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Contributor

Re: Investing in rental houses

I just returned from California visting relatives.  They are funding their retirement with income from rental houses.  In the San Diego county area the overall market is still depressed but you have to jump immediatly when reasonably priced properties (under $200,00) come on the market.  With a requiste down payment, and clean credit, it's possible to get low cost mortgages with monthly payments well below rent received.   In that area, rents are strong because so many people have lost their homes, who may have walked away from or foreclosed out of impossible mortgages, but are still employed.  They can't qualify for home loans but are good rental risks.  Two caviats:  You need to have connections with reliable contractors to do renovations that will be affordable and you need to be on site to monitor your tenants and re-rent vacancies.  It can't be done by remote control without considerable slippage.  You have to choose wisely as you rent and have the stomach to deal with bad tenants as described in many of the posts here.  Its harder and more risky to rent houses than renting farmland!  Population demographics favor attractive sunbelt sites as they will grow with boomer retirements and other immigration.  They expect a 40% population increase in San Diego county over the next twenty years.  Also unlike farmland, in most states, home mortages are non-recourse.  The bank can't go after your other assets if a deal goes sour and you stiff the mortage holder.  This is a big deal; because what you risk is that property, nothing else.  Everybody and his dog seems to have skin in the game around San Diego.  Newby's beware. 

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Honored Advisor

Re: Investing in rental houses

Longterm, I really expect to see some sort of "forgiveness" statutes or self-dictated banking practices, perhaps driven by bankers' desires to be forgiven their own sins, that might bring a lot of people back into the housing market as buyers.  It may take a while, but the only way our economy recovers longterm is to re-ignite at least a part of the mortgage-fueled fires of home ownership.

 

Housing starts will stay in the toilet, until stocks of existing homes are consumed in some manner.  I am thinking this will possibly put quite a damper on plans to get rich quick on rentals.  We saw one small town go highly speculative when a big new employer came on the scene about a decade ago...reasonably-priced rentals snapped up, and rents jacked sky-high.  Gentrification in a way. 

 

Now, locals in this area who I know pretty well, who had been into rentials as a retirement funding plan, are not all that happy with them.  I see them hunting for tenants on Facebook, and hear they are being cheap in ways and to a degree that they never did before. 

 

The thing about renting that has always bugged me is that few tenants are ever grateful for your being fair to them.  Most see that you are some rich bitch with more than one house to your name, and they have none.  You ought to let them live in it for free, fix it fast when they break something, and consider that every personal problem they have should be visited upon you, their landlord.  Shudder the thought that they need to provide their own shelter at any personal expense.

 

I have had some great tenants, and a handful of others who literally rented one small house, and expected to have the run of several hundred acres as a playpen.   Mike's saying is that "there are reasons some people HAVE to rent." 

 

Some of those reasons - a mobile career path, tempprary need as when in college, etc. - aren't really problematic.  We knew one guy whose wife drank and fell asleep smoking, burning down several places in the process.  Pets can be a liability and sanitary problem.  Children, ditto. 

 

It's not for everyone. 

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Senior Advisor

Re: Investing in rental houses

Good points Jim. I wonder if I even have the temperment for it.

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Honored Advisor

Re: Investing in rental houses

We have a situation going on with two of our tenants at odds with one another right now...teh two houses are too close together, and one of them thinks she rules the roost over anyone who occupies the other.  The last one I had with this kind of attitude has a different address, very far away, now. 

 

We fix up houses to be nice and comfortable, rent them very reasonably, and all we ask is that everyone get along with the other tenants on the place.  Three out of four is not sufficient. 

 

One bad apple there can drive me to drink, so I had two glasses of wine with dinner tonight.  Should have had three.  Mike is on the phone with our son, who lives there and manages that place, right now.   He has been dealing wiht the festering situation for a while, and it has come to a final head today. 

 

I am staying out of it...his place, his call.  This situation would call for the wisdom of Solomon.  We have agreed in past problems that if we could get away with it, we'd burn down three of the four houses and be far better off. 

 

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