Investment Property

[sniper97]

Hi! Who owns investment property? Is it working for you? Tips and tricks you have learned? How many units? How often do you raise rents?

[Cdn_Cuda]

Have a basement suite, so not technically an investment but helps pay the mortgage. My area is rent controlled, so can only raise rent a specific amount and only once a year. As everything seems to be going up, you should increase your rental as well.

If you don’t regularly raise rents and the market is going up, you end up with a rental rate significantly below market rate in just a couple years. Don’t need to be maximum rate increases every year, but should keep up with market increases. The better the tenant, the less you want to increase the rent, but if the tenant isn’t great, do full allowable increases.

I gave my tenants a minor raise before COVID but none since. They will be getting the maximum increase starting next year as they are about 20 percent under average rent and due to some poor personal conduct have slipped from being “good tenants” to “okay/tolerable tenants”.

[sniper97]

Thanks! Do you build a 3% increase into your rent? Are you concerned the renter can afford the rent? Looking at buy a duplex as investment property, rents are 30% below market.

[Cdn_Cuda]

Our provincial government dictates the allowable increase, for 2022 it was 1.5 percent of the total rent. No idea what the 2023 allowable rent increase will be until it's announced. We then have to give 3 months notice on the rent increase.

[SignOfZeta]

I’d rather eat garbage than be a landlord but…serious question, are you a bot? These are bot level questions.

[sniper97]

Seriously...not a bot!! Have 2 feedback on the new MCB, 7+ pages on the old MCB

[Grendel]

I invest in land (rural agricultural) and do not rent. Tenants are not worth the hassle IMHO (helped a friend manage his rentals for a while). I invest in cheap-ish farm/woods acreage in advance of what I perceive as the direction of growth. Looking to benefit on suburban pressure to raise value of the land it self. In the mean time I plant trees and harvest pulp wood and lumber off the properties (lumber is my preference). I am currently at 52 acres (not sold any yet) and have my eye on another 8 acres from a failed development. Recently had an unsolicited request to buy 24 acres at ~10K/acre for land I bought at 2.7K/acre but not selling that land yet. This parcel is right in line with current expansion progress and locks development access to some larger tracks, so will be hard (costly) to develop around me.

[sniper97]

That is a good idea! Nice future profit!

[Grendel]

Like any investment there is no guarantee of profit but in my life overall property value increases over time. Sometimes more or less then inflation but if you pick the correct properties in the end land is a fairly positive long term investment. Definitely does not have the gains sometimes you get in the market but it also does not seem to have the risks either. In my early days of investing I caught up in the more speculative investments (primarily bonds but stocks too) then I got burnt real bad by buying on margin and that completely changed my view on investing forgoing short term gains for long term gains with a concrete asset. It is working for me.

[gabe]

I’d rather eat garbage than be a landlord but…serious question, are you a bot? These are bot level questions.

Why the animosity towards landlords?

I have a couple rental properties right now. They're a great source of reliable income however you should be handy with doing home repairs/work or build a network of people that can help. Having some money set aside for the inevitable maintenance woes is key.

Fire away if you have any questions. I'm happy to answer any you have.

[sniper97]

Thank you!

[punkncat]

IMO a terrible time to be considering purchasing new properties to rent. If you already have them it is an excellent time.

The house across the street from us just sold and the guy is getting $2400 a month rent for it and had a renter FAST. Small 1 bed apt is north of 1400 a month in this area right now.

[Seajay]

The easiest form I found is to buy in brand new developments when the cost to start is lower, hire the whatever management company to manage it, then do nothing.
Profits are low, after the cost of mortgage and management... but you don't do anything. You make positive passive income after taxes.

Jumping on cheap new developments right now is hard. I did some rental for a time with a spare room, money was fine, but I'll never do it again ( the general public is gross ).

I don't own any investment properties at the moment, save my own house.

[sniper97]

New development is very expensive in my mkt. $345,000 for a basic ranch, taxes are $7000/yr approx. Thank you!

[Seajay]

Ah I should of been more specific, so if you go this route you are targeting town houses or multi-house neighborhoods, or condos.
Single family homes can be higher profit but are a much higher investment. Most of the money in these is flipping them.

[sniper97]

This will be my 1st purchase. I have several friends that make money on rentals. Values go up, rents go up, loan is paid down. Going to try it. With a 6 yr lock, 20 yr term @ 4.35% The 1st yr of principal reduction vs. the down pmt is 12.70%. With mkt rents, returns should be over 30%

Biggest question, rents are substantial below mkt, 2/1 900 sq ft, 1 car carport including washer/dryer per side, rents are $632.50 per side. Rents should be $850 - $1000 per side. (Just heard of someone renting a similar apt for $1000 today, housing is in short supply),.I know alot of people are struggling. Do I raise rents? Leave rents be? I don't want to push the renters out. Maybe have a conversation with them after closing. Although I did buy it to make $$$.

I am outside the St Louis mkt on the Illinois side. Buying it off mkt from a local realtor. Needs a few minor things done. 1964 brick ranch on a crawl, good neighborhood. I am pretty handy and have 2 friends that will work with me for cash.

[gabe]

Raise rents. I don't think its right to gouge or pay 100-110% of whatever the market value is but if you go a little lower like 90% of market rate you can attract more and better tenants. The quality of the units is of huge importance too. Don't think you can raise rent without giving something of quality in exchange for that higher rent.

You're obviously on the right track with running your numbers and rent comps. Check out biggerpockets if you want actual quality real estate investment advice.

[Cdn_Cuda]

If you have good tenants you want to keep them. Bad tenants can be costly, and difficult to remove. And getting new tenants can be a lot of work. Just make sure you know tenancy rules and regs locally and it will help.

[sniper97]

Thanks! If you are month to month leases, which is the case, 30 day notice is required.

[Nish]

We had an apartment attached to our first house. I'll second the notion that being a landlord can be a special kind of hell if you have a bad tenant. Get a good tenant and make it a good deal for you and them both to keep them there.
I Believe most places have groups you can join as a landlord. There was one in VT that shared feedback between eachother on bad renters, good lawyers and even negotiated a group rate for credit checks on potential tenants. Look to see what is around your area for resources.

[flyweightnate]

I have one house (my first) as a rental; absolutely move heaven and earth for good tenants. If you're 10% under market, they'll come. It saves you 8% a year (and a headache) on placing new tenants, so why not?

The cap rate is an interesting metric, but for passive income, it ignores some real factors. Appreciation is where I'm making most of my money (since I'm in a major city). When the kids hit college, it's gonna be a nice second stream.

You better be handy, or know a handyman, though. Even a good tenant will break stuff more often than you'd expect. My first year renting the house out, the AC, water heater, and kitchen faucet all gave up on life. That hurt, even though I could replace two of the three myself. At least it was a tax deduction. After each set of tenants, I've spent at least 20 hours painting and doing minor repairs. Tenant turnover is a major expense, even when it's not a major problem.

[Paintslinger16]

Yes, you can make decent money renting, it can also turn to shit in a hurry. If you have decent tenants right now and they pay on time while they keep the place nice.
I would keep them as is, as you get your feet wet.

I have rented and flipped houses for 15 years, wife is real estate agent, We have bought decent houses for as little as 15k they always need something but if the bones are good, flipping can be way easier then renting.

My last single unit was the 15k. I had about 50k total in, rented for 5 years, so I made money just on rent.
my last tenant wanted to buy it, shaky credit so we did a 2 year land contract, 20 months in, he gives 5 days notice he’s not completing the contract and is in fact leaving the state.
His payments were never late, he’s buying the house, lot of rules in NYS that protect the renter, we have no reason to inspect the interior, outside is fine.

The house was destroyed by a 64 year old man, all the carpet completely gone. To cover up the soiling from dogs, it had soaked through in some areas.
Drop ceiling and walls destroyed, the appliances were all ruined, the stove wasn’t even the same one.

He left NY and was in the south west, it was all filed with PD, out of state, nothing could be done, insurance paid out less then half, citing depreciation in a market that is up everywhere.


it was 38 thousand dollars worth of damage. More money then I had originally used to rehab it, we started over rehabbing and if you have to farm stuff out especially easy stuff like painting that’s a whole other issue with competent contractors .

I still made money sold for just under 100k, just super frustrating and you are fronting repairs until you sell it, at this point we had to anyway, it would have took to long to get the 20k new rehabilitation money back.

it was the only house on the street without a yard, so limited potential for buyers, did have a very small driveway, houses on the street especially the second block are in 200k range.

I also owned a four unit, and rented to a bitter divorced woman also in her 60’s her calls about the other tenants or random bags blowing in the yard never stopped, her crap made the other 3 good tenants move.

One actually bought a house wife had listed, and we flipped the four unit with her still living there.

[sniper97]

Thanks for sharing your rental experience. I read every post 2xs. Sorry for the horrible experiences. Mkt rents are $900, current rents are $632.50, would you raise them slowly? Not just $100 below mkt, almost $270 below mkt.

2nd question, how do you avoid bad renters? Require 60 months housing history? 12 months employment? Call prior rental references? Not allow pets? Good application and credit check? Check references?

[Paintslinger16]

Yes slowly, a small bump, you do need to make money.
If you raise it all at once and they leave now you have a empty apartment and no income. Also be aware In the winter especially, the place still needs heat so you would be putting it back in your name and paying lights and heat, water bills etc.
There are background services landlords subscribe too, references, credit checks etc. all this cost money though.
And definitely not fool proof, a 20 year old can have excellent credit, be a couple living together but not have much history. And three months later, the girl left him, it’s just the guy living there with like 5 other dudes and it’s party central.
Also happened to us lol

[Cdn_Cuda]

For raising rents, yes start bumping things up but do it slowly and give the tenants a heads up. That way they know what to expect.

Finding good tenants is all about screening and even then, you may strike out. References are important but who knows if they fake them. Criminal record checks, credit checks are important, same with meeting people and talking to them.

We’re still good friends with our previous tenants. They bought a house a few hours away. Our latest tenants have been really good, until I caught one of them driving under the influence. Couldn’t provide it directly, but ended up writing an official warning letter warning for eviction. That and some our behaviour have soured the relationship. So keep in mind the same tenants who are good, can also be bad.

As for pets, often allows you to charge a bit more. My tenants raised assistance dogs. So they had a bunch labs of various ages. Generally was fine, but find they stopped cleaning up after the dog and it became my chore, which was annoying. But again, good pet owners are good, bad pet owners are bad. Discretion is important.

[Paintslinger16]

I would ask to meet the dog, a long time ago, the only time I ever rented actually, we ran into this problem. I am a collie guy, they are in the 65-75 lb range and the landlord was hesitant on allowing a pet in his brand new Rental.
We had been running out of options, and asked if they would like to meet our dog. Well a well behaved collie was all it took and we got the place.

[BLachance75]

I agree with BrickHaus about the aggressive breed lists. They really should figure out a way to come up with an asshole owner list. Most dog bites are from small dogs. There are also ways to get around the list. The easiest is asking a vet to put lab mix on the paperwork.

[Mann]

A thought on dogs from a landlord. Some insurance dictates what breeds of dogs are allowed in rental properties. I know our list that we got from ins last year had @ 20 new breeds on it that are a no go. Side note I agree the owners are the problem, but I have also had to remove animals due to attacks so some breeds are a definite no go.