Becoming a landlord

[tvguy]

in that situation, if it were financially feasible (to the extent of even accruing some personal debt) i would put clearing enough to cover the payment each month AFTER finding someone that i knew i could trust to maintain and protect my property. i assume she will have to store all her furnishings and private property (been there for 9 months when we sold one home and lived in a small rental in your neck of the woods before buying the next) in a climate controlled unit to ensure non warping/mold of furniture, no damage to electronics. a SECURE/SAFE facility is was pretty costly. to be able not to hassle with all of that ( or at least reduce it dramatically) and ensure the care of MY HOME (not some rental property that will just get a cheap refresh and go on to the next tenant) i'd try to go with a trusted friend or family member and offer them a below market rate rental in exchange for them doing certain things pertaining to routine upkeep (changing hvac filters being at the top of the list b/c the last rental we lived in a month after we moved in the entire hvac went out only for the owner to learn the previous tenant never in 3 or more years changed the filter-the unit burnt out and all the duct work collapsed into itself-tens of thousands in damage).

She has a lot of decisions to make first. She's going to spend a week in Germany in May to check out the University she is thinking about getting her Master's degree at. If it measures up, then she has to get serious about what to do about the house, her personal property and her car. The 2% mortgage is a reason to keep the house. It has dropped $50,000 in value since the first of the year, but at current value she could just sell and walk away with about $150,000 which is not a bad gain on a $250,000 house she has owned for 4 years.

 

[barkley]

She has a lot of decisions to make first. She's going to spend a week in Germany in May to check out the University she is thinking about getting her Master's degree at. If it measures up, then she has to get serious about what to do about the house, her personal property and her car. The 2% mortgage is a reason to keep the house. It has dropped $50,000 in value since the first of the year, but at current value she could just sell and walk away with about $150,000 which is not a bad gain on a $250,000 house she has owned for 4 years.

with the car it could be much less expensive (vs. storage) if you and your wife were willing to let her 'sell' it to you for a couple of bucks, insure it and park it in your driveway. the multi car and low mileage insurance rates in california could result in a net savings over what she pays now let alone not having to pay for storage. you can turn it over periodically to save the battery.

 

[tvguy]

with the car it could be much less expensive (vs. storage) if you and your wife were willing to let her 'sell' it to you for a couple of bucks, insure it and park it in your driveway. the multi car and low mileage insurance rates in california could result in a net savings over what she pays now let alone not having to pay for storage. you can turn it over periodically to save the battery.

The issue is, she is looking to use the money from selling the car to live on for 2 years. At least at this point.

 

[Mackenzie Click-Mickelson]

She'll get it all sorted out I'm sure. Not sure if she will interview other property management firms, but so far the three she has talked to said the same thing, she needs a business policy.

She needs to find a property management company that works with someone who doesn't own a business and just has a property or two they rent out. A large firm may be only interested in the person who has 15,20,30 properties rather than the one or two properties. For a property management company they may be looking at their own profit margins and what type of client they themselves want to focus on.

 

[tvguy]

She needs to find a property management company that works with someone who doesn't own a business and just has a property or two they rent out. A large firm may be only interested in the person who has 15,20,30 properties rather than the one or two properties. For a property management company they may be looking at their own profit margins and what type of client they themselves want to focus on.

I will pass that on. Although I do know people with multiple properties and when you get to say 15 properties, they tend to move from a Property Management company to having their own full time person to manage them. A friend inherited 20 houses from his Grandfather. He has a a full time manager and a full time handyman. But those houses just all turned 100. His Grandfather 20 Sears kit houses and assembled them himself on land he owned. He has all the original records, his Grandfather paid a grand total of $19,000 for the houses and the land. Now my friend rents exclusively to Section 8, and HUD basically does a large part of the marketing and eviction process.

 

[Mackenzie Click-Mickelson]

they tend to move from a Property Management company to having their own full time person to manage them.

Yeah that can be a personal decision.

My step-father-in-law is an independent insurance agent. His most profitable insured has more than 35 properties mostly in our metro but uses a property management company. It would be too much work for just 1 person to handle all those properties plus it would cost a lot more for his costs on the salary. It's a lot to ask 1 person to do all that including interviewing the potential renters, fielding calls for maintenance and doing that work too as in hiring out contractors not to mention collecting rent, etc. Plus with just one person when does that person get a rest or vacation? Not all property management companies are the same too some are more for just the collection of the rent and the advertising and vetting of the potential renters. Some do it all. From what I know of the guy that has 35 properties is he still has outside contractors that come and do the handyman work but most often they are referrals from my step-father-in-law from his other clients he insures lol. The property management company collects the rent, advertises the properties, does the mailing of all the necessary documents (and thus takes care of the postage) and takes the phone calls from the tenants.

My sister-in-law and her boyfriend own a 4-plex and they do all the stuff themselves but it's a lot for them to deal with. If there's a water leak issue they have to sorta drop everything and go deal with it. Luckily they live close enough to the 4-plex. They are considering getting a duplex and I think they still want to do it themselves. Profit-wise (which they aren't making a huge ton) it would put them in the red to hire one person to do it but if they decided to go with a property management company it probably wouldn't. If you ask me and this is going back to the OP's question it's a lot of commitment on their ends to be the landlords. But they also have gotten and are looking in the case of that duplex on properties that need work instead of turn-key properties that may just need a spiffing up on paint. So when they have put these units on the market for renting they typically haven't needed as much attention after the fact. But I know they've dealt with water leaks and then an issue with locks.

Now my friend rents exclusively to Section 8, and HUD basically does a large part of the marketing and eviction process.

Speaking of that that is an issue in our area because landlords just don't want to accept the vouchers and such. I get it both ways (tenant and landlord) but some of it is stereotypical viewpoints and others is really we are in desperate need of housing. In my county they've shut of section 8 housing wait list for IDK more than a year now honestly it could have been 2 years at this point (time is weird now lol). I saw a figure just today for my area 40% of renters are exceeding the 30% mark HUD has for housing costs and 18% for the homeowners. This was in relation to the county on the other side of the state line as me having an average of 30% increase in property values. That county only does re-evaluations of properties every other year.

 

[china mom]

I have not read the comments yet but wanted to address the question about trying to find Military renters. There is a website that if free for you to list your house. MilitarybyOwner.com. I have not lister there in years but it used to not allow realtors or management companies to list, only owners. But you can list there and then direct any inquiries to your management company or realtor.

I'll come back after reading other posts

 

[china mom]

This might be a state by state thing. I carry homeowners insurance on my rentals but have identified the properties as rentals. You would think that this would make my rates higher but it did not. This is because I am only insuring the structure and liability, not the contents. Tenants are required to have renters insurance to cover their contents.

I do have a $2M umbrella policy but it costs somewhere in the ballpark of $350 a year ad covers my personal residence and my cars also.

 

[china mom]

OK, I have four rental properties, three long term rentals (LTR) and one short term rental (STR). I am operating at an annual loss but have more than made up for it in equity. I am playing the long game, I am building equity.

Before embarking on this adventure, you need to be emotionally prepared to no longer think of the house as "your house" rather an business. DH gets emotionally attached and it hurts his feelings when a tenant damages the house that used to be our primary residence. I get mad at the damage and the expense but do not take it personally. You need t be prepared to accept that they will not only not love your home, they won't care about it at all.

Some will take good care and some will not. But the ones who do take good care of it are usually basically good people and/or want their security deposit back. They are not emotionally invested.

 

[barkley]

I have not read the comments yet but wanted to address the question about trying to find Military renters. There is a website that if free for you to list your house. MilitarybyOwner.com. I have not lister there in years but it used to not allow realtors or management companies to list, only owners. But you can list there and then direct any inquiries to your management company or realtor.

I'll come back after reading other posts

curious-are there real estate sites that market home sales to military as well? I ask b/c we've always been curious about a particular home in our neck of the woods that has had multiple owners and each and every one has been recently or soon to be retired military who (from what we can tell) have bought it sight unseen (some moved from distant states, at least a couple from stationing outside the country). it just seemed to us more than just a coincidence.

Tenants are required to have renters insurance to cover their contents.

this was the norm around us for renters for several years but now landlords and complex owners have upped the requirements and mandate some minimum amount of liability insurance on the renter's part. the place my oldest rents is pretty much in line with other (not high end) apartment rentals in our area and requires a minimum of $100K in liability coverage on the renters part.

 

[china mom]

Next: The money. The rule for investors looking to purchase for rent. I don't think it translated as well as my next rule because it is dependent on factors such as interest rates, taxes, HOA fees and such but the rule is that rent should be 10% of you purchase price. So if houses of similar size rent in your area for $1500/mo, you should plan on spending $150,000 or less on the house.

To me, a much better rule is the 3x your mortgage rule. You should look at you current total mortgage, multiply it by 3 and if comps in your area do not rent for that, you will not earn money renting your house. None of my houses rent for 3x the mortgage, hence I am losing money annually. But, I am building wealth. If you plan is to build wealth, not income, you can relax this rule somewhat but I would still stay above 2x mortgage payment, and even that is scary.

Also, do not embark on this unless you have cash reserves to cover several months without rent, major repairs and tenant turnover costs.

I am not saying this to scare you. You just need to be prepared. It is hard to make an income from rentals unless you scales but starting out small, it is still a good way to build wealth. My current real estate equity is between $1-1.5M.

 

[china mom]

curious-are there real estate sites that market home sales to military as well? I ask b/c we've always been curious about a particular home in our neck of the woods that has had multiple owners and each and every one has been recently or soon to be retired military who (from what we can tell) have bought it sight unseen (some moved from distant states, at least a couple from stationing outside the country). it just seemed to us more than just a coincidence.

I truly don't know. I listed my one house on MBO for rent and never looked to see if they also have homes for sale.