PromoTheRobot Posted May 18, 2014 Posted May 18, 2014 We are considering buying a multi-unit house to rent out. We're trying to do as much homework as we can on it. I know rules vary from state to state. (We live in NH.) Can anyone offer any insight into the pros and cons? I've heard the horror stories yet people still do this. PTR
Maury Ballstein Posted May 18, 2014 Posted May 18, 2014 Pros --- make money Cons -- crackhead tenants who skate by without paying rent for 6 months before police kicks them out. Court dates, lies, missing work to deal w crackhead "x"
zevo Posted May 18, 2014 Posted May 18, 2014 I guess it ultimately depends on the area which will most likely dictate the quality of your tenants
mrags Posted May 18, 2014 Posted May 18, 2014 I own a rental unit Promo. You can PM me anytime. But I'll give yiu my highs and lows off the top of my head. My mortgage and taxes rolled into 1 is 893.00 a month. I take in 575.00 from one tenant, and 650.00 from the other. For 3 years I only received the 575.00 while I lived in and remodeled the other side. Took me a while, about 10 grand and a ton of work but now I'm profiting every month. Although I'm still upside down on why I've out in, I have no doubt that things will work out and I'll make money. At the time I bought my house, I got hired by NYS and had to drive back and forth every Monday and Friday to Albany for the academy. If I wasn't receiving Income from my tenant, there's no way I would have been able to keep both. Either the house or job would have had to have gone. And when I was temporarily downstate in the Catskils, it wasn't any better. The income was a savior. It also made it easy to work on the house because I essentially wasn't living there more than a few days every few weeks. Remodeling sucked. Ate up 2 years worth of tax returns and a huge retro check from work. But HALF of the remodel is complete. Still have the other half to go. Gonna do that side with my tenants living there and gonna do it very slowly at my own pace though. The way I see it, they've lived there for years. When I bought the house they were ok with their side. So any major issues I fix, anything cosmetic, that's on them since they were the ones who trashed it in the first place. This past fall/winter we had a bad flood in the basement. My sump pump broke. Couple of inches. Sucked. Was on the morning of a Home game too. I ran to Home Depot. Got a new sump, replaced it. Bought a massive shop vac and made it to the game barely on time. Also had a leak in my roof this past year. Was right at the chimney. The chimney needed pointing. But because it was so bad for so long it created a mess of the roof. Had a friends father come over to point the chimney (that's what he does) and patch the roof to get me through the winter. Although in gonna have to fork over about $5k this summer for a new roof because I doubt it will last another winter. At least if it's as bad as this one. My electrical, hot water tanks, furnaces were all within 3 years old when I bought the house so I was good there. My advice, if yiur going to do it, make sure that stuff is all set. Only buy something that might need cosmetic work unless you fall in love with a house. In hindsight, I would have easily spent another 30k on a house that was more updated and needed less work. Would have made my life easier these last few years and what I can only imagine my next few years. Have a lawyer write up your lease agreements. Mine was from a lawyer and it's as ironclad as the Bills lease in Erie County. Try not to let your tenants dictate to you anything. I'm in a battle right now between the 2 I have. One has been there for years. Was there when I lived there. I know she's a bit loud. You can hear through the walls but not too bad. The other complains about every single little thing. Getting in the middle of that is rough. That's why if you have specifics in your lease it'll help. Like for example, mine says that the noise levels must be lower after 10pm at night. This way if my one tenant complains it's too loud, well, it was in your lease when you signed it. You know what you got yourself Into. Just the other day she contacted me wondering if there's been any issues with vandalism in the area. Apparently her car was "keyed". I looked at it and I know because I've done it myself before but she out something in her trunk and scratched it herself. She even admitted to me that the other day it was fine when she was putting things in her trunk. She just didn't want to admit it. But it was no "key job". Oh well, if she had renters insurance like I recommended, she would have been covered. Not my fault. And when I was in Jamaica in my honeymoon (yeah, I'm married now... Woot) she emailed me asking how to turn on the AC because it was 85 degrees out. I explained to here many times that there's no AC in the house. That windows and fans is about all she can do. Sometimes, people are just helpless and idiots. You've for to deal with that a lot.
mead107 Posted May 18, 2014 Posted May 18, 2014 I had a 10 unit for afew years. Check them out good and fun credit checks. Had a guy fall in the tub and die.
PromoTheRobot Posted May 19, 2014 Author Posted May 19, 2014 Thanks for the stories. I have a little money coming soon and my wife and I need to turn it into more money for retirement. I'm trying to do as much homework as possible and know there are risks and pitfalls. So far what I think I know is to spend more and get a property in better condition. Also go for minimum 3 unit houses, preferably in areas with good schools.
mrags Posted May 19, 2014 Posted May 19, 2014 Good schools/nicer areas are much better. Mine is on the border of city. I get a bunch of scumbags when I look for for tenants. Nicer area would fix that. Higher rents too. Also, if your going to do it. Open a separate account and deposit at least a portion of the rent in there every month to build up an "oh chit!!!" Fund. For when things go wrong like a flooding basement or leaky roof.
mrags Posted May 19, 2014 Posted May 19, 2014 (edited) Insure everything remotely reasonable. forgot that. I've got a million dollar umbrella policy on my rental. And at one point I made it mandatory that my tenants provided proof of renters insurance prior to moving in. That way, any injuries, damages, thefts, would be covered by their renters insurance before my umbrella policy would be activated. Edited May 19, 2014 by mrags
Ralonzo Posted May 19, 2014 Posted May 19, 2014 Renters are like little stupid children that will do everything practical to break everything possible. I wish to God I had never gone down this road, cash flow notwithstanding. I don't like stupid people. Non-stupid people do rent, but the percentage is so small, and let the gummint get a sniff of you trying to find a non-idiot to rent your property and you have a discrimination lawsuit. And since when was discrimination a 4 letter word? It used to mean you could tell the diff between what was good and what was crap.
truth on hold Posted May 19, 2014 Posted May 19, 2014 A good experience is the exception. Whatever income you expect haircut if by about 15%-20% to account for the normal wear & tear, repairs for damages they caused (but not worth your effort to dispute), outside manager, and legal costs for having them removed when they default on rent.
ICanSleepWhenI'mDead Posted May 19, 2014 Posted May 19, 2014 . . . I'm trying to do as much homework as possible and know there are risks and pitfalls. . . . I tried googling "rental real estate for robots," but all I could find was: http://www.dummies.com/how-to/content/real-estate-investing-for-dummies-cheat-sheet.html Seriously, although I haven't read the book, the bullet points listed at the above website sound reasonable. Not sure if there are better landlord association options, but you might want to explore this website as part of your "homework" - - there must be some sort of apartment owners' association in NH that would give you access to some of the info you're probably looking for: http://aanh.pilera.com Good luck.
mead107 Posted May 19, 2014 Posted May 19, 2014 Back in 2005 had just went through a basement apartment new rugs kitchen cabinets. Rugs installed on Friday we went to home opener and I get a call 8am Sunday morning that the sewer line that goes to the road backed up. Had to redo the rugs as it spilled over all the new rugs. Have the phone numbers in your phone of all the different trades. Rent to young girls and they will want to know if you could take money off the rent for some sex when they can not pay.
Best Player Available Posted May 19, 2014 Posted May 19, 2014 in out experience. leave the headache to them. Hire a management service, pay their fees and sleep at night instead of replacing water heaters during a Bills game on Sunday.
Ted William's frozen head Posted May 19, 2014 Posted May 19, 2014 So far what I think I know is to spend more and get a property in better condition. Also go for minimum 3 unit houses, preferably in areas with good schools. IMPORTANT: Live close to your rental units. managing property from a distance can be a problem. I moved to a rural location that was over 30 miles from my building. I ended up selling the building since I was now an 'absentee' Landlord, and the management problems escalated.
Guffalo Posted May 19, 2014 Posted May 19, 2014 We have one nearby that has been a rental for around 17 years and it is not bad, the 3 am phone calls can be annoying, but the income covers the taxes and leaves us with a bit for other things. We are just about to close on another in South Carolina and we will be using a management company to handle the calls and collecting rent. For the SC home, we expect to retire there someday and hope to let the tenants pay it off (or a chunk of it) before we go down. Don't gamble all of your recent new found money, let a bank take some of the risk, by allowing the property to be paid off by the renters (and keep some for yourself). This also allows for some nice tax breaks since your income is offset by the interest paid on the mortgage. If you have a 10-15 year mortgage, when you do decide to retire, you have one of two options, A) You have a fully (or mostly) paid off asset that you can sell for a chunk to be applied to an annuity or other investment vehicle or B) You have a property that will continue to give a positive income but in your retirement years you will have to start paying to have work done since at 70 years old you may not be able to do as much as you did when you were in your 40s-50s.
Gordio Posted May 19, 2014 Posted May 19, 2014 That's what I do. Don't even have to think about our rental unit. My manager does everything; the tenants don't even know I exist. The other thing is that we are able to charge a pretty high rent, which helps with the quality of tenants. That's what I do. Don't even have to think about our rental unit. My manager does everything; the tenants don't even know I exist. The other thing is that we are able to charge a pretty high rent, which helps with the quality of tenants. How much does the management service cost? If you could make the margins work I would think this would be a nobrainer to hire them even if they cut into your cash flow. Who has time to deal with all of this stuff, especially if you have a demanding job/wife/kids.
Security Posted May 19, 2014 Posted May 19, 2014 I have been lucky and unlucky. Had a 5/1 ARM, but the rate is now LOW, like 3%. I only pay like 700 and I take in 1020 a month. I have had the same tenant for 8 years. She pays late every month, she pays between the 15th and 25th, but ends of paying. I deferred to a company called Renter's Warehouse, they charge me like $70 a month and they harass my tenant and collect the money. They have made my life less stressful.
Just Jack Posted May 19, 2014 Posted May 19, 2014 Have a lawyer write up your lease agreements. Mine was from a lawyer and it's as ironclad as the Bills lease in Erie County. And know what's in the lease. I had an apartment years ago that I was able to break the lease early even though the management company said I couldn't, because they used a generic off the shelf lease agreement, and I was able to find more than enough things in it that they were in violation of to basically tell them shove it, I'm out. Things like entering the apartment when I was not there and not notifying me, not doing repairs in a timely manner, abandoned vehicles in the parking lot not being removed, etc.
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