Anybody here used to be a landlord?

[twuoo]

I was just curious what it's like to be a landlord. Where I live, there are a bunch of bank owned homes that could be good rental properties.

Was hoping to get some insight from people who have been able to do this in the past.

I found a house that in 2006, the mortgage taken out on it was $120,000

The bank is now asking $15,000 for the house! There are alot of repairs to do however. I'm guessing easily over $8,000 worth of repairs. The house is in a solid neighborhood.

The house is too small for my needs. But I was trying to think how I could turn it into a rental.

Any advice would be greatly appreciated!

[kenshirley]

My Father and his brother inherited rental properties from their Mother man years ago.
It wasn't too bad then.
But today the courts tend to side with the renters. You can't seem to get them out even if they don't pay. It can take a very long time via the courts and it's very expensive too.
They can destroy the place, sell appliances and nearly anything of value and you have little recourse as many renters have nothing in the first place.
There is no way today that I would own rental property.

[frogger]

I was just curious what it's like to be a landlord.

I still am one. Have been for 25 + years.

Rental property "was" a good business to be in where I am until a few years ago. Between the crack, meth, cocaine, bulldogs, tequila, lottery, malt liquor, etc., there is not much money left when it's time to pay the landlord.

I did good for many years, but our area has turned into little Detroit. Rental property is why I'm heading for bk. I am so looking forward to being out of the rental business......

[StartingOver08]

I was a landlord for over 20 yrs. In general it was great - one caveat - don't ever lease to family/friends. It is a business like any other business, keep it professional. Do NOT get friendly with tenants (I had a couple of my clients become too friendly with their tenants and they ended up having to evict).

You have to have a little 'hard shell' around your heart - if you listen to tenant's excuses and buy their stories you will always have a rough time. I never had a problem with that. My rents were market rents, but the rent was due on the due date and there was a large late fee that was a deterrant to getting late payments. Enforce the late fee. Once you enforce it, then the tenant remembers the date better. This is a business and needs to be run like one.

I had a separate account for the tenant to deposit their rent payments as I did not want the 'check in the mail' excuse. This was helpful to both the tenant and to me.

If you are an organized person and you purchase the property so that you have positive cash flow, it is a rewarding experience.

Keep your properties well maintained and you will get good tenants. Keep reserve funds for maintenace. The rent is a function of the direct neighborhood in which the property is located - if you are 'close' to a good neighborhood, you are not going to get the good neighborhood rents.

Do your homework. Not only on the purchase (checking real property values, real rental rates) will save you a purchase that looks good on paper, but is a disaster waiting to happen. Do your homework on each tenant. That is not to say that you want to reject tenants with poor credit histories - you just want to know EXACTLY what you are getting. Run complete background checks on each tenant, but use common sense. If you are looking for perfection, do not become a landlord.

If the house that you are considering is truly in a half way decent neighborhood (nothing wrong with blue collar, something is definately wrong with crack neighborhood) - then you have a very good chance of getting in for a good price and having decent cash flow. Think of rental property as a bank account that throws off better than average returns with a long term prospective of one day waayyyy in the future of accessing the principal balance. Run your numbers on long term, not short term perspectives. We will not be in this kind of real estate market forever. It will turn around. In the meantime it is an excellent opportunity to pick up rental property as many people are not going to be able to buy over the next few years while this economy works out of this mess.

Don't go back in and borrow against the equity later. That was one of my mistakes - borrowing against current properties to purchase others - better to have fewer rental properties owned with little mtg's and large cash flow to whether the economic storms.

[frogger]

Don't go back in and borrow against the equity later. That was one of my mistakes - borrowing against current properties to purchase others - better to have fewer rental properties owned with little mtg's and large cash flow to whether the economic storms.

Pay close attention to the above statement. That is one of the most valuable things to remember. It was also one of my same mistakes. Better to have a few paid for than many that you owe debt on.

And another thought... pay attention to shifting neighborhoods and demographics. What is "good" today can be "fair" next month, can be "poor" soon thereafter. All it takes is a few of the wrong people moving into a neighborhood to destroy it. If you start to see a neighborhood shift into a lesser quality area, get out and get out quick. It will only get worse.

That, and too much debt, is my downfall.

Startingover08 gave excellent advice.

[myhearts07]

Previous landlords, question for you. Have you had tenants who had filed bk and/or had foreclosed on their properties that you rented too? What were you looking for as far as credit/income/work history?

hearts

[StartingOver08]

Yes. I was looking for tenant's with jobs that would pay the rent! So the income issue was important. I felt that a recent filer was in much better position to pay than someone that stuck their head in the sand.

[JustOverBroke]

If you don't mind the 2am calls saying the heat or A/c is not working or a daytime call telling you that little Johnny just flushed a potted plant down you're toilet.
But the best is when Jim and Sue take the rent money down to the casino to try and double it but just are not having real good luck that day.
Then it's up tho you to find the note money.

I'd pass on that Business.

[StartingOver08]

You are right - not everyone is cut out to be a landlord.

As to having the note money, you better be able to pay the note without the rent. That goes back to my original statement, low mortgages (or none!) and positive cash flow.

[relief13035]

Landlord here also. Surrendered 2 out of our 3 rentals in the BK and boy am I thrilled. It was cool for a while, but practically gave me ulcers the rest of the time. Every month I had to chase down the rent for at least one of the properties.

We also were house flippers during the times when houses were actually worth something. That was a blast! Too risky for us right now since the California housing market is so bad.

[frogger]

Previous landlords, question for you. Have you had tenants who had filed bk and/or had foreclosed on their properties that you rented too? What were you looking for as far as credit/income/work history?

hearts

Yes. A tenant that has filed for bk never scares me. Especially if they have finished the process and been discharged. You know they are not going to do it again for some time.

As far as what I now look for? Income and work history. In the past, it was credit checks, background checks, the whole works. All of that is fine and good, but you need someone with enough income to pay the rent. When renting to someone, I try not to let their rent be more than 30% of their gross income. I do flex on that a little, but not much.

The #1 thing that matters to me now is "collectability". Job stability, amount of income earned, assets, etc. If I can't collect form you in the future, I really don't want to rent to you.

In the past, I went into a rental with the attitude of finding the best tenant. Now I try to find the tenant that I can collect best from when I have to evict them.

The tenant pool is pretty much a cesspool........

[StartingOver08]

Just so you know, the only reason I still run the background check is for the criminal record aspect.

If they have a drug history, it is a problem not only for collection of rent, but also your home can be siezed by the DEA if the tenant's are dealing out of the property. Used to be you could avoid any of that type of situation by buying in the right neighborhood. Not anymore.

[twuoo]

Thanks for all the great input! I did put a bid on the house, but the realtor said there is now a bidder war between me and another potential buyer.

I just wonder if the banks don't generate their own "bidding wars" so they can hike the price of the home on the unsuspecting. How could something like that be proved?

[frogger]

Thanks for all the great input! I did put a bid on the house, but the realtor said there is now a bidder war between me and another potential buyer.

I just wonder if the banks don't generate their own "bidding wars" so they can hike the price of the home on the unsuspecting. How could something like that be proved?

"Bidding Wars". That's the biggest crock of bovine excriment that ever happens. When someone wants to start a bidding war on a distressed piece of property, back out and move on along.

There's ALWAYS another piece of distressed property.

[StartingOver08]

Normally, a 20% downpayment is expected but in this recession I would suggest a 25-30% cash downpayment.

Please, this is baloney! When you are buying investment property now you have to put down 25% MINIMUM and fixed rate is all you can get. You are letting your inexperience show again.
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