Anyone here own a rental property?

[Mark B]

Hey everyone,
For the last 6 years or so, I have been living in a condo I own in South Jersey. My fiance & I are ready to upgrade to a single family house with some (alot) more room and a GARAGE!! Anyway, I have been toying with the idea of keeping the condo and renting it out. I checked to see what condos like mine are renting for. Ones in my development that havent had as many interior upgrades as mine are going for around $1200. My mortgage is just under $1000. Its not a very big profit margin, but even if I can get someone else to pay my mortgage, I think its a good deal for me.

I have never rented a property before. What is involved in being a landlord? Is it alot of hassle with tennants calling every other day complaining about stupid stuff?

Thanks,
Mark B

[Joe 1320]

I have never rented a property before. What is involved in being a landlord? Is it alot of hassle with tennants calling every other day complaining about stupid stuff?

Thanks,
Mark B

I rented my house out while I moved to other area of the state for my company. One thing is for certain, tennants do not take the same kind of care as the owner. The building will see more wear and tear and you'll need to mildly renovate every time someone pulls out. My best advice when renting would be to make sure the appliances are fairly new, be sure to do credit checks before leasing, require substantial cash up front (ie first, last and security.) that usually screens out the less than desireable tennants. Oh.... NO PETS. The downside is that if the place goes unrented for any period of time, the cashflow strain can be substantial.

[Performin Norman]

I rented my house out while I moved to other area of the state for my company. One thing is for certain, tennants do not take the same kind of care as the owner. The building will see more wear and tear and you'll need to mildly renovate every time someone pulls out. My best advice when renting would be to make sure the appliances are fairly new, be sure to do credit checks before leasing, require substantial cash up front (ie first, last and security.) that usually screens out the less than desireable tennants. Oh.... NO PETS. The downside is that if the place goes unrented for any period of time, the cashflow strain can be substantial.

Exactly. 2 of my sisters are slum lords and I was thinking about it until I talked to them. I don't want anything to do with dealing with those kinds. Sure, you can find good tenants but it is very hard to do, especially in this economy.

[FroSSty]

You will have to be able to pay both mortgages for 6 months or more because it will go unrented or people will get behind and the responsibility to the mortgage is on your shoulders and credit rating. Plus, as said above, renters won't care enough to keep the place looking nice. Plan on new carpet, drywall fixes, paint etc. every time someone moves out. Not worth it imho.

[Gary94Formula]

I have 2 condos I rent out. I agree on the credit checks and the security deposits. It also depends on where they are located and the cost of the rent for the area may screen away some less than optimal tenants. Mine are in a suburb and that helps.. I agree they do not take care of the place like I would, but they are not getting trashed either. Do your homework and make sure you have signed documentation. I also take photos prior to anyone moving in. Also, if there is any rules or regulations, make sure they sign a copy of those and are willing to abide by them. Most places will come after the owner if the tenant has violated some of the rules... Good luck with whatever you decide.

[sneitzel]

You will have to be able to pay both mortgages for 6 months or more...

Pay attention to that statement. It can take 6 months or longer to legally evict someone who doesn't want to leave. Even if you get 1st, last and security up front you may still have to cover the payments for a few months during the process. I think you need to have a 6 month cushion IN ADDITION to getting 1st last and security just in case. If you decide to go ahead I would deposit any "profit" from your rental in the bank as well. That should be your incidental fund for things like broken AC, plumbing leak etc. You also need to be aware of the laws in your area and what your responsibilities as a landlord are as well as what the impact is on your income taxes. I would seriously consider setting up a business and separating the rental/business from your personal finances.

Another option is to hire a management company to handle all of that for you and you just become the money guy. Of course, doing that will most definitely eat away any "profit" you might be getting.

One final thing to consider is can your credit handle 2 mortgages. Not only today but in the future if (fill in major life changing event here) happens.

[markd79ta]

I can't sell my old house with the downturn in the economy...the house is severely upside-down. I rent it at a loss, but the tax break more then offsets the loss. Your profit/loss is factored with depreciation, vehicle miles, repairs, interest, insurance, and taxes. If your rent doesn't cover these costs, then you get a tax deduction.

My renters are good; they would actually like to buy the place when the economy recovers. You need to think about maintenance and repairs. I always get the furnace serviced once per year. You need to factor depreciation in all areas of the home. For instance, your carpet will not last as long as if you owned it, and you must replace it about every three years or two long term occupancies. When you make repairs and/or replace items, you need to keep it new but don't buy expensive stuff. You need to be available at short notice or you need to pay somebody if needed. I get called on average about 3 times per year.

If you can deal with the financial pressure at times, it is a good investment. However, you do need to take into consideration a few months of vacancy as well as repairs and replacement of depreciated items.

Make sure you put inspections in the lease and the failure of inspection will render the lease in default resulting in eviction. It is possible to have your place destroyed and you need to be prepared to pay the cost of fixing the damage. Additionally, make sure your lease covers occupancy. Do not allow additional occupancy or changes in occupancy without your authorization.

[Dave M]

My girlfriend owns a rental condo in Las Vegas. Because she lives across the country she has a property management company, so she doesn't have to deal with the every day calls about something needing fixed or collecting rent, etc. If you live in the same area as your rental, you could forgo the management company and save some money. When the condo goes vacant it's definately a major squeeze on the finances, so as others have said you have to be in a position where you can afford the mortgage payments even if it goes vacant for an extended period of time. You don't want it to drown you financially. However, a rental is one of the best vehicles for long-term wealth you can have. Once the mortgage is paid off, it's all profit.

You should consider allowing a tenant a rent-to-own situation. You could get a long-term tenant who is likely to take better care of the house if they think they'll be living in it and owning it down the line. And in a few years you wouldn't have the hassle of a rental property anymore. There are lots of books out there on the subject. hit up the library and start reading.

Make sure you're familiar with your local rental laws too.