| Posted By |
Message |
MarathonKnitter
HAPPY
Member since 2/07 17374 total posts
Name:
EMBRACING CHANGE
|
rental real estate... how to?
as i'm analyzing my life and wanted to do and be better, i've been thinking A LOT about rental real estate as a way to help make this happen.
does anyone hear have a rental property?
how would i get started?
what should i know before buying the first rental?
|
Posted 8/16/13 10:29 AM  |
| |
|
Prudential Douglas Elliman Real Estate
Long Island's Largest Bridal Resource | Long Island Weddings |
Beth
The Key to your new home....
Member since 2/06 24849 total posts
Name:
Beth
|
Re: rental real estate... how to?
anyone I ever sold a rental to paid cash
I would only buy one this way - after the market fell I had many people coming to me with mulitple rentals and they couldn't afford them anymore
it's not easy to get a mortgage on one now- but it was 7 years ago and people bought mulitple rentals- some times in other states and one or 2 months with out a renter (or a renter who stops paying) and then were screwed
factors to consider- who will do repairs? if the boiler breaks at 1am- do you have a plan in place to repair it and do you have money to replace it?
are you going to hire a management company?
can you afford to carry the property with no tenant- if not- this is not for you at this time
after I buy myself a house this year- I plan on buying a rental every year to every other year- but I am a realtor- so I have a cost savings there
I am doing this over tradition investment in the stock market etc
I also know lots of contractors- so I would have a handy man on call
my goal for the next 10 years is to collect rent- but I also understand the downside of it- it's a long term investment- not anything to make quick money
it's a place to park cash for a tax write off-
I would start getting some books to read- real estate is not as glamourous as it looks on TV 
|
| Posted 8/16/13 3:04 PM |
| |
|
ali120206
2 Boys
Member since 7/06 17795 total posts
Name:
|
rental real estate... how to?
I have a rental property out of state. We do have a mortgage on it but, it's pretty small.
DH bought it before we were seriously dating since it was affordable, good for a tax write off at the time, and something he could see using in the future.
We use a management company to get us rentals and handle day to day things but, we currently are having an issue and it's been quite difficult being far away - and the people we are working with in management don't have all the answers and are slow to get a response back to us on certain things.
Right now, the place pretty much just pays for itself and we aren't making a profit. We have debated selling but, the market isn't great right now in the area.
Message edited 8/16/2013 3:19:25 PM.
|
| Posted 8/16/13 3:17 PM |
| |
|
MarathonKnitter
HAPPY
Member since 2/07 17374 total posts
Name:
EMBRACING CHANGE
|
Re: rental real estate... how to?
Posted by Beth
I would start getting some books to read- real estate is not as glamourous as it looks on TV
yes, i plan to do research first! no where near ready to jump in, yet.
and yes, i agree about tv making it much more glamorous than it is... then again, tv/movies do that about almost anything lol
|
| Posted 8/16/13 3:39 PM |
| |
|
MarathonKnitter
HAPPY
Member since 2/07 17374 total posts
Name:
EMBRACING CHANGE
|
rental real estate... how to?
beth, are there any books that you'd recommend?
|
| Posted 8/16/13 4:01 PM |
| |
|
JennP
LIF Adult
Member since 10/06 3986 total posts
Name:
Jenn
|
Re: rental real estate... how to?
I am kind of an accidental landlord because I never intended on renting out my house.
My DH and I both owned property before we got married. I moved in with him and I rent out my half of the house (it's a two family and my mom lives in the other half.) It's not feasible for me to sell it for a few reasons, primarily my mom's residency there.
I echo a lot of what Beth said. If I didn't have a mortgage on the house I would find it a lot less burdensome. Being a cash buyer would be ideal, and even then, there are still unexpected expenses that are sometimes significant - loss of tenant, repairs, etc. You MUST have a lot of cash on hand to deal with such things.
The other thing I didn't anticipate - and this might not apply to you if you rent the whole house out - is that if you are going to have rules like no pets, no smoking, you then have to be prepared to enforce them. We have a no dogs, no smoking rule that is pretty strict. My mom wants those rules and I don't blame her. I have had to deal with either requests to bend the rules or just outright breaking of them. I am talking about texts asking me to allow the tenant's mom's german shepard to stay there for a week...smoking tenants who declared that they "just started recently"....meanwhile my mom is picking up cigarette butts and flipping out. So if you are going to have rules, be prepared to be able to look another adult in the eyes and say "no" - sometimes multiple times.
I would get rid of my rental now if I could.
|
| Posted 8/16/13 9:48 PM |
| |
|
|
|
Re: rental real estate... how to?
I'm also an accidental landlord as I was unable to sell my condo in Queens when I got engaged as I was about $50K underwater on it (and still am now that Sandy caused the entire town to plummet in property values).
I went through 3 tenants in 4 years, the first 2 were terrible- they kept calling me at odd hours to complain about their upstairs neighbors. They also faked their employment info and they moved their kids and parents in (thankfully they vacated after 6 months due to some immigration issue, who knows). The 2nd set of tenants were a sweet young couple who paid the rent on time but had to breach the lease in their 2nd year because the husband cheated on the wife and they were getting divorced. I sat with an empty apartment for 5 months until I found my current tenant who is an godsend so far (she's NYPD and pays rent early, keeps the place immaculate).
If I could sell now, I would. Being a landlord isn't easy - repairs are always needed and even if you screen potential tenants carefully, you can't guarantee they won't have other issues you won't like (ie like having multiple pets that piss all over the carpets). Think carefully about whether you can handle the responsibility.
|
| Posted 8/16/13 11:28 PM |
| |
|
ave1024
I Took The Wrong Road
Member since 12/07 6153 total posts
Name:
That Led To The Wrong Tendencies
|
Re: rental real estate... how to?
Posted by libby2595
as i'm analyzing my life and wanted to do and be better, i've been thinking A LOT about rental real estate as a way to help make this happen.
does anyone hear have a rental property?
how would i get started?
what should i know before buying the first rental?
A lot of good posts in this thread. I am starting to look into possibly buying a second property for rental and I am educating myself on the process. I already have a decent amount of real estate knowledge, but rentals are totally different ballgame. This is what I have learned so far:
If you don't understand how to calculate things like NOI (Net Operating Income) and Cap Rate on your cash invested to determine the value of a potential rental, don't even think about buying an investment property.
I don't think you need to be an all cash buyer like Beth said to invest. You may need all cash to get some of the best deals out there. But some of the best investors look to only put a certain amount down and not tie up their liquid assets into one property so they can leverage multiple properties at a time. Again having positive NOI and high cap rate on the money invested is key to being successful. I have enough equity in my primary residence to be able to buy a rental in cash, but I am still going to elect to just put 20% down. Why am I going to sink a chunk of liquid assets in a property?
Expect vacancies, and a LOT of them when calculating NOI. Many people say to expect 10% vacancy, I would be more conservative and calculate with 20% vacancy.
If you are buying out of state, don't even consider doing it without spending money on a good property management company. This will cost anywhere from 10-15% on a year's rent. You need to factor the costs of this into your NOI. They would handle taking calls from the tenant for things like repairs, emergencies, etc. and call in contractors on your behalf to fix issues. If you are a new landlord, it may even be beneficial to have a property management team even if your investment is local to you. Who wants to get leaky pipe calls at 2am?
You also have to factor in all your other expenses when calculating NOI. Don't forget to account a certain amount for yearly maintenance (id say 1 months rent for maintenance is likely enough). You also have to factor in things like homeowners insurance, mortgage interest, HOA fees. You don't necessarily factor in your entire mortgage payment as principal paid isn't considered an expense (although it does factor in to your monthly cash flow calculations).
And finally make sure you are financially stable enough to be able to carry BOTH your primary residence expenses and your rental in case you go through a period where you aren't getting rent. All it takes is one d-bag tenant that will screw you for months. During the months it takes to evict, you won't be getting a dime in rent. And if you are renting to somebody with a kid, it's even longer to evict.
I like the website biggerpockets to learn about rental investments.
BiggerPockets
|
| Posted 8/20/13 10:14 AM |
| |
|
marianne13
LIF Adolescent
Member since 6/10 887 total posts
Name:
|
Re: rental real estate... how to?
We bought a 2 family house as an investment property 3 years ago. We didn't pay cash, we have a mortgage on it.
Right now we break even as the rent just covers the mortgage, interest, insurance and taxes. But we bought it for the long term.
I agree with what everyone else said. Be financially able to not get rent for a few months, be very picky about tenants, and it's not always easy but really, what investment is easy?
Message edited 8/20/2013 11:26:15 AM.
|
| Posted 8/20/13 11:22 AM |
| |
|
ave1024
I Took The Wrong Road
Member since 12/07 6153 total posts
Name:
That Led To The Wrong Tendencies
|
Re: rental real estate... how to?
This is a real basic video on how to build a spreadsheet around NOI.
|
| Posted 8/20/13 1:11 PM |
| |
|
