Investment/Rental Properties - Megathread

Personally I think the only way this works is either slum lord it (multi-fam houses, multi-unit buildings, etc.) or go nuts and make it a full time job.

Most of the people I know who make money basically slum lord it. The ones who don't are largely just in it to gain equity and leverage unused credit to increase their retirement nest. I know several people who lived their life as primary +1 mortgage + renters in all prop owned outright. Market conditions, maintenance, loss of tenancy and the like means that part time you will be lucky to break even with expenses. Now, don't get me wrong for INVESTMENT that's actually a killer deal. But it isn't a path to consistent income unless you put so much in assets into it to begin with that the hassle makes no sense.

The commercial side is so much more chaotic. A good location with good tenants I'm sure could be worth a lot but the wrong areas are just sooo bad on commercial. Housing is always in demand (even if it goes up and down) while shitty commercial space is just worthless because it has to provide specific value to a business.

Also, I'll say the most successful person I know who did this wasn't afraid to sell. He did sell I think 3/14 or whatever over the course of his career - with low unit numbers you cannot rely on statistics and averages, you have to get heuristic and just call it once you know the place isn't going to generate consistent revenue.

Do you have a lot of acquaintances you can rent to? I think there is a sweet spot between stranger and family (friend of a friend type) to rent to where the have the burden of being vouched for without the closeness to ask for breaks..and having enough acquaintances so there's a steady recommendation for potential renters. I think it's a little mutually positive because it's tough to get involved with a terrible landlord too.

The tenants make or break it. You get an old woman tat keeps it immaculate for 10 years and you're golden. May have to take in a few shit renters until it works out because being vacant is terrible.

Well the theory is you don't rent to people that need evicted.

Picasso_sl said:

Do you have a lot of acquaintances you can rent to? I think there is a sweet spot between stranger and family (friend of a friend type) to rent to where the have the burden of being vouched for without the closeness to ask for breaks..and having enough acquaintances so there's a steady recommendation for potential renters. I think it's a little mutually positive because it's tough to get involved with a terrible landlord too.

The tenants make or break it. You get an old woman tat keeps it immaculate for 10 years and you're golden. May have to take in a few shit renters until it works out because being vacant is terrible.

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Seems like a good idea on paper but almost never works out that way. This kind of thing can easily ruin your own relationships with whoever vouched for them if it doesn't work out. On the one hand you get more information about the person than you could through more traditional background and credit checks. On the other hand you never really know how someone lives until you've seen it so unless the people vouching for them have actually lived with them their opinion is kind of moot.

It's worked out fine for us thus far. It is a delicate dance and probably not for everyone. You have to evaluate the relationships involved but I prefer it to phoning and meeting complete strangers.

Cad_sl said:

That was semi-sarcasm Lyrical, I'm sure I'll rent based on age/income/education/credit. Calm your tits.

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Given that you lead with that, I thought you were serious.

Big Phoenix_sl said:

From my poor persons perspective real restate always seemed like one of those things that was more about stroking egos than good investing. Buying stock seems like a much easier than the whole process of buying a house, listing it, vetting renters, responding to them when xyz breaks/leaks, possibly evicting them etc.

Though 5 houses sounds a lot, especially if you already have a full time job. You going to be handle that yourself or would let some rental agency place take care of it?

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There are two types of landlords I've encountered. One type is the one that has lots of cash, and wants a passive income. The other type is the one that is willing to play the long game, and wait until the property is paid off before they make a profit. A customer of mine just bought a 100 apartment complex at the local college. He's not making a dime off of it right now. The hope is that when he retires, it will be paid off and provide him a nice income.

I've seen lots of people lose money in rentals, and I can think of easier ways to make some money. Now if I had a million in cash sitting, and wanted to diversify my income, ask me that question again. The guy who I bought my business from had lots of rental properties, and he had to get out of them. He was renting to trash that did more damage to the home, than what he collected the entire time of the lease. I'm going to say he had at least 20 rental properties, and he sold every last one of them off, so he didn't have to deal with the aggravation. And like I said, he was renting to anyone that had a pulse, and that's what did him in.

Cad_sl said:

TL;dr

choose your tenants carefully

Ok

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Yea but just know that's a lot easier said than done.

Kinda 6 on one hand a half dozen on the other. I know a few people (my grandparents included) who got completely screwed by prop management companies who weren't doing anything other than collecting a paycheck. My grandparents company didn't even enforce their strict no pets rule. One of their tenants had 6 dogs in their apartment. Six!

So finding a good company is a lot like finding a good tenant but they can definitely take a lot of the stress out of the situation.

Palum_sl said:

Personally I think the only way this works is either slum lord it (multi-fam houses, multi-unit buildings, etc.) or go nuts and make it a full time job...

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Never been in the business, but had a colleague of mine that did. His advice (learned the hard way) was to steer clear of the low end market. For starters, the cheaper the property, typically the shittier the tenants. Why have 10 cheap units with constant tenant and (possibly) maintenance issues when you can go with 2-3 more upscale properties in better condition and better prospective tenants.

Seems like a shit load of work for the ROI to me. I've made 12% and 9% in two separate short market investments this year alone. One was less than a day. Sure you can't always win, but it is a hell of a lot less work! Plus you've only got yourself to blame, not some chance a meth head literally torches your investment.

Jysin_sl said:

Never been in the business, but had a colleague of mine that did. His advice (learned the hard way) was to steer clear of the low end market. For starters, the cheaper the property, typically the shittier the tenants. Why have 10 cheap units with constant tenant and (possibly) maintenance issues when you can go with 2-3 more upscale properties in better condition and better prospective tenants.

Seems like a shit load of work for the ROI to me. I've made 12% and 9% in two separate short market investments this year alone. One was less than a day. Sure you can't always win, but it is a hell of a lot less work! Plus you've only got yourself to blame, not some chance a meth head literally torches your investment.

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Right, but it's a volume game. Higher price rentals may yield better renters but they also move slower on the rental market. Anyway, my point was more in the management style yielding ROI rather than strict tenancy guidelines.