First time home buyer, first time landlord?
February 21, 2017 2:08 PM Subscribe
The plan: Buy an older home in the pricey liberal College Town in our area. Rent it out for a couple of years while we live for free with extended family out in the country (40 minutes away). Pocket savings from living for free while the rent pays our mortgage, then remodel and live in the new house a few years down the road once kids are school-age and we want into the better school district. The numbers are as follows...
Husband and I are professionals in our early 30s with young children.
The numbers:
-We make low six figures combined income, good credit history. I work in College Town, husband telecommutes.
- Have $100k for downpayment.
- Retirement accounts and kid's college accounts are being contributed to regularly
- Have additional $25k liquid for savings and to go towards closing costs. We are also currently saving $3500 per month (see next point)
- Live for free with extended family and could do so for the foreseeable future.
The local housing market
- Fixer uppers in College Town are in the high 500s to mid 600s, newer condos/townhomes similarly priced. Single family houses in this price range sell within a couple weeks of listing.
- Prices dipped in the recession (think to 400s) but are back to pre-recession levels
- Rents for these houses are typically $2600-3000 per month and the rental market is expensive and competitive due to students at local college.
-Your money will buy you more house if you are outside the city but these areas are pro-Trump (for California) and have worse schools so we're not keen on buying out here. Besides we have the choice to build a house on the extended family's land if we did want to live outside the city.
We're willing to pay a premium for the opportunity to live in College Town and have always lived in older and smaller homes. However, we're not handy or have the time/energy to DIY renovations hence the plan to save money and pay for it later. We would get a property manager to oversee the rental.
We have the money ready to buy now and want to do so before interest rates rise but are cautious because national politics (sigh) and general cautiousness about money due to coming of age in the great Recession. But on the other hand we are here because the SF Bay Area priced us out and we'd hate for that to happen again because we were scared to take a chance.
What do you think fellow MeFites? Any words of wisdom?
Husband and I are professionals in our early 30s with young children.
The numbers:
-We make low six figures combined income, good credit history. I work in College Town, husband telecommutes.
- Have $100k for downpayment.
- Retirement accounts and kid's college accounts are being contributed to regularly
- Have additional $25k liquid for savings and to go towards closing costs. We are also currently saving $3500 per month (see next point)
- Live for free with extended family and could do so for the foreseeable future.
The local housing market
- Fixer uppers in College Town are in the high 500s to mid 600s, newer condos/townhomes similarly priced. Single family houses in this price range sell within a couple weeks of listing.
- Prices dipped in the recession (think to 400s) but are back to pre-recession levels
- Rents for these houses are typically $2600-3000 per month and the rental market is expensive and competitive due to students at local college.
-Your money will buy you more house if you are outside the city but these areas are pro-Trump (for California) and have worse schools so we're not keen on buying out here. Besides we have the choice to build a house on the extended family's land if we did want to live outside the city.
We're willing to pay a premium for the opportunity to live in College Town and have always lived in older and smaller homes. However, we're not handy or have the time/energy to DIY renovations hence the plan to save money and pay for it later. We would get a property manager to oversee the rental.
We have the money ready to buy now and want to do so before interest rates rise but are cautious because national politics (sigh) and general cautiousness about money due to coming of age in the great Recession. But on the other hand we are here because the SF Bay Area priced us out and we'd hate for that to happen again because we were scared to take a chance.
What do you think fellow MeFites? Any words of wisdom?
Property management for a single house is overkill.
posted by srboisvert at 2:38 PM on February 21, 2017 [3 favorites]
posted by srboisvert at 2:38 PM on February 21, 2017 [3 favorites]
Why not just live for free with your family and save the money you'd be paying in rent/mortgage? $3000/month on a $500-600K place is not a great rate of return. It will barely cover your mortgage. Professional real estate investors look for places where they can charge 1% of the purchase price in a month ($5000 on a $500K place, e.g.).
Also you won't be able to get as good of a mortgage for a place you're buying to rent, and you'll have to pay taxes on the rent, and if you sell it without living in it you'll need to pay capital gains taxes on the increase in value.
If you want to invest, invest; if you want to buy a home, buy a home.
Interest rates would have to rise A LOT to make up for leaving your money in a bad investment for five years, and, as I said above, you will qualify for better interest rates for an owner-occupied home than you will for a renter-occupied home.
posted by mskyle at 2:42 PM on February 21, 2017 [18 favorites]
Also you won't be able to get as good of a mortgage for a place you're buying to rent, and you'll have to pay taxes on the rent, and if you sell it without living in it you'll need to pay capital gains taxes on the increase in value.
If you want to invest, invest; if you want to buy a home, buy a home.
Interest rates would have to rise A LOT to make up for leaving your money in a bad investment for five years, and, as I said above, you will qualify for better interest rates for an owner-occupied home than you will for a renter-occupied home.
posted by mskyle at 2:42 PM on February 21, 2017 [18 favorites]
Landlording is not for the fainthearted. Landlording with students even less so. Hire your maintenance/management/lawn company *in town* to save yourself grief. Have them or a leasing agent handle vetting the tenants. I respectfully disagree with srboisvert about that. Mom & I leased out a house 40 minutes from her and from me and having management to handle lock outs, lawn maintenance, snow removal and the nightmare tenant who tried to contract major renovations was a godsend.
Which, by the way, make sure you know a local landlord attorney, should you ever need one--an attorney with experience in the courtrooms you will be in is much better than any other attorney.
Otherwise, expect the house to be in worse shape when you move in, finally, than it was when you bought it. Even the most conscientious tenants don't do the deterioration-abatement that you would do if you lived there and minor damage or minor needs will accumulate. Expect loose knobs to get looser; sliding doors that don't quite stay on track to get worse. Things that home owners know to do (like clean dishwasher traps or dust the tops of doorways) may not happen if you have renters, either because they don't know to do those things or they know it's not really their problem.
Also, make sure you come by and meet your neighbors. Try to establish and maintain a relationship with them before you move to show you're invested in the neighborhood, the house, and the relationship with them. I lease out the condo I owned before I got married. And maintaining the neighbor relationship with the people on my floor was very helpful when I had the jerkface tenants making it hard for the management company to do a major plumbing repair.
I don't know that I'd do this--unless the perfect house was available now--just as a hedge against interest rates, rather than save the money and buy when it's time to move, for the reason (noted above) that mortgages are written differently if you do not occupy the place for the first 12/24/36 months of the mortgage. And most mortgages can be called and due in full if you lie about your intent to immediately occupy the place as your primary residence.
posted by crush-onastick at 2:46 PM on February 21, 2017 [1 favorite]
Which, by the way, make sure you know a local landlord attorney, should you ever need one--an attorney with experience in the courtrooms you will be in is much better than any other attorney.
Otherwise, expect the house to be in worse shape when you move in, finally, than it was when you bought it. Even the most conscientious tenants don't do the deterioration-abatement that you would do if you lived there and minor damage or minor needs will accumulate. Expect loose knobs to get looser; sliding doors that don't quite stay on track to get worse. Things that home owners know to do (like clean dishwasher traps or dust the tops of doorways) may not happen if you have renters, either because they don't know to do those things or they know it's not really their problem.
Also, make sure you come by and meet your neighbors. Try to establish and maintain a relationship with them before you move to show you're invested in the neighborhood, the house, and the relationship with them. I lease out the condo I owned before I got married. And maintaining the neighbor relationship with the people on my floor was very helpful when I had the jerkface tenants making it hard for the management company to do a major plumbing repair.
I don't know that I'd do this--unless the perfect house was available now--just as a hedge against interest rates, rather than save the money and buy when it's time to move, for the reason (noted above) that mortgages are written differently if you do not occupy the place for the first 12/24/36 months of the mortgage. And most mortgages can be called and due in full if you lie about your intent to immediately occupy the place as your primary residence.
posted by crush-onastick at 2:46 PM on February 21, 2017 [1 favorite]
To add on to praemunire, check out this calculator to see how the numbers work out:
http://www.goodmortgage.com/Calculators/Investment_Property.html
posted by TomFoolery at 2:56 PM on February 21, 2017 [1 favorite]
http://www.goodmortgage.com/Calculators/Investment_Property.html
posted by TomFoolery at 2:56 PM on February 21, 2017 [1 favorite]
Best answer: My take is that you will have to declare that this is an investment property and not a primary residence. That means 1) higher down payment (usually 25%) and 2) no first time homebuyer credit or any other benefit of a primary residence. I think insurance might be higher as well, and you would definitely want to carry additional insurance in the case of younger renters (personal liability, property damage, etc...)
25% down should put you in a low monthly payment. My (very) rough estimates put the payment at $1800/month (for 500K home, you will need to add your own taxes/property management).
I highly recommend property management unless you intend to make this a full time business. You will have to deal with complaints (most likely noise/nuisance) and property maintenance. I personally do not like dealing with that.
I would recommend setting aside 6month emergency fund (10k?) to handle repairs (older homes generally have more) and maintenance. With your downpayment, I would feel comfortable going forward if I had $135K in cash. You'll definitely want to save more to renovate the property after you convert back to primary residence. The good news is that if you live there for 2 years after it's been a rental, you don't pay taxes on any capital gains (at least in colorado, if I remember correctly).
In general, the rule of thumb is that you should return 1% of the cost of the property in monthly income (500K home means 5K monthly rent). That is _very_ difficult to do in this market where housing prices are high. However, I think you have an alternate path for this home (convert to primary residence) so as long as I was getting a comfortable rate of return, I would be okay with it.
ROI calculation
135k * 10% = 13.K (this is your expected return)
assuming 2.3K/month expenses you would have 27.6K in expenses/year.
13K + 27.6K = 40.6K (your target return with expenses) / 12 = 3.3K/month. Can you get this value as rent? If not, there are other opportunities for investment that will get you closer to that without the headache (Look at yieldstreet.com or peerstreet.com).
If not, you'll be the only one who can weigh the end goal (owning the home in the area you want) vs the rate of return. However, I would never put myself into a position where I am razor thin on the cashflow... this is your buffer for any unforeseen problems (and your renovation money, when you finally move in)
posted by kookywon at 4:01 PM on February 21, 2017 [5 favorites]
25% down should put you in a low monthly payment. My (very) rough estimates put the payment at $1800/month (for 500K home, you will need to add your own taxes/property management).
I highly recommend property management unless you intend to make this a full time business. You will have to deal with complaints (most likely noise/nuisance) and property maintenance. I personally do not like dealing with that.
I would recommend setting aside 6month emergency fund (10k?) to handle repairs (older homes generally have more) and maintenance. With your downpayment, I would feel comfortable going forward if I had $135K in cash. You'll definitely want to save more to renovate the property after you convert back to primary residence. The good news is that if you live there for 2 years after it's been a rental, you don't pay taxes on any capital gains (at least in colorado, if I remember correctly).
In general, the rule of thumb is that you should return 1% of the cost of the property in monthly income (500K home means 5K monthly rent). That is _very_ difficult to do in this market where housing prices are high. However, I think you have an alternate path for this home (convert to primary residence) so as long as I was getting a comfortable rate of return, I would be okay with it.
ROI calculation
135k * 10% = 13.K (this is your expected return)
assuming 2.3K/month expenses you would have 27.6K in expenses/year.
13K + 27.6K = 40.6K (your target return with expenses) / 12 = 3.3K/month. Can you get this value as rent? If not, there are other opportunities for investment that will get you closer to that without the headache (Look at yieldstreet.com or peerstreet.com).
If not, you'll be the only one who can weigh the end goal (owning the home in the area you want) vs the rate of return. However, I would never put myself into a position where I am razor thin on the cashflow... this is your buffer for any unforeseen problems (and your renovation money, when you finally move in)
posted by kookywon at 4:01 PM on February 21, 2017 [5 favorites]
Loan companies handle loans for primary residences and investment properties differently; interest rates will be higher unless you pay a lot of points up front, you'd absolutely need to put minimum 20% down because you can't get mortgage insurance on an investment property, your insurance is going to be more expensive, and it's going to impact your ability to deduct mortgage interest. If you consider that you're probably talking a $500,000 cap to your potential purchase price and thus will probably be at the bottom of the rent range you cite, plus low-ball estimates of $1,000/year landlord insurance, $5,000/property taxes, 10% to the property manager, and another $1,000/year for maintenance, and an interest rate of 4.75%, you are going to lose money renting the place out.
posted by drlith at 4:07 PM on February 21, 2017
posted by drlith at 4:07 PM on February 21, 2017
I am in a college town--er, village--and also a (thankfully) ex-LL.
1) If you rent to students, bear in mind that many of them will expect a lease for the school year only, not for the full year. This means that you will need to jack the rent proportionally and/or find short-term renters for the summer.
2) Renting to students means that you will need to do repairs, sometimes drastic repairs, to the house every nine months. Are you prepared to entirely repaint the house every year? Replace all the appliances because the kids never cleaned them? Tear out the kitchen or the bathroom(s) multiple times because ditto?
3) I agree w/posters above that the rent you expect from the property may not be sufficient to cover the mortgage and your likely expenses. Bear in mind that there is a time limit on how long you can lose $ on a rental property and still count it as a business expense on your taxes, which is an important consideration.
4) Property manager: if you go ahead and rent to students, you should have a property manager, because there will be, if not blood, then certainly problems that you aren't going to want to deal with from forty minutes away. OTOH, if you use the property as a non-student rental, matters are likely to be calmer.
posted by thomas j wise at 4:13 PM on February 21, 2017 [1 favorite]
1) If you rent to students, bear in mind that many of them will expect a lease for the school year only, not for the full year. This means that you will need to jack the rent proportionally and/or find short-term renters for the summer.
2) Renting to students means that you will need to do repairs, sometimes drastic repairs, to the house every nine months. Are you prepared to entirely repaint the house every year? Replace all the appliances because the kids never cleaned them? Tear out the kitchen or the bathroom(s) multiple times because ditto?
3) I agree w/posters above that the rent you expect from the property may not be sufficient to cover the mortgage and your likely expenses. Bear in mind that there is a time limit on how long you can lose $ on a rental property and still count it as a business expense on your taxes, which is an important consideration.
4) Property manager: if you go ahead and rent to students, you should have a property manager, because there will be, if not blood, then certainly problems that you aren't going to want to deal with from forty minutes away. OTOH, if you use the property as a non-student rental, matters are likely to be calmer.
posted by thomas j wise at 4:13 PM on February 21, 2017 [1 favorite]
Response by poster: Thanks all for your thoughts. We're definitely still in the pondering phase. Husband's from Texas (anything over 200K is insane!) and I'm from the Bay Area (anything under 1 million is cheap!) so our ideas about reasonable housing costs are all over the map. Good to know to look into different mortgage residency requirements, tax implications, alternative investments and unforeseen costs as we continue our research.
posted by wilky at 4:22 PM on February 21, 2017 [1 favorite]
posted by wilky at 4:22 PM on February 21, 2017 [1 favorite]
Best answer: I actually recently did something sort of similar to what you're describing. I'm around your age - maybe a bit younger - and recently bought a two-unit property in downtown Philadelphia on a mortgage (I'm a 50% owner and so is a relative of mine who went in with me on the purchase). I'm currently living with my parents for a couple of years while I save money, and then I'm planning to move into one of the apartments. Just to give you some numbers for comparison, I paid around $475k for the property and it's renting now at around $2900/month total. As soon as possible, I'm planning to improve one of the apartments (the low-hanging fruit one): I'm hoping to spend 20k and get $300/month more. I'm also planning to improve the upper one with more intensive improvements/additions and get around $700-800/month more. Ultimately, my goal is to have spent $600k on the property and improvements, and be making $4000/month. Some thoughts on my experience so far:
- I contemplated hiring a property manager, but decided to do it myself. It surprised me that actually this was the *easiest* part of the whole project. I found tenants within 10 days, and could have found one much more quickly (MeMail me for details about how I advertised and screened). I've had good communication with my tenants, try to be responsive about any issues they mention and to run any proposed changes to the house by them, and it's been a great experience so far.
- I am extremely glad that I picked an area that is largely populated by affluent young professionals who haven't bought their own houses yet. Literally all of the people who replied to my listing and whom I showed around the apartments were people I would have been happy to rent to. I have had zero problems with my tenants so far (one even pays his rent 10 days early!). I was thinking about purchasing in a studenty neighborhood but decided against it, even though the properties were priced lower and the returns were potentially higher. I also looked in more "emerging" neighborhoods where people are flipping houses, but I thought that looked too risky for me - and I didn't want to buy in an area I didn't feel safe walking around at night in in a few years when I live there. Chasing down rent payments and initiating evictions are something I'm not interested in spending my time doing, to the extent I can avoid it, and since I want to buy and hold the house a long time, I didn't want to basically bet/speculate.
- My real estate market is pretty hot right now and it was surprisingly hard to find a multi-unit house in my price bracket in an area that I wanted to live in. I didn't settle and was patient and then jumped on one that came up. Conversely, though, I didn't get so emotionally invested in the property before I bought it that I was convinced that it was my One True House and I was afraid to negotiate for fear of losing it: I saved almost 50k off of the initial asking price by making a low offer and being prepared to walk away (the seller had also made some bad decisions in listing that contributed to the unusual final price).
- There are far more repairs/bills associated with the house than I had anticipated. There are way more issues going on than the inspector found before I purchased the house. My house was a semi-fixer-upper - it's in rental condition, in a semi-upscale neighborhood. The previous landlord lived far away and fixed things minimally, so now everything needs to be updated/upgraded/fixed. I'm currently forking out an unexpected $20k to completely redo the heating system in the house, because it failed right after I bought it (while tenants were in place). There are lots of other things too. It's basically an endless list of projects. You need a big cushion between your monthly mortgage payment and the monthly rental amount in order to cover these unexpected costs. Even things like the cold water bill - who knew that the tenants' cold water bill would be $100/month? Lots of unexpected expenses that add up. There's a steep learning curve.
- It's really really hard to do major repairs with tenants in place, as I'm finding. Want to get lots of estimates on a given job to get a good price? Hard to do, if you have to enter tenants' space every time you want to do it. Everything takes ten times longer because you have to set up all estimate time slots on the same day, drive down and spend the day at the house, etc.
- Along with that, if you've never owned a house before, be prepared to spend LOTS of time becoming familiar with things you knew nothing about. I spent about 100 hours reading up on the mechanics of steam heating, to figure out what was going wrong in my system and whether to spend money fixing it or whether to spend more money replacing it. Same deal in terms of insulation, plaster walls, leaks, etc.
- I hate to say it, but I have had horrible experiences with pretty much every tradesperson/contractor that I have encountered since I bought the house. I feel like I'm being profiled because I'm a white-collar woman: I keep getting estimates that are much much higher than they should be for plumbing jobs, tiling jobs, HVAC jobs, etc. It's pretty demoralizing to experience patronizing sexism from, say, 10 men in a given day who come round to give estimates. If you don't have connections in that world, you're probably going to get inflated price estimates, as well (e.g. I got quoted $6000 to run a gas line when I knew that the price I could get from my stove installer was under $1000). Also there's a lot of bait-and-switch going on in terms of advertising vs reality.
Ultimately, though, I'm really glad I bought the house. As long as you have a financial cushion and aren't expecting to make quick profit, and as long as you're prepared to basically take on the house as a half-time job, I think your idea could be a sound one. I feel much less panicky about the rapidly rising prices in my city now that I know that I own my house, and I feel a lot of flexibility to know that I can move into my own place at any time once I get tired of living with my parents. One tip: you need to put down 25% instead of 20% or less if the house is an investment property. You also get a higher mortgage rate. You may want to consider living in the house for one year after you buy it - that will qualify it as a primary residence and entitle you to the lower mortgage rate and down payment. You could then rent it out after that.
posted by ClaireBear at 5:00 PM on February 21, 2017 [5 favorites]
- I contemplated hiring a property manager, but decided to do it myself. It surprised me that actually this was the *easiest* part of the whole project. I found tenants within 10 days, and could have found one much more quickly (MeMail me for details about how I advertised and screened). I've had good communication with my tenants, try to be responsive about any issues they mention and to run any proposed changes to the house by them, and it's been a great experience so far.
- I am extremely glad that I picked an area that is largely populated by affluent young professionals who haven't bought their own houses yet. Literally all of the people who replied to my listing and whom I showed around the apartments were people I would have been happy to rent to. I have had zero problems with my tenants so far (one even pays his rent 10 days early!). I was thinking about purchasing in a studenty neighborhood but decided against it, even though the properties were priced lower and the returns were potentially higher. I also looked in more "emerging" neighborhoods where people are flipping houses, but I thought that looked too risky for me - and I didn't want to buy in an area I didn't feel safe walking around at night in in a few years when I live there. Chasing down rent payments and initiating evictions are something I'm not interested in spending my time doing, to the extent I can avoid it, and since I want to buy and hold the house a long time, I didn't want to basically bet/speculate.
- My real estate market is pretty hot right now and it was surprisingly hard to find a multi-unit house in my price bracket in an area that I wanted to live in. I didn't settle and was patient and then jumped on one that came up. Conversely, though, I didn't get so emotionally invested in the property before I bought it that I was convinced that it was my One True House and I was afraid to negotiate for fear of losing it: I saved almost 50k off of the initial asking price by making a low offer and being prepared to walk away (the seller had also made some bad decisions in listing that contributed to the unusual final price).
- There are far more repairs/bills associated with the house than I had anticipated. There are way more issues going on than the inspector found before I purchased the house. My house was a semi-fixer-upper - it's in rental condition, in a semi-upscale neighborhood. The previous landlord lived far away and fixed things minimally, so now everything needs to be updated/upgraded/fixed. I'm currently forking out an unexpected $20k to completely redo the heating system in the house, because it failed right after I bought it (while tenants were in place). There are lots of other things too. It's basically an endless list of projects. You need a big cushion between your monthly mortgage payment and the monthly rental amount in order to cover these unexpected costs. Even things like the cold water bill - who knew that the tenants' cold water bill would be $100/month? Lots of unexpected expenses that add up. There's a steep learning curve.
- It's really really hard to do major repairs with tenants in place, as I'm finding. Want to get lots of estimates on a given job to get a good price? Hard to do, if you have to enter tenants' space every time you want to do it. Everything takes ten times longer because you have to set up all estimate time slots on the same day, drive down and spend the day at the house, etc.
- Along with that, if you've never owned a house before, be prepared to spend LOTS of time becoming familiar with things you knew nothing about. I spent about 100 hours reading up on the mechanics of steam heating, to figure out what was going wrong in my system and whether to spend money fixing it or whether to spend more money replacing it. Same deal in terms of insulation, plaster walls, leaks, etc.
- I hate to say it, but I have had horrible experiences with pretty much every tradesperson/contractor that I have encountered since I bought the house. I feel like I'm being profiled because I'm a white-collar woman: I keep getting estimates that are much much higher than they should be for plumbing jobs, tiling jobs, HVAC jobs, etc. It's pretty demoralizing to experience patronizing sexism from, say, 10 men in a given day who come round to give estimates. If you don't have connections in that world, you're probably going to get inflated price estimates, as well (e.g. I got quoted $6000 to run a gas line when I knew that the price I could get from my stove installer was under $1000). Also there's a lot of bait-and-switch going on in terms of advertising vs reality.
Ultimately, though, I'm really glad I bought the house. As long as you have a financial cushion and aren't expecting to make quick profit, and as long as you're prepared to basically take on the house as a half-time job, I think your idea could be a sound one. I feel much less panicky about the rapidly rising prices in my city now that I know that I own my house, and I feel a lot of flexibility to know that I can move into my own place at any time once I get tired of living with my parents. One tip: you need to put down 25% instead of 20% or less if the house is an investment property. You also get a higher mortgage rate. You may want to consider living in the house for one year after you buy it - that will qualify it as a primary residence and entitle you to the lower mortgage rate and down payment. You could then rent it out after that.
posted by ClaireBear at 5:00 PM on February 21, 2017 [5 favorites]
A house is not a guaranteed investment anymore. It requires a lot more brain power and cash than it would be to invest more traditionally. Live with family and save the money you might need if housing prices go up later. Never assume you can make money as a landlord (especially renting to students) or when selling a house (if your life ends up working out differently). I think you're creating needless complications for yourself this way.
posted by possibilityleft at 4:52 AM on February 22, 2017
posted by possibilityleft at 4:52 AM on February 22, 2017
Something I haven't seen mentioned yet--are you going to want to live in a house that is in a neighborhood that is appealing to student renters? Loud parties, multiple cars parked in driveways (or the the lawn) or taking up all available street parking, transient feel since the "neighbors" all turn over every year or two? You can mitigate this somewhat depending on the demographics of where the house is located, but the flip side is if you pick an area that doesn't really appeal to students, you may have difficulty finding tenants (or the tradeoff will be that you'll have to lower the rent to attract them).
posted by msbubbaclees at 6:05 AM on February 22, 2017
posted by msbubbaclees at 6:05 AM on February 22, 2017
Best answer: Sorry to jump back in again, but saw the comments and wanted to add a few more things:
Property managers can help with repairs. The good ones have a stable of tradespeople that they work with regularly (if they manage several properties). They don't work with poorly skilled ones and they don't generally work with overpriced ones. They can get a good guy in and finish the work. It took me a bit to trust my guy, (because I'm skeptical with people and money in general) but he's worked out really well.
Do the math often and trust your numbers. I have the equation that I broke down for you in a spreadsheet that I use constantly. This is primarily an investment, so treat it like one and if the numbers don't work, walk away and don't look back.
I had a lot of skeptical people telling me that real estate was the worst: dealing with people, uncertainty in the market, the huge risk involved with tenants destroying your house, etc... I've been doing it for 4 years now and its worked out really well.
I put most of that on my property manager because he's really good and I knew that before I started working with him. He seems (to me at least) to treat my properties as an investment that he has part interest in and works hard to get good people in and keep me up to date on what's happening. Often it seems like he's not doing much and I'm sure other people would think "I'm paying him to do nothing but collect checks and I could do that" The reason its so smooth is because he's doing his job well.
real estate is just another type of investment and has its positive and negative sides. Do your homework, read up and go in with your eyes open to the risks and you'll be fine.
some books to start with.
posted by kookywon at 8:00 AM on February 22, 2017 [3 favorites]
Property managers can help with repairs. The good ones have a stable of tradespeople that they work with regularly (if they manage several properties). They don't work with poorly skilled ones and they don't generally work with overpriced ones. They can get a good guy in and finish the work. It took me a bit to trust my guy, (because I'm skeptical with people and money in general) but he's worked out really well.
Do the math often and trust your numbers. I have the equation that I broke down for you in a spreadsheet that I use constantly. This is primarily an investment, so treat it like one and if the numbers don't work, walk away and don't look back.
I had a lot of skeptical people telling me that real estate was the worst: dealing with people, uncertainty in the market, the huge risk involved with tenants destroying your house, etc... I've been doing it for 4 years now and its worked out really well.
I put most of that on my property manager because he's really good and I knew that before I started working with him. He seems (to me at least) to treat my properties as an investment that he has part interest in and works hard to get good people in and keep me up to date on what's happening. Often it seems like he's not doing much and I'm sure other people would think "I'm paying him to do nothing but collect checks and I could do that" The reason its so smooth is because he's doing his job well.
real estate is just another type of investment and has its positive and negative sides. Do your homework, read up and go in with your eyes open to the risks and you'll be fine.
some books to start with.
posted by kookywon at 8:00 AM on February 22, 2017 [3 favorites]
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posted by praemunire at 2:31 PM on February 21, 2017 [1 favorite]