LaCostaRacer

Wow, sorry to hear that things did not work out. It can be tough dealing with tenant issues and seeing home values decline at times.

I just see it as my tenants are paying the mortgage payment, extra principal and more each month. Eventually the place will be paid off (12 years) and then I can pocket a reasonable income stream and hopefully the place will appreciate from today's values too.

MR1

I have ended up losing 2 of 4, good news is I only have great tenants and positive cash flow left. Still underwater but life is good. Life is full of surprises. i'm glad for the degree of my health that I still maintain.

Hope future education is more positive and profitable.

Fibonacci

After five years of being a landlord, it was enough time for me to judge that it was not my cup of tea. I also didn't have any desire to scale up, so it made more sense to liquidate.

In all honesty, it was a stupid financial decision because I could have easily refied the minimal balance on my mortgage, rolled it out into another 15yr fixed and captured a very conservative $500+ per month in positive cash flow based on the now robust rental market. It just wasn't meaningful enough for me to want to keep it vs the time I had to spend thinking about it. I probably would have reconsidered if the house wasn't as old and didn't require constant TLC and was a bit closer to my current home.

TzarChasm

I have very rarely heard of anyone who really enjoyed rental property once they got into it. On the other hand, I have heard a whole ton of horror stories.

Do you think your experience was positive overall?

vas25tl

I have a condo and am waiting an approval for an offer we submitted on a home. I listed my condo for sale but am not getting any hits (It's only been 10 days though). I'm afraid I'm going to have to lease it out when the time comes to move into our new home.

I'd really rather sell it but I may be in a situation where it just isn't selling. I can swing paying both mortgages and letting it sit empty until it sells but who knows how long that will be.

Fibonacci

For me being a landlord was by default, or plan B if I couldn't sell at an attractive level. In hindsight, I made the classic error of being a bit overambitious in my original listing price back in mid '07 and was chasing the market down.

It wasn't a horrible experience. Had good tenants for two years. Second tenant's were fine for the first year, then got flaky on the second year bouncing checks consistently. I don't particularly enjoy laying beatdowns and it was irritating to have to send out the attorney nastygrams and chasing down late rent.

Neither tenant abused the house, it was just a minor annoyance to repair items because each occurrence was at least a grand (new sump pump, sewer line repair, leaky tile in the upstairs bathroom/replaced, etc.) Granted, it was an older home and I am not particularly handy so that added to the aggravation.

It was positive in the sense that I rode out the absolute bottom and chipped away at my principle for a few more years to ease the sting. That and I held up my end of the bargain by not walking away and dumping on my former neighbors. I do take pride in trying to do the right thing.

Like anything in life, you take your lumps, learn your lessons and move on a bit wiser.

LaCostaRacer

I guess I have been pretty fortunate renting a 70 year house. We redid much of it right before renting it out which helped. I have had the same tenant for 10 years so it hasn't been a big hassle to do. Here are my secrets to success:

1. In the rental agreement, have an 'discount rent' credit of $50 when tenants pay rent by 1st business day of when rent is do. For me it's the first of each month so my tenant always deducts $50- she paid on the 4th this month. In the 10 years, I have had only one issue and it was early on with a bounced check- they get charged the bounce fee and need to pay the extra $50 if that happens.

2. Be pretty conservative on raising the rent- have a basis for when you do and let that basis be known to the tenant. For me, I use the CPI as my basis and I baseline the rent to the CPI. Example: baseline CPI for 2003 was 186.6. The CPI now is 231.98 and I last raised the rent in June 2008 when the CPI was 216.4. A rent increase is due now but I'll wait until next Spring to do the increase.

The short take away is: don't jack up the rent all the time- tenants hate that. Remember one vacancy because of a $25 rent increase might take a years to recover depending on your rental rate. I jack the rent when it is $150 out of balance.

3. Touch base with the tenant occasionally. We try to send a Christmas card with some Starbucks Gift cards each year to let them know we appreciate their business.

4. Remember the Golden Rule- treat the tenant as you would want to be treated. For example, return their phone calls in a prompt manner and fix things when they are broken.

Legend2TL

This is a good thread, I've thought of buying some single family homes and renting them out with the housing market being what it is. Some friends/relatives who do this for supplemental income have very similar comments to many in this thread about the hassles and issues that seem pretty common.

speedemon90

My family owns one rental property, near UCR. Going into my sophomore year of college (4 years back) my friends and I were looking for apts/houses to rent and my dad thought of the idea to just buy a house and have them rent from us, which they did. Of course I ran into money issues with friends, that wasn't fun, but I do think property near university is a good idea.

Because this house is roughly a mile from the center of campus I think it will always be easy to find renters and well they will always be college students.

The con is that they are college students so maintenance is probably higher as shit always gets f'cked up faster.

I'm not doing much now in handling anything since I graduated last year but we found renters after I left. It was my mom's boss's son and his friends. They've been great tenants from what my dad tells me.

One thing my dad does is handle all the utilities, except cable/internet, pays for it and then sends them the total they owe. Now this works because we kinda know one of the tenants but I will be advising my dad NOT to do this after they move out.

So really our bad experiences will come when these guys move out and I gotta find new tenants.

I can see myself in the future buying property near colleges though. Assuming its still kinda smooth sailing for the future for this house.

We have also furnished the whole house except for bedrooms. Backyard also has a pool, which my dad is thinking about filling up for liability reasons. But its a good selling point so I dunno whats gonna happen.

stogie1020

Bump.

Anyone with rentals use a management company to find tenants, handle the rent, etc? Does this make more sense for a rental in another state?

Also, for those of you who rent, does a $300-$400 home warranty make sense (I realize this wont cover everything)? There is usually a $50-$75 service call fee and then everything is handled. Hell, you could even charge the tenant the service fee.

Dan

Yes and yes. A friend manages my rentals and it is MUCH better than when I did it myself. Monthly statements are much better to deal with than phone calls saying this/that is not working; usually on a weekend.

My current problem is a guy whose rent is $1500/month has only been paying $1100-$1200 a month because of "his hours being cut back". Expenses are only $500-$600 and he has been there for over 10 years. I am not his Mother and I want to kick his ass out, but this is California where landlords have no rights! It could take six months to get him out if he fights. Legal Aid used to just fill out paperwork, but now they are actually going to court too. Bastards!

TzarChasm

I think you need to decide what it's worth to you, if a guy has been a good tenant for 10 years, it might be worth giving him a break for a while.

On the other hand, if you want him out, I highly recommend just offering him money to move, something along the lines of " It seems like you are having trouble, you don't want an eviction, and I don't want to have to evict, so I'll give you your last months rent back so you can get something cheaper". It doesn't sound fair, and it's not, but it's cheaper and easier than going to court is likely to be.

As for Stogie's question, just make sure you do your homework on the rental management company just like you would any other contractor, some are good, and some are shady. My parents had one and they did a terrible job finding good tenants. Fortunately/unfortunately the last ones they found burned the place down, so they don't have to worry about it anymore.

stogie1020

Do you have a home warranty for the property? If so, do you have the tenant pay the service call fee or do you pay it?

Dan

I have never purchased any type of warranty for anything.

te3point5

Hey guys, where do you all have rentals? It's funny the number of people I meet who have no idea you can have rentals out of state. I live in SF, which is such a crazy housing market, the cost to enter is too rich for my blood, plus cash flow sucks for the initial investment.

My wife and I have rentals in Houston, Atlanta, Memphis, and one in Indianapolis. All cash flow positive and for an entry cost of ~30k per house, we'll invest there all day every day. 4 locations are pretty crazy for us to manage though, since we have full time jobs, so we are concentrating on Houston and Atlanta. We may possibly branch out to Austin, since the Tech market is having a mini boom there at the moment.