Is anyone here a landlord?

Discussion in 'Bad Dog Cafe' started by geoff_in_nc, Apr 11, 2016.

  1. sacizob

    sacizob Friend of Leo's

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    I would sell it. I've been a landlord, you get good and bad tenants. Always an excuse for late payments, something always breaking. If I had to do it over again, I'd let a management company handle it.
     
  2. dan1952

    dan1952 Friend of Leo's

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    A rental property is like a boat: The second happiest day in a man's life is the day he buys one...the HAPPIEST is the day he sells it! BTDT...
     
  3. roadkillbill

    roadkillbill Tele-Holic

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    I've landlorded a bit over the last 25 years, and if I had to offer one piece of advice, it would be go high end over low--nice newer or renovated places renting for top dollar marketed to people with good jobs and incomes, as opposed to older falling apart buildings rented at the market's bottom end, attracting tenants who are a car breakdown away from eviction every month. Sounds obvious, but I've done it both ways and one is a constant headache, the other a breeze.

    I guess the only way to apply this to the OP's question is to ask where on the scale his particular property sits.

    Headaches aside, and there have been many, I'd have to say it's always been financially rewarding, in the long run, and I have no regrets.
     
    6stringcowboy and nomadh like this.
  4. nomadh

    nomadh Tele-Afflicted

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    Lots of good stuff here. See my likes of others comments.
    I have rentals and do well. I have them in good upper neighborhoods, midlevel house keep the rent a tick below market and don't raise it for years at a time. People stay for years. Sometimes handing it off to a friend or fam member. Usually need to make a sig price bump at the time.
    Credit check , credit check, credit check!
    Check the laws but if I can do it in CA you can do it anywhere.
    Start off with a prop mgmt. co. ITs good training wheels.
     
  5. geoff_in_nc

    geoff_in_nc Friend of Leo's Silver Supporter

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    Yes indeed! Thank you tapollock, and everyone else who responded. You've given me an awful lot to think about, and I really appreciate it.

    As for the market position of the house, it's a mid-1990's suburban neighborhood, 2400 sq ft, quarter acre, good schools, desirable area of town. I'd consider it middle to upper middle class neighborhood. I would guesstimate the houses in the neighborhood would sell for between $240K - 280K, maybe a little higher. Mine is in the upper half of that range I think.
     
  6. tapollok

    tapollok Tele-Holic

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    geoff...

    If you are considering renting the property...it's easy enough to check current rental rates to judge what you may expect to rent for.... as well as to study recent comparable sales in your area and current listings to judge what you might sell for.
    Again, if the property is still mortgaged, you could download a blank Schedule E (Supplemental Income) form and plug in values to calculate what you might expect to retain after expenses and depreciation. That might help you determine if you can command enough rent to override the tax advantage of the mortgage deduction (which usually affects whether one can itemize on 1040).

    Renting opens up a world of "paper" deductions (depreciation, expensing property taxes, vehicle expenses, etc.) that allow you to lower your tax burden...but it can also create a "paper" reduction in your taxable income which can lower your ability to borrow on a new property (lower income/debt ratio).

    Do you know what your home's value track has been over the years you've owned it? Can you find info on projections for your area in the coming years?

    Hope that helps,
    Tom
     
  7. dented

    dented Doctor of Teleocity Gold Supporter

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    Wow. I rent a home out that is 2500 miles away from me. I see it once a year. I have always scrutinized applicants very hard and only take the ones I want. I have a property management company take care of the place along with all of the plumbing, gardener, snow removal and rent collection. The rental agreement is very wordy and explanatory. I make money on my rental. If a tenant is in for a couple of years I paint it and change the carpet and write the expense off as a cost of doing business. Read up.
     
  8. tapollok

    tapollok Tele-Holic

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    I'm glad that it's working for you...I'd be curious to know what you mean by "make money"....but I hope it continues for you.

    However, "the exception doesn't prove the rule".
     
  9. KokoTele

    KokoTele Doctor of Teleocity Vendor Member

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    Suburban neighborhood: your ideal tenants are professionals without children. Check local laws regarding housing discrimination. You do not want to rent to families. Children are harder on houses than pets, and mama will be calling you about every little thing.
     
  10. stephent2

    stephent2 Poster Extraordinaire

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    We rented our old house for a bit over 10 years and to our credit, seldom had any tenant issues. We really took a good look at potential renters, called all of their references, credit check, check w/ previous landlords, employers, etc. And most importantly, listened very carefully when we met them to show the house. Folks have a way of telling about themselves if you just listen.

    We sold the house last year and my wife and I will look at one another and say, "hey, we still don't own the rental house". It was a lot of work, we did improvements, kept the house in good condition, which eats into profits,... so assess your own temperament. Decide if it's for you and decide if you have the skills to deal w/ the hassles you will encounter.
     
  11. phaedrus

    phaedrus Tele-Meister

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    If you feel comfortable, go for it. If you don't, then don't. So long as you live near by, it really isn't that hard. The most important thing is to screen tenants properly. It sounds like your property is in a decent area, so screen for good credit scores, require a deposit, first month's rent, etc. Don't budge on tenant quality or the money. If someone can't come up with deposits, then they won't be able to pay the rent. It's better to have it sit empty for a month or two than to have crappy renters who will drain your resources.

    I recommend pricing the rent a little below the market, then you will have the pick of the litter. Offer deals for longer leases. Put clauses in there about proper maintenance. I have sections on mowing the lawn and watering the trees. If they don't I charge a monthly fee for hiring a service. Have them pay by ACH draft if possible.

    Everyone who will be living there goes on the lease and gets a background check. Don't fall for only check me, but my partner will be there, too. Run both of them.

    You will need different insurance; your current carrier will offer it. Just call. Mine was actually less expensive. Put something in the lease strongly suggesting the tenants get renters insurance. You can't require in most cases. And have them sign on the lease that they are responsible for their own coverage.

    Don't bother with placing the property title in an LLC, if you go pro then think about that. One side-effect of that is that you cannot convert the property back to a primary residence for tax purposes. However, you do need an umbrella policy. You get this from your homeowners insurance company. Don't worry, you get to deduct this. You get to deduct everything.

    As a regular homeowner renting your old house, don't expect to make any money. You're doing this to protect your equity and let someone else pay for your house to appreciate. Over time you'll make money, but not right away. People with multiple properties make money, but that's their gig.

    Make a spreadsheet that mimics the layout of the Schedule E form. Keep track of rent, expenses, and mileage. TurboTax makes everything easy. You can rent out the house for up to three years and still sell it with the primary residence capital gains exclusion. After that, it's a commercial property in the eyes of the IRS, so you'll pay capital gains unless you roll it into another property. Or, you can move back in and reset the clock.

    Try to manage it yourself instead of using a service. Most charge 10-15% and will call expensive contractors for every little thing. Most of these folks are barely more qualified than you, and are juggling lots of properties. They have no interest in keeping costs down or spending any more time than the law requires. So that means they are mostly glorified answering services with a hefty price tag.

    Screening for good tenants eliminates most issues. I get very few calls.

    Get familiar with Craigslist and Trulia. You can post ads on both places. Trulia will bring you better tenants generally.

    Waterbeds? Just say no. Put that explicitly in the lease. Make them sign it. No waterbeds.

    People with pets make great tenants, and they will be grateful. People with too many pets are horrible. Put a limit on weight and number. Require a hefty deposit. What you want to screen for is people with packs of animals. Let the deposit do the screening for you. 1 month's rent per pet. I don't change quite that much, but you get the idea. Ask for a picture, meet the pets if you like, get copies of their vaccination records. These last things will eliminate all the problem pet owners. Responsible people take their pets to the vet, they are their children. Trashy people don't.

    Some good resources are:

    Every Landlord's Legal Guide
    Every Landlord's Tax Guide
    nononsenselandlord.com
    iboughtaduplex.com
    tenantbackgroundsearch.com

    Most important factor, screen your tenants. Bad tenants equals misery, good tenants equals bliss.

    Think about it this way...

    If someone can lay their hands on all that cash: security deposit, pet deposit, 1st month, last month; that's quite a bit of cash. And they have good credit scores and clean background check. That person is going to be good. If someone can barely scrape together 1/2 the security deposit and wants to make installments, then no matter how high their credit score, etc. they will ALWAYS be trouble.

    So in conclusion, properly screen your tenants, and everything else works out.
     
  12. Geo

    Geo Friend of Leo's

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    If you decide to rent it make applicant pay a fee up front for a credit check.
    That will usually eliminate most undesirables one way or other. Landlords here
    generally select a good potential renter then require them to pass the credit check.
     
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