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Thread: Living off rental property?

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    Default Living off rental property?

    So here's the deal. I have had a small townhouse that I've been renting out for about 6 years now. I've dealt with mostly everything (4 tenants, lawsuit, trashed place). I believe I have enough experience with being a Landlord that it would not be too much of an issue to take on another property. I have lots of experience doing remodels (kitchen/bathroom) lots of repairs (myself).

    However, I want to see if I could "make a living off this". My property is in Baltimore, I'm looking at purchase another "foreclosure/rehab" somewhere in the city with a rent potential of at lease $1200 or so a month. My thinking is if I could get several of these (individual houses) It could make a pretty large supplement to my income. Major problem is I don't have much liquid to buy the entire thing, I'm planning to use a mortgage (paying 20%).

    Could you essentially make a living off individual units (homes)? Would have have to purchase an apartment complex?

    Thanks

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    Quote Originally Posted by steppinthrax View Post
    So here's the deal. I have had a small townhouse that I've been renting out for about 6 years now. I've dealt with mostly everything (4 tenants, lawsuit, trashed place). I believe I have enough experience with being a Landlord that it would not be too much of an issue to take on another property. I have lots of experience doing remodels (kitchen/bathroom) lots of repairs (myself).

    However, I want to see if I could "make a living off this". My property is in Baltimore, I'm looking at purchase another "foreclosure/rehab" somewhere in the city with a rent potential of at lease $1200 or so a month. My thinking is if I could get several of these (individual houses) It could make a pretty large supplement to my income. Major problem is I don't have much liquid to buy the entire thing, I'm planning to use a mortgage (paying 20%).

    Could you essentially make a living off individual units (homes)? Would have have to purchase an apartment complex?

    Thanks
    Of course you can make a living off of rental properties------assuming the houses are paid off. Assuming you don't owe a ton of a money to anyone and are just paying for utilities, then you can absolutely make a living from rentals.

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    No, you can't make a living off rentals were you have to pay a mortgage. The only exclusions to that would be if you could purchase a property extremely under-cost, then you might be able to.

    Also, it would not be a mortgage for a rental property, it would be a business loan. The terms and rates are very different.
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    Yes and no. Yes if you have the wherewithall to buy more homes. At a certain point, the lending for a home gets harder to get because you become a bigger and bigger risk with more properties.

    You'd need to pay more like 25-30% to get a good rate on an investor loan. But you'll still pay an extra point on the loan compared to an owner-occupied loan.
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    My wife and I have been thinking about buying some investment property (in Baltimore city) and flipping it to rent it out. I've been looking at homes from HUD.gov for some time (see below)

    https://www.hudhomestore.com/Listing...nguage=ENGLISH

    The biggest question is these are mainly auction homes and they start low and have many problems. How much do these usually get up to. I've seen several on here that just have, what I call "floor/wall" issues. They just need new carpet, floors, cabients, hardwood, cleaning and your more/less done. However they seem cheap enough that I can sit on it for some time to "fix-it-up". The rent potential in some of these areas are around $1200 or so a month. My thinking is around $100,000 per home which would bring the mortgage down to 500 or so a month. That would be out to maybe around 700 or so profit.

    Please tell me that I'm delusional .

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    Quote Originally Posted by steppinthrax View Post
    My wife and I have been thinking about buying some investment property (in Baltimore city) and flipping it to rent it out. I've been looking at homes from HUD.gov for some time (see below)

    https://www.hudhomestore.com/Listing...nguage=ENGLISH

    The biggest question is these are mainly auction homes and they start low and have many problems. How much do these usually get up to. I've seen several on here that just have, what I call "floor/wall" issues. They just need new carpet, floors, cabients, hardwood, cleaning and your more/less done. However they seem cheap enough that I can sit on it for some time to "fix-it-up". The rent potential in some of these areas are around $1200 or so a month. My thinking is around $100,000 per home which would bring the mortgage down to 500 or so a month. That would be out to maybe around 700 or so profit.

    Please tell me that I'm delusional .
    The only problem I have is the fact that you probably don't know the area that well. Before a real estate management company buys real estate, especially with the intent of renting it out, most of the time they know about the area they're buying in. If you think you're going to buy a small house for $15,000 in 8 Mile and rent it out for $1,200, you're on crack. No one with the money to move into a nice house like yours would be once it's fixed up won't move in because of both the neighborhood, poverty rates, crime rates, schools, etc. unless you're looking for short-term renters or abandonment.

    If you know the area, have done EXTENSIVE research on the property and the area it's in, and have visited the house, by all means do your thing. I will say, I did get that website out of this and would love to get a real estate license and a small loan of a million dollars to buy some real estate in about 233 days from today

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    You're not entirely delusional, just don't have enough information.

    One of the problems with rental property is that people rarely treat them as their own and a typical security deposit (e.g., one month's rent) doesn't cover the renter bringing in a dog that tears up the carpeting and floorboards. Or the renter who moves out and takes the A/C unit with them, because who doesn't need a spare one of those? Or throws knives at the walls and ceiling for fun.

    And then there's the 3 AM call "my toilet is overflowing and there's sh** everywhere!" Fun times!

    If you find a house in a good neighborhood with good schools then you have a chance to keep the repair costs down by renting to families. If you're getting a home in a bad or marginal neighborhood, then you have to account for higher than normal repair bills on move-out.
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    Quote Originally Posted by Freelancier View Post
    You're not entirely delusional, just don't have enough information.

    One of the problems with rental property is that people rarely treat them as their own and a typical security deposit (e.g., one month's rent) doesn't cover the renter bringing in a dog that tears up the carpeting and floorboards. Or the renter who moves out and takes the A/C unit with them,
    Freelancer, it sounds like you have had some rental properties. I will share a few of my experiences as a landlord. I would never be a landlord again.

    The first go round was a building I bought in 1980 that was on the main street of our little town and had what I wanted to use for offices on the first floor and an apartment that I could rent out for enough to cover my costs on the second floor.

    First tenant was a gal who was about 5 foot tall and 5 foot wide and was on section 8 which meant the government would be paying most of the rent which sounded like a good thing. Once she moved in I picked up all kinds of stories about her moving her sister into the last place and nearly burning it down. All the neighbors were upset with me because they felt like she was running a house since guys were running in and out all hours of the night. I got rid of her and got what seemed to be a nice young guy who was recently divorced. Well it turned out he was gay which doesn't bother me but the neighbors were again complaining about guys running in and out all hours of the night.

    The same building had two garages behind it that I also sometimes rented out. I had a reasonably well dressed middle aged guy who stopped one day and wanted to rent it. He said he had been a pilot and was starting a business to sell some specialized airplane parts and needed a place to store them. He also said his money was tied up in inventory so he would give me a small amount of rent and would put new doors on the garage and do some repairs on the roof which were needed anyway. That sounded ok. Well I saw him back there all the time and he did do the work on the roof but never did the doors. About 6 weeks later I got a citation in the mail. He had moved into the garages and was using a bucket for a toilet and I was charged with renting a place that was unfit for habitation. Of course until they told me I had no idea he was living there but that cost me $ 400.00.

    This isn't my rental property but involves the same guy who said he was going into the airplane parts business. About a year later I was driving home and saw a fire. I saw that guy standing there and stopped to see what happened. He had rented an apartment above an empty store (probably never paying) and his electric was turned off so he was using a coleman lantern for light. His apartment had wasps and he swatted a wasp, knocking over the coleman lantern and burned the place down.

    A few years later I bought a house actually for taxes that had the potential to be a nice house. I mentioned that I bought it to a young couple that I bowled with in a mixed couples league and they said when I got it done they would like to rent it. Actually they offered to help with the remodeling if I would discount the rent a bit and despite the fact that he didn't know which end of a hammer to hold did that. At the time they had a small white cat. Once they moved in they got two big boxer dogs. One of the funny parts was one door had the upper part in glass and had a mail slot just below that. One day the mailman was putting mail in the slot and one of the boxer dogs came flying through the glass. They moved out after a couple of years. The new wall to wall carpet was ruined from the dogs and half of the remodeling needed to be redone.

    About that time my mother turned over a small house to me that had been a rental property for her. My son was living with my ex and I really thought that had to be tough for a single guy so I asked him if he wanted to rent that place for enough to cover the taxes (60 bucks a month). Well he got a black Lab but being single he was never there. The lab destroyed his furniture, his army boots, his pool table and everything else he owned. It had no place to go to the bathroom so it went in the house. Even after ripping out the floor and part of the walls the place smelled so bad I would't go in it for 6 year and never did rent it out again.

    The last place I lived in had a renter next door. They were really trashy people and were drug dealers as well. I heard them outside one night at 3 AM swearing at the landlord because their toilet was stuffed up and overflowing and he didn't want to come until morning to work in it. I sold that house last November and had a terrible time selling it because of the neighbors. I ended up getting 10 grand less because of them.
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    I currently have two and professional managers to handle the people who rent from me. I pay for their services, but I also don't get 3 AM phone calls, which is a huge bonus.
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    If you are capable of remodeling homes I say go for it. Interest rates will never be this low again our lifetime. Scour Google and learn all you can before you take the leap.

    Things I've learned from owning rentals...
    Property management companies are worth what you pay them.
    Stay away from low income. My experience is people with money tend to be less trouble. In my opinion it's better to have one 150K home over three 50k homes.
    Vacation property. My condo at the Gulf does much better than my rental homes in town.

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