was typing.

[Judge Jude]

depends on your personal tolerance for risk AND either your access to knowledgeable people in the field, or ability to find same.

I am renting and paying a preposterously low rent because my landlord - who lives maybe 3 miles away - had some horror stories out of the 2008 recession. a couple of his renters lost their jobs, and while at first he said they expected to get a new job and catch up on payments, they soon realized that evicting a "squatter" is very difficult here so why bother paying. meanwhile, we paid in full and on time every month.

so I am still paying the same rent a decade later in a booming region. if he raised the rent tomorrow by 35 percent, I'd act reluctant but I'd be bluffing. if he raised it by 50 percent, I would start looking into the local market - because I think I'd stay anyway and I could still afford it, but it doesn't hurt to look.

he hasn't been by to look at the place in 3+ years - and he hasn't been asked to fix anything or address any issues at all in that same time period. I suspect my rent is matching his monthly costs, so he gains equity year after year and he is scarred enough from squatter experiences that he doesn't want to rock the boat. works for him, and it sure works for me.

[revo]

It’s really not difficult to evict in NJ. The laws favor the landlords.


And Gregg is correct — you can’t be a liberal when selecting tenants. Use a credit check to weed out prospective tenants. I made a critical mistake almost a decade ago by accepting a new tenant without a credit check. She’s gotten better in recent years, but for years she was the biggest mistake I made in my entire life.

[Gregg]

In Illinois it can take 6 months to a year to evict a non-paying renter. Just because you get a judgement does not mean they get out.

[Judge Jude]

"It’s really not difficult to evict in NJ. The laws favor the landlords."

then maybe perception is reality here - or he had a poor attorney. not sure if a court would have dragged its feet in that era given the economic chaos? some reason that he had no luck getting his tenants out....

[revo]

"It’s really not difficult to evict in NJ. The laws favor the landlords."

then maybe perception is reality here - or he had a poor attorney. not sure if a court would have dragged its feet in that era given the economic chaos? some reason that he had no luck getting his tenants out....

Nope. Probably didn’t know what he is doing. If a tenant isn’t paying rent, the first thing the court officer says in mediation is “you have until 5pm today to pay what you owe.” There are no excuses for unpaid rent in the NJ tenant/landlord court system.

If the tenant doesn’t pay by 5pm the day of the court case, the landlord can request a warrant for removal. The lockout will actually happen 2-3 weeks later, depending on the Marshal.

[Judge Jude]

well, in this case Revo literally is the expert! maybe landlord just was/is too nice to pull the trigger.

my oldest brother, who went to Columbia U in NYC and then worked there, had a rent-controlled apartment near campus for decades. the joke was that he had to die there because why would you ever move? he got even more of a discount than I have. but then he and his wife had a kid and they all moved to the Jersey suburbs.

even if I didn't love the condo complex that I am in (and I do), I get the feeling. good info on what might rights would/wouldn't be, but I wouldn't screw over this good landlord even if I could - even under the worst of circumstances.

maybe the more general point is that being a very reliable tenant nets you tangible benefits. I lived in a rent-controlled apartment complex for years in the 1990s, and I never once got hit with the 5 pct annual permitted boost in rent. again, Revo knows this more than me x 1000, obviously, but from the other end it's clear that being a low-maintenance (literally), very-reliable tenant produces its own reward.

interesting to hear the perspective from the other side.

[Sour Masher]

Good diversity of perspectives so far. I have little to add, only echo. I was forced into renting the first home I ever lived in, a home my wife and I built and loved, when I left Louisville in 2012. We built in 2008, at the worst time in that market. We were under on the house in 2012 and could not afford to sell it for a loss. Since we were leaving the area, we thought it best and simplest to contract with a property management company. There were pros and cons to doing that, but the overall take away is, I would not do that again, if I could help it.

In 4 years of renting, we have 4 different tenants. Each time, it cost us a significant amount of money for the PM to find a new tenant and while all the renters paid almost exactly what we paid for our mortgage, overall, we lost 3-5k per year while renting, with the fees and transition expenses. This included one renter who would constantly call the PM for things as small as changing light bulbs, and they'd go out every time and charge us for the visits. We were super happy when we finally could sell the house and not have to deal with the headaches anymore.

But, of course, if you can do it like Revo, and make money instead of loss money, while also building equity in the home itself, and you are willing to handle small things and have someone reliable to handle big things, it does seem like a great way to build wealth smartly.

On the flip side, I echo what JJ says about being a good tenant. We now rented a home for 6 years. It has its issues, but we only call the landlord for big stuff we can't handle, and we let slide stuff that we probably should not, like pot holes in the drive way and a noisy heater or some outlets not working, etc, because this rental market is brutal. It is near impossible to find good rentals in our price range (tons well below it, and some great ones above it), and we haven't had our rent raised in those 6 years. So I see it as a tacit agreement that we won't bother him often or frivolously, and him not upping the rent or selling the home.

[Judge Jude]

wow, another great perspective across the board from Sour Masher.

I love RJ threads where I think we all can learn. this definitely is one!

[the heat]

I bought a rental property in 2011 (single family house).

I’ve had 3 sets of tenants which all started on a 1 year lease. They’ve all been about 2.5 years.
First tenant was great, always on time, took care of issues themselves & deducted any expenses from rent. 2nd tenants also good. On the few occasions they were late they let me know up front & it wasn’t more than a week late.
Current tenants I’m constantly chasing rent. I’ve served them 4 3-day notices in the last month. I’m about to start the eviction process...unlawful detainer.

It makes a profit unless there are large expenses/repairs. I found reliable people for repairs I can’t handle myself.

The best advice I can give is be very strict with credit checks. Any one of the tenants (like a spouse) that has no or bad credit, that’s a red flag. I have a pre-qualification checklist I hand to potential tenants while showing the house. It’s good for weeding out the unwanted.

Last time I was looking for tenants I put it on Zillow & a couple other rental sites (all free) & had more responses than I could handle properly. It’s best to promptly return messages or phone calls.

I use AOAUSA.com (apartment owners association). I think it’s specific to California though.
It’s not free, but they do my credit checks, background checks...a monthly magazine. They have all the forms I would need online & have phone support which I’ve used several times lately. It’s about $80/year & well worth it to me.

You can also check out the landlord protection agency (thelpa.com). I think I’ve just read their free articles & reviewed some forms.

[Teenwolf]

I was a landlord. I hated it. I rented two units upstairs and lived down stairs. Very often I was chasing the rent money. Those that paid on time bought a house and left a terrible mess. My best renter, neat, paid on time ended up changing jobs and had to move.

I also managed an 8 unit building for a friend of mine who was in the Military in Germany. The company that he hired to take care of the property ripped him off. He asked me to help him. It was a terrible mess. I stepped in before he lost everything. I worked hard to help him. I was even given a veiled threat when someone that I was attempting to get rent from stated I know where you live and mentioned my address. That did not go as they intended. Eventually I recommended he sell the building and found someone that had a lot of properties. He sold it a slight loss, but far from where it was heading.

The people that bought the building said that it was a business and you have to treat it as such. NO hardship stories, very little tolerance and learn how do do things on the cheap.

I would never do that again.

Maybe some in here will share good stories. I wish you best if you decide to try it.

Revo was posting while I was typing.

From this story, and many others, I'm gleaning that there's a higher percentage of problem renters than most people realize.

Anybody have experience renting out to students? I like the idea of an 8 month lease to a student, never stuck with anybody, with 4 months every summer to either fix the place up, or rent it out through AirBnB. Private suites can go from $70-$100+ per night, so there's a $2000/mth ceiling if you just get 60-80% occupancy... just a lot more laundry, cleaning, etc. Could also hire cleaning service so that it doesn't interfere with my work schedule as much.

[Hornsby]

From this story, and many others, I'm gleaning that there's a higher percentage of problem renters than most people realize.

Anybody have experience renting out to students? I like the idea of an 8 month lease to a student, never stuck with anybody, with 4 months every summer to either fix the place up, or rent it out through AirBnB. Private suites can go from $70-$100+ per night, so there's a $2000/mth ceiling if you just get 60-80% occupancy... just a lot more laundry, cleaning, etc. Could also hire cleaning service so that it doesn't interfere with my work schedule as much.

Is there a lot of call for AirBnB in Thunder Bay? Just seems like a long shot to me...

My Dad owned a fourplex back in the day and he hated being a landlord, for all of the reasons already listed, and some that weren't. Every time it snowed, he had to go and plow out and shovel the driveway and sidewalk. Every leaf that fell needed to be raked, and all of the piddly repairs had to be taken care of ASAP.

I wouldn't count on hiring out much work until you've owner the place for several years. You'll get more than a few 3am phone calls to mess you up...

[rhd]

There are pros and cons and it's hard to advise, but I can relate my experiences. I started renting out 34 years ago and I've had 4 tenants during this time, using a property manager the entire time who I pay about 8% of the rent. The 1st 2 didnt stay long, about a combined 2 years paid more or less on time and the house was left in good shape. The 3rd tenant stayed about 8-9 years and was very messy and was habitually late w the rent. We had to file papers on her several times and she always caught up the rent until the last time when she moved out w about 2-3 months rent owing. We got a court judgment against her but we were told we couldnt collect it (I forget the reason). The house was left needing a lot of work (replace carpet, lots of cleaning, repair minor damage, etc.). Got another tenant shortly after completing the fixup, which took a few weeks. This current tenant, who's been there 23 yrs, is very messy also and pays late but always ends up paying. We've filed on him at least a couple times for non-payment but he always pays up. He is a "hoarder" and the basement was full of junk which posed a fire and safety hazard. The PM and I told him he would have to clean out a lot of the junk and we've scheduled regular inspections (a couple times a year) to check on the condition of the house ever since. All we've been able to do is get him to organize the junk and clear a pathway so people can get thru the house. He's a nice guy but just keeps a very junky house and doesnt believe in paying until the end of the month, altho he makes pretty good money. I havent had to do an excessive amount of repair to the house, just standard things like replacing the roof, furnace, refrigerator and washer/dryer, fixing toilets and the AC, termite inspection, painting the outside, etc. The expenses, management fees, insurance, taxes and depreciation can be deducted from your income.

It's been a good investment for me, as the property's value has gone way up and the PM handles collecting the rent and most of the issues. So, I can recommend being a landlord if you have the right house (among other things, medium price range houses are easier to rent than more expensive ones). I would get a management company to handle things, which typically charge around 10% or so, but it's worth it. I also recommend regular inspections to check on the house's condition.