Investment Properties

[ineedawatch]

I thought about adding this post to a previous thread of mine, but thought that I might start an interesting discussion with a new thread.

Does anyone here own property that they rent out?

About me:
24 y/o
Living at home, not being charged rent
60K salary (might fluctuate slightly with bonuses <5k)
No debt, no car payments, nada

Right now I have a solid job and while its not glamorous, I'm getting great experience, and see myself being here another few years. So I have a steady income.

I've been thinking. I live two hours away from Chico State. I've been looking at the real estate up there and it seems like grabbing a co-op for under 200k is very do-able. I'm actually looking at a 4BR, 2BA apt, for 177k. With today's rates and only a brief looking, I'd be spending anywhere from 650-900 a month on mortgage payments with 30k down. I also think I could rent that out anywhere from 4-700 a bedroom to college students. My parents are thrilled with the idea of me getting into real estate, but I'd like to hear from people who rent out properties.

What advice would you give? What would you advise against?

I'm only starting this thread because I've gotten a lot of great answers in the past on other threads and am looking forward to more!

Thanks!

[cpark]

You're 2 hours away from Chico State? Did you got to Chico State?!

Originally Posted by ineedawatch

I thought about adding this post to a previous thread of mine, but thought that I might start an interesting discussion with a new thread.

Does anyone here own property that they rent out?

About me:
24 y/o
Living at home, not being charged rent
60K salary (might fluctuate slightly with bonuses <5k)
No debt, no car payments, nada

Right now I have a solid job and while its not glamorous, I'm getting great experience, and see myself being here another few years. So I have a steady income.

I've been thinking. I live two hours away from Chico State. I've been looking at the real estate up there and it seems like grabbing a co-op for under 200k is very do-able. I'm actually looking at a 4BR, 2BA apt, for 177k. With today's rates and only a brief looking, I'd be spending anywhere from 650-900 a month on mortgage payments with 30k down. I also think I could rent that out anywhere from 4-700 a bedroom to college students. My parents are thrilled with the idea of me getting into real estate, but I'd like to hear from people who rent out properties.

What advice would you give? What would you advise against?

I'm only starting this thread because I've gotten a lot of great answers in the past on other threads and am looking forward to more!

Thanks!

[AgentHsu]

I would advise to also consider the costs of property tax, insurance, maintenance, and any renovations you might need to make it tenant-ready. These costs can add up quickly.

Being 2 hours away from the property might make it a little more cumbersome to check out maintenance issues, if they come up. For example, pipe leaks, floor damage, roof issues, electrical issues, etc. College students also tend to throw parties, so be careful about who you're renting out to. Parties damage your property, annoy neighbors, and ultimately cause trouble for you.

Another thing to consider is the turnover for renters. As a property owner, I'd prefer to have tenants who stay there long term. Each time you lose a tenant or group of them, it costs you time and often times money to replace.

Make sure you purchase at least $500k in liability insurance on your rental dwelling policy, since being a property owner makes you likely to have legal issues on your hands.

Good luck!

[El Cascarrabias]

. . . and be sure you form an LLC to protect you from being sued personally.

Involve a real estate lawyer. Preferably one who owns rental property themselves.

Originally Posted by AgentHsu

Being 2 hours away from the property might make it a little more cumbersome to check out maintenance issues, if they come up. For example, pipe leaks, floor damage, roof issues, electrical issues, etc. College students also tend to throw parties, so be careful about who you're renting out to. Parties damage your property, annoy neighbors, and ultimately cause trouble for you.

Look into having the property managed by a real estate agency so you are not having to handle the aggravations that come with management.

If you use a management company have your lawyer look over everything including the management agency's rental agreement.

Consider doing criminal background checks. If you're leasing to multiple persons you do not want to be accused of leasing to someone with a criminal background. Especially if involves crimes of a sexual or violent nature.

If you are looking at the property as an investment (not just rental income) make your money on the purchase not assumed appreciation. In other words, ask yourself, "Can I sell this property next month and make a profit?"

ASSUME NOTHING!! GET A LAWYER!!

. . . and good luck!

[waQstar]

Excellent idea, no investment like real estate investment, getting a property manger is a must.

[teqp]

2 hours away from the property and renting to college kids, I would use a property management company. As others have said,don't forget about property taxes, any HOA fees, insurance,gardener, maintenance property management fees. When you factor all these, make sure the rent covers it all. Also, use a real estate agent to find the tenants so they can run background checks for you or at least have an agent draw the contract and run the background checks. Good luck with your search.

[cdmorenot]

I have investment properties. I own a two family with a legal basement in northern NJ and I own two single family homes in Mooresville NC. All units are currently rented out.

My advice: Start early. The earlier the better. Real Estate is safe and it only snowballs. You may not put much cash in your pocket but you'll be sitting on hundreds of thousands on equity before you know it

Get a property manager and only lease through an agency

Have an attorney review all aspects of the lease agreements

Don't buy properties where taxes are too high , keep the overhead low

When possible, try to get section 8 tenants

With $30k , get two mortgages and pay PMI - Get help from your parents to qualify and let someone else pay for your properties simultaneously

Do you live at home? If so, stay there and milk it. Stay away from TRF and don't buy any watches yet.

Good Luck!


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[Tri-Tip]

Don't know if I'd want to rent to college students.

I have a rental property and originally didn't want to allow pets, and then realized that a pet could do less damage than kids and I can get an extra security deposit.

[Almostlucid]

I know Chico intimately. Make sure you can cover expenses with positive cash flow for 9 months of the year. I wouldn't bank on renting by the bedroom, that could get sticky. You actually may have a bit of exposure there. I would rent the apartment out as a whole unit. Get a good deposit,Chico has been known to have a party or two. Btw a property manager will run you about 9%.

[mrricks]

Criminal background check, credit check, history of evictions, former landlord check, employment check and salary verification.

I recently had a couple that had tens of thousands in unpaid debt, (never made ONE payment on any of their loans), 3 evictions, and 3 sex offender convictions.

A manager is essential if you are new at this, and their fee is partially tax deductible.

[ineedawatch]

Originally Posted by Almostlucid

I know Chico intimately. Make sure you can cover expenses with positive cash flow for 9 months of the year. I wouldn't bank on renting by the bedroom, that could get sticky. You actually may have a bit of exposure there. I would rent the apartment out as a whole unit. Get a good deposit,Chico has been known to have a party or two. Btw a property manager will run you about 9%.

Thank you!

[ineedawatch]

Thanks everyone! I feel as though I could get a couple more bucks renting to college students, but the risk is greater. Need to do a risk vs reward..

[Star Ferry]

Yeah my wife and I have an apartment building in the SF area and a mixed use building in Gangnam area of Seoul. Both are doing very well and are under the care of management companies.

[Highland Ranger]

Off campus non school housing rentals to college students usually make all kids AND their parents sign a lease making them all responsible for rent and damages.

Management company nice but 5-15% fees may not be there depending on market. And then giving work cost plus to their cousin the plumber and brother the electrician can eat your profits quick.

Crunch the numbers, factor in everything including all the things that were rules that are now broken, like not all real estate appreciates.

In the end, you want to benchmark what you expect to make against a safe investment. Whatever that is.

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[Dyim]

Originally Posted by cdmorenot

I have investment properties. I own a two family with a legal basement in northern NJ and I own two single family homes in Mooresville NC. All units are currently rented out.

My advice: Start early. The earlier the better. Real Estate is safe and it only snowballs. You may not put much cash in your pocket but you'll be sitting on hundreds of thousands on equity before you know it

Get a property manager and only lease through an agency

Have an attorney review all aspects of the lease agreements

Don't buy properties where taxes are too high , keep the overhead low

When possible, try to get section 8 tenants

With $30k , get two mortgages and pay PMI - Get help from your parents to qualify and let someone else pay for your properties simultaneously

Do you live at home? If so, stay there and milk it. Stay away from TRF and don't buy any watches yet.

Good Luck!


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priceless!

[james1787]

Interesting thread as I know a few people who have some real estate and rent it out. I know nothing about it myself but at one time or another the thought has crossed our minds. I think I would avoid the college student idea.. just knowing what some of my friends have done to places during college parties would be enough to know that isn't the type of tenant you want.

[VICI]

You would be a 1st time home buyer and qualify for more programs than others.

Being that far away requires a management company. Cap rates : cash flow : appreciation : damage (renovations) are all factors to consider.

I would rather take less money per month but with less headaches than worry about damages and law suits for someone falling due to being drunk...

Btw - calculate 20% dp

[juniorlawrence]

Investment properties are no picnic...

Here is a rule of thumb for me:

Buy your own owner occupied residence before buying investment homes

Investment home should be very close to where to live now to have easy acess to fix thing when they pop up

Dont buy a co-op


(If I were you I would buy yourself a 2 family, live on one floor and rent the other unit out, if anything needs fixing your right there and you also have your own space). Gl

[SamanthaWachter]

Investment properties are never easy to buy. It requires proper documentation and verification from the professionals who are expert in this domain like a real estate lawyer. Getting an investment property checklist evaluated makes for a responsive approach to purchasing property. When my cousin faced such issue, he read on the internet to get complete knowledge!

[SamanthaWachter]

Investment properties are never easy to buy. It requires proper documentation and verification from the professionals who are expert in this domain like real estate lawyer. Getting an investment property checklist evaluated makes for a responsive approach to purchasing property.

[SMD]

Originally Posted by ineedawatch

I thought about adding this post to a previous thread of mine, but thought that I might start an interesting discussion with a new thread.

Does anyone here own property that they rent out?

About me:
24 y/o
Living at home, not being charged rent
60K salary (might fluctuate slightly with bonuses <5k)
No debt, no car payments, nada

Right now I have a solid job and while its not glamorous, I'm getting great experience, and see myself being here another few years. So I have a steady income.

I've been thinking. I live two hours away from Chico State. I've been looking at the real estate up there and it seems like grabbing a co-op for under 200k is very do-able. I'm actually looking at a 4BR, 2BA apt, for 177k. With today's rates and only a brief looking, I'd be spending anywhere from 650-900 a month on mortgage payments with 30k down. I also think I could rent that out anywhere from 4-700 a bedroom to college students. My parents are thrilled with the idea of me getting into real estate, but I'd like to hear from people who rent out properties.

What advice would you give? What would you advise against?

I'm only starting this thread because I've gotten a lot of great answers in the past on other threads and am looking forward to more!

Thanks!

You sure you want to do this with a coop? Your ability to rent it out could be restricted (as it can with condos but coops are typically worse). Financing coops is not as easy as it is with condos, etc. Perhaps you were speaking loosely but if it is a coop you are looking at you need to do a lot of due diligence up front.

[dysondiver]

dont wear rose tinted glasses while doing the sums
be realistic , err on the cautious side , id does not take a lot for it to all get nasty and it may not be your fault , but you will be the fall guy.
i own 14 houses.

[worldfamoussam]

Originally Posted by El Cascarrabias

. . . and be sure you form an LLC to protect you from being sued personally.

Involve a real estate lawyer. Preferably one who owns rental property themselves.



Look into having the property managed by a real estate agency so you are not having to handle the aggravations that come with management.

If you use a management company have your lawyer look over everything including the management agency's rental agreement.

Consider doing criminal background checks. If you're leasing to multiple persons you do not want to be accused of leasing to someone with a criminal background. Especially if involves crimes of a sexual or violent nature.

If you are looking at the property as an investment (not just rental income) make your money on the purchase not assumed appreciation. In other words, ask yourself, "Can I sell this property next month and make a profit?"

ASSUME NOTHING!! GET A LAWYER!!

. . . and good luck!

Most lenders will not loan to you in an LLC.

[Ballzzz]

2 hours away you 100% need a management company, which for your first property may be a blessing. Learn as much from the management company as you can. The 8-12% fee will not feel as rough when you are learning as well.

College kids + renting rooms individually again I personally would not BUT consult the management company they may be highly skilled in a university area. Guaranteed there are individuals/companies who are highly profitable in this segment.

If you can put 20-25% down comfortably and have a positive cash flow or even close to positive after all expenses are paid than I think you can afford it and it may be something you want to do. Make sure you have a 6-9 month account set up for "Issues". I personally do not feel comfortable purchasing an investment property and paying PMI I think its counter intuitive.

These are my personal opinions of course, good luck and go with your gut.

[wantonebad]

.

[bobernet]

Advice if you decide to do it:

1) Have cash. Ideally lots. Stuff breaks, renters damage things, you can go a while without a tenant. Make sure that your carrying and maintenance costs are easily covered even without the rental income every month.

2) Find a really good management company, unless you want to be in the property management business as a career.

3) Do lots of extra diligence and be extra picky up front. It’s much harder and more expensive to deal with the consequences of not doing so on the back end.

4) Form relationships with handymen, contractors, etc. Whether it’s remodel, repairs, etc you’re going to need help. Cold-calling is a bad way to get the best service and value.

Good luck. Starting young is a great way to go.


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[imperio]

Why don't you buy REITs? That way expose your portfolio to real estate and not have to:
1. take on additional debt (put $30K down and an additional mortgage)
2. worry about bad tenants, tenant turnover, property damage etc
3. worry about handymen to call if things break, or spend personal time fixing issues (doesn't sound like you'll be buying a brand new home)
4. worry about credit checks
5. worry about suing your tenants if they don't pay (if you choose a commercial REIT, "your" tenants could be larger corporations, probably more financially stable and able to pay on time than college kids)

The list goes on.

[CamSLC]

Originally Posted by worldfamoussam

Most lenders will not loan to you in an LLC.

On your first property you can secure long term financing in your name then have your attorney transfer the property into an LLC via Warranty Deed. IF you need to refinance you can transfer it back 6 months prior to the refi and you would still fall in fannie mae guidelines.

Once you have a little history it's very common to personally guarantee a loan held by an LLC if the property meets the lenders cap requirements.

Lots of good advice in this thread from multiple perspectives.

[sam florio]

As a very successful real estate investor friend once told me “the best time to buy real estate was five years ago” he has said the same for years

[Valenciawatchrepair]

I have a couple pieces of property. One has been a huge headache. One is just land rent and easy mailbox money. My dad has been doing rentals and owner finance deals for years. But, recently he bought a piece of land and turned into an RV & Boat(or whatever else) storage place. Best method from my observation. Someone calls, brings in their RV or boat and starts paying every month. No tenants, no pets, no kids...basically none of the crap of being a landlord, just quick money. I so wish I could get a piece of land here and do this. It's my next step if I can get rid of the headache property I have now.