Yikes - buying our first investment property!

[pbjmaker]

The house down the street forclosed a good 1 1/2 years ago and finally came up on the market this week. My husband and I have talked about buying a couple rentals over the years and are now in a situation where we are financially able to do this. They don't want a lot for the house and it does need a lot of work that we can do ourselves for the most part. We are looking at around $15,000 in repairs. Even with $20,000 in repairs and the cost of the house we will have spent less than half of the appraised value of homes in our neighborhood (even with the recession)

I am very excited and nervous at the same time. Our bank has already pre- approved him so now we just got to get a bid in and start moving forward.

Guess it is time to start learning about being landlords...


Any advice out there?

 

[Miltonchix]

If you're going to be a landlord grow really thick skin and practice being #1 JERK!
If you don't you'll get walked all over.

 

[Elite Silkies]

Good Luck!

I personally did not like it! Just make sure you get the first and last months rent, or at least a deposit that will cover a payment. I had my renters sneak out and I had to come up with the payment myself. They were our friends too (NOT ANYMORE)

Sorry, but friends and family are the worse people to rent too! Some of them anyway.

 

[chics in the sun]

I have two investment properties now. One is my former home with a little MIL cottage behind it, and one is a duplex that my brother rents half of and helped me to fix up. My advice:
1) Screen your tenants well, always call their employer. You don't need to be a jerk, just savy and smart. I have had wonderful tennants three times so far. Knock on wood. Just know that you may eventually have to get tough, but being smart and picky about your tennants up front will avoid most of that.
2) If it won't make too much difference to your budget, price the house just a bit under what similar ones are going for. You will have a larger pool of people to pick from that way.
3) The repairs will cost more and take more time than expected. Really, they will.
4) When you get the mortgage, just make sure the payments are low enough to allow room for more repairs if needed. If you don't end up needing it, then you just have more cash coming in, but save a chunck of it. Trust me - last week I had to replace the water heater on my former house. Ouch!
5) When it feels like a money pit you are being sucked into slowly, remind yourself of what it will be worth 10 years from now. And that other people's money is paying the mortgage. That helps me when situations like the water heater come up......

Best of luck!!

 

[Zahboo]

My hint, don't allow pets. People seem to think because they rent it's okay for Fluffs to pee on the rug. Either all hardwood/tile or you'll never get the smell out.

 

[pbjmaker]

Bah - it's been on the market 1 full day and there are already 3 bids on it. One is for residential/owner occupied and the other two are investment companies. But since my husband got pre-approved he is going to start doing some serious looking. My husband definately knows how to hold his ground and not get walked all over and we would never rent to family. The payments on it would have been $171 a month and with the size of the house we could have rented it for around $700/month. We felt we could save most the payments for the first couple of years. Fortunately the house we live in will be paid off within 2 years or sooner, so a $200 a month payment would not be a burden. They are suggesting it needed $10,000 in repairs so we assumed $15,000 - $20,000.

I am thankful for a husband that is conservative with money and that we have lived below our means for quite a while.

Now if only we can find just the right house to bid on for a rental.

Thanks for the great advice so far!

 

[Debob]

Just be carefull, it's easy to get in over your head. We started in 1990, and with every thing said and done it was't entill we had 3 houses in rental before we started turning things around. And we paid cash for all of the ones we have bought. Only had taxes,insurance, upkeep but with 1 poor renter that sets you back some. Also figure evictions,around here it's around 175.00 pluss court cost. If you can join a renters group, they should have a list of bad tennents that have been to court. With ours we also get a roll back on our property taxes.

 

[onecent]

(1) screen them, where they work, where they live & why are they moving? landlord reffs, background check

(2) first, last & security deposit

(3) lease i would do a 6 month to start with & see how it goes

(4) no inside pets

(5) a list of rules such as, keeping the grass cut, no drugs, no loud music, police not called excessively, and if something breaks call you
immediately, etc.

(6) never be friends with a tenant.

I owned a small 5 unit apt building, and i learned if people dont own it, they wont take care of anything! even with good screening, i still had tenats from that really HOT place...

but you have some good tips up here, best of luck to you!

 

[Mrs. Turbo]

We have 2 rental properties….
When the carpet needed replaced we went with commercial grade carpet, trust me, it last longer……never use barber carpet because tenets like to unravel it……

Have a late fee set for the 3rd of the month. We do a $50 late fee if rent is not paid on the 3rd…it is due on the 1st…after the 5th day it is a additional $5 a day until paid… They will pay if there is a late fee attached.

Do not be afraid to file eviction for nonpaying…learn you state laws.

Have a couple months rent set aside in a account separate from repair funds….you will need them eventually.

I do allow 1 pet, but charge a $300 nonrefundable pet deposit weather they are inside or out. If additional repair is needed it can be taken from the house deposit. We found someone willing to buy us carpet at his discount cost and charge a $50 install fee.

Highlight certain items in your lease and have them sign it in addition to the actual lease….examples, no drilling into the house for additional phone or cable lines, no painting, no swimming pools, no lock changes…etc

Do not become friends with them….it will make your job harder…..like someone else mentioned….grow a backbone, but be willing to compromise now and then if you have a great tenant.

If you are not handy have a decent repair fund because the air or heat will go out, the roof will leak, the tenants will trash your house and leave without notice sometimes…….
We had one couple leave without notice and when we couldn’t get them on the phone we drove to the house and found it trashed…..back door was busted, holes in the wall, master bedroom toilet was GONE!, carpet torn……you name it. $3000 worth of repairs and that was with us doing the labor on everything except the carpet.

But, one of these days it will be worth it. You also get a nice tax write off for repairs and depreciaton…..

 

[Mrs. Turbo]

I just read the previous posters.....

When we first started I tried to put nice stuff in the house and it just got trashed...... We finally took the shed out of the back yard and made us a new chicken house, and I buy low end ceiling fans, stoves.....you name it because you will have to buy a new one again and again. I look at the used appliance shops when the stoves and fridge go out....