cancel
Showing results for 
Search instead for 
Did you mean: 
Highlighted
Senior Advisor

Investing in rental houses

I don't find the idea very appealing but I heard a couple of guys on one of the business shows this morning that were advocating just that. They think the housing market has stablized and the demand for rental housing will assure that those properties will pay for themselves.

 

If farm land is getting too high perhaps houses aren't.

0 Kudos
13 Replies
Highlighted
Senior Contributor

Re: Investing in rental houses

If I were a little closer to retirement and didn't have a son coming back in the next couple of years, I'd dump every bit of farmground I own and invest in houses and condos in cities like Las Vegas and Phoenix.  Housing prices won't fall forever, and ag. land prices won't rise forever.  I'd stick to the markets where prices will be the first to rebound. 

0 Kudos
Highlighted
Senior Advisor

Re: Investing in rental houses

What value of properties would you buy? I suppose the higher priced properties will attract quality tenants? I was thinking of the $150K range. I don't care much about immediate income merely that they cash flow.

0 Kudos
Highlighted
Senior Advisor

Re: Investing in rental houses

I managed two rental houses for my elderly mother for about 10 years and was sick of it.  And this was not in a bad area.

No matter what you wish, the relationship can get adversarial very quickly.  We started with a handshake and ended with a four page lease and everything in writing.

Some areas of the country will recover faster than others.  I'd ask the bankers, credit unions and real estate people which areas where most attractive.

Keep in mind that many governments now have policies in effect to determine your practices.  You can't just throw some bum out even if they deserve it.  You may have to rent to people with lifestyles that you fear will not keep your property up.  

If I were to invest in rental properties, I think I'd put up the money and leave the management to some professional, heartless, efficient and well administered outfit.  I'm not interested in doing that myself anymore.

My experience is that nicer properties attract nicer people but I'm sure that is individual.   

My bet is there is good money to be made in some aspects of rental property management if you have the right skills and temperament for it. 

0 Kudos
Highlighted
Honored Advisor

Re: Investing in rental houses

Houses may be cheap, comparatively speaking, now, but rental houses are rarely all that great an "investment" from my considered point of view.  Let's just say that pigs are better on a property than many house tenants are. 

 

I am evicting a squatter as I type this.,,not exactly a tenant, but a hanger-on after a property went to partition suit.    She had a public agency there yesterday, doing weatherization on a house she doen't own, and ought to be out of in a month or less.  I am sole owner, but no one bothereed to call me for permission..  My SIL happened to notice them there with their work van. 

 

I called the agency project director, expressed that I appreciated the improvements, but that I will not repay them for what they expend.  I also informed him that i was not liable for them while they are there, essentially trespassing.  I've paid two years of her share of the property taxes, and two years of her trash disposal, while completing the partition process.  Now, our tax dollars are putting in caulking and insulating her ductwork. 

 

As Judge Judy says, "This is a wonderful America."

0 Kudos
Highlighted
Senior Contributor

Re: Investing in rental houses Kraft

My brother has made a killing in rental properties, but the key for him was staying in for the long haul. Also be aware that about every two years you are gonna have a tenant destroy the place, and you will have some maintenance here and there of course. Also be aware he is in Denver and there is a lot of demand.

0 Kudos
Highlighted
Advisor

Re: Investing in rental houses

I have to take care of a rental property that my mother owns, and believe me, I'd much rather see it burn down. It's an old house that I guarantee you..will always have an issue when you don't have enough time to fix it. If I was investing in "rental" properties..it would have been those high rise condo's in Miami..that have little to no upkeep, because they are virtually new. As far as tenants...you'll never get one that takes care of your property the same way you would...so in effect, you're just maintaining a house...and hoping the property value goes up long term. Tenants in Ohio have the upper hand...it takes 3 months after they violate their lease before a court officer has the right to evict them..and it takes quite a bit of legal rigamarole to get to it. We had one tenant, that didn't even have electricity the last month he lived in the place, because it had been turned off by the electric company. He's really lucky we paid the electric on the barn..because that's where the well pump was located to pump water so he could shower and flush the toilet. His tenancy has even effected the latest tenant..because they had to go to the cable company's offices..and show that they are now living in this location...because they put a block on running cable to that address.

0 Kudos
Highlighted
Senior Contributor

Re: Investing in rental houses

Because I'm not going to do it, I haven't put a lot of thought into it other than here and there particularly after a local land auction around here.  However, I would set my sights a little higher than the 150K range.  Like I said, I'd be looking in the Phoenix and Vegas areas.  I'm not sure 150K would buy much of a property.  The target rentor group would obviously for me be of retirment age.  I'd more than likely be looking in the 250-300K range.  Renting out the properties would only be to see some sort of return in the short term.  If I were to do it, the primary objective would be to dump the properties within the next decade to decade and a half when property values rebound where the same 250-300K units bought would sell for at least double. 

 

I don't recall what housing prices looked like back in the early 80's, but I do know they were depressed when the economy went south in 1982.  Locally, irrigated quarters were bringing around 2K per acre in 1982.  If a guy would have sold then when the general economy went south, he could have picked up the same ground in 1988 for just under 600 bucks per acre.  I've always thought with the way things are going that we'll see similar action to what occurred then.  While I'd be willing to speculate here, I'm pretty sure the rest of my family would disown me or have me committed if I took part.     

0 Kudos
Highlighted
Senior Advisor

Re: Investing in rental houses

I am considering an investment company with a business associate I know in the vacation rental properties---they do the front work and have acess to mid range properties---time will tell  ?

0 Kudos
Highlighted
Senior Advisor

Re: Investing in rental houses

1.  define your targets, you looking at vacation type homes, single family suburbia homes, apartments, multi-family......

2.  consider the target, is the area defined as high rent, college town, low rent, rural, vacation, etc............

 

Why are these things important.............well a high demand vacation spot probably doesn't have nearly the depression in prices but income is probably good and steady and the clientel are probably pretty good..............a low rent or rural setting is probably cheaper but income could be sporatic and the clientel might be an issue.................single family homes typically require more capital versus income versus multi-family or apartments...............larger college towns usually provide a stable environment, but require an additional set of skills when dealing with certain clientel..............

 

Things to consider overall....

 

1.  the newer or better quality the unit/units generally make for better rents, upkeep, and tenants...........

2.  its usually all or none, might go two years with zero issues, but might spend 6 months in hell with problems...........

3.  got to have tough skin, remember when they leave its appliances, sheetrock, paint, and carpet, as long as they are law abiding, keep things relatively clean, pay the rent, and dont redecorate with a chainsaw its all good..........

4.  it pays to not settle, applications for rent and some face to face time will tell you pretty quick if they will be acceptable tenants, take time to ask the right questions............

5.  make sure the lease is bullet proof, so that you have some protection............

6.  be sure to keep in touch with the tenants, just cashing a check every month doesn't cut it, a call or swing by will help in more ways than one and is a good thing...........

7.  put some money back for repairs and don't expect to get rich, its a grind, don't expect to flip it unless you get lucky........

 

I would say the rental market is probably going to be good for awhile, with the tight guidelines on mortgages and tight cash for most, rental is the only way to go..............

 

And yes, speaking from a fair bit of experience, got into it in college to help supplement living expenses and well, never shook it...........one of those side projects that never goes away but never consumes you.............

 

Final thought, rental properties are kind of like marriages, you have to work at them............you either get divorced and go broke on the deal.............or you wake up one day and realize its been X number of years, so many you can't really remember, debt is gone, and its been a good but sometimes rough ride............

0 Kudos