Time to Be a Landlord?

Buy high quality units and rent at the higher end of the market. Get references, double check them and call employers to verify income. Many low or iffy income renters are into the fake it till you make it routine and once they get in they won't leave until you've exhausted every legal recourse. Don't get into the habit of accepting late payments. Give a short grace period and have eviction papers ready to serve. Do not make an agreement of work for rent on a vague verbal basis. Work completed before rent is reduced. Make sure your units are up to snuff and code compliant. It can be a nightmare.

I was forced into it when I ended up with too much real estate. Out of four tenants, I've had two from hell, (I'm talking holes punched in walls, stolen appliances etc.). These were in the "family friend" "friend of a friend" category. The last guy stiffed me for 3 grand and it's taken me 6mo. to repair for re-rental. This is not unique, in my area many are having similar experiences.

I would seriously consider buying a share in a complex with a Super and a maintenance schedule than owning a whole building.

Hope you have better luck.

Unless you are going to have the property professionally managed, it is a part-time job. As tenants change and maintenance is needed it might be 1 hour a month or 50.

Some of my past landlords had a stipulation in the lease that said for each day the rent is late there is a $20 charge. After 7 days the charge increased to $100 per day.Needless to say, most tenants did whatever they had to do to pay the rent on time. Also, I lived in one place where the rent was due on the fifteenth of each month. It was kinda nice to not have all of our bills due at the same time. Just a couple of suggestions from someone who was a renter for 20 years.

Jim, you've offered me some good advice over in the Boiler Room, so I'll try and return the favor here. I work three hours from home and as a result bought a short sale townhouse in the town where I work. I built a basement apartment and rent the rest of the townhouse. It's a six, now seven, year old attractive townhouse in a nice neighborhood. It originally sold for $270,000, well over twice what I paid. My renters are great and I break even on the mortgage after expenses, which was my goal. My plan was to live there three nights a week (I work four tens) and to sell in six years when I retire.

The negative side is that there is a fair amount of upkeep. Almost every appliance, including the furnace and water heater twice, have needed repair or replacing. The upstairs shower leaked intermittently because the shower fixtures were not tied to the studs. We've had ants, a roof leak, and the new carpet unraveling on a seam when vacuumed. The construction of this townhouse included every construction shortcut known to man, including contractor grade fittings, cheapo appliances, and shoddy workmanship. They seem to knock up these townhouses in record time to maximize profit. The money was all put into appearance, not the bones of the house.

So look carefully at the townhouse you're considering. It's easy to cover a lot of second quality work and materials behind sheetrock. I've had a real learning experience here, and am sick of being called by the tenants to fix things that shouldn't be broken in a relatively new home. Our own home, which I built myself, is built like a brick. Our appliances and furnace at home all lasted twenty years. I wasn't even thinking of those same items having a planned obsolescence of seven years. The whole experience has provided a lot of unwanted stress. And I've still four more years before I can retire and sell this place. Keeping up your own house is enough work for anyone I think.

Not trying to bum you out, but this has been my experience. I never did intend to be a landlord.

Mike

I've been a landlord twice. Learned a whole bunch...especially that I will never be a landlord again. Even with the help of a property manager. If you decide to do this, get real familiar with the applicable tax code requirements. Some provisions therein are not particularly intuitive. For example, when it one day comes time to sell the property, you must figure into your basis all the depreciation that was allowed by the tax code for the years you owned the property whether or not you claimed the depreciation on you returns over those years. Just one of many landmines you might step on. In any case, good luck with whatever you decide to do. Rick

I've rented out several residential and commercial units over the years. The above advice is good stuff. I'd add that if the rental market is strong, you might consider month-to-month leases. This saves you from ever having to evict someone, because if they don't pay the rent, the lease is easily term'd by you in a month, which saves you from having to go to court. A tenant without a lease is much, much easier to remove than a tenant with a lease.

Read up on the laws that apply to landlording in your state. They vary.

At least in NY you personally cannot evict a tenant even with out a lease. First a 3day notice, (pay or quit, not served by you, does not force tenant out.). Then a court date for a hearing, where in both sides are presented. Then if (if mind you) the judge finds in your favor, a 30 day notice (again served by your agent, again does not force tenant out). Then, the sheriff can be contacted and (for a fee) will physically evict in 72 hours. Takes about 2 months. You will be obliged to keep all tenants possessions safe and whole until he retrieves them, if I remember, for another 30 days. That's pretty much as I remember it.

Ehouse said:

At least in NY you personally cannot evict a tenant even with out a lease. First a 3day notice, (pay or quit, not served by you, does not force tenant out.). Then a court date for a hearing, where in both sides are presented. Then if (if mind you) the judge finds in your favor, a 30 day notice (again served by your agent, again does not force tenant out). Then, the sheriff can be contacted and (for a fee) will physically evict in 72 hours. Takes about 2 months. You will be obliged to keep all tenants possessions safe and whole until he retrieves them, if I remember, for another 30 days. That's pretty much as I remember it.

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Yes, some states are very tenant-friendly. I've never been a landlord in any of those, luckily. In other states, having no valid lease is an easy out.

Time to be a Landlord?

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I don't know, but if you see my tenants please tell them they're three days late and counting.

Mine used to tack it to the outside of the front door somewhere from mid-month on.

Watch this movie:

Do not rent to "that guy".

Actually I bought a 3 decker in Dorchester Ma. with 2 friends about 20 years ago, we fixed up, rented it out for a few years then sold it for a nice profit.

We have 83 rental units. Dad's dream was always to have his kids working for him. To keep a long story short he started buying some in 1983 - a six townhouse unit. Since he was working full time didn't need the money he used the profits and colateral from that property to buy 6 more, and so on. He worked full time during the week and worked on the properties on the weekend. My dad always was a workaholic. Now after all this time we usually buy a fixer-upper over the winter when people don't move much and there is little to do outside unless it snows. We do all the management and maintenance, rental collection, refurbish when they move, and general day to day stuff. Often means weekends and evenings.

We have a lot of successes, we have a lot of horror stories. It is one of those businesses where you really have to have the right mentality of "take the good with the bad and it will all come out in the end". As far as the time, that depends on your area and the timing. There are some deals, some not. Around here the economy never really tanked like some areas. Our unemployment stayed below the national level.

As Ehouse said holds true in PA. We must give a 10 day notice before we can go to the District Justice, then it is a long drawn out process, about 2 months.

Ehouse said:

At least in NY you personally cannot evict a tenant even with out a lease. First a 3day notice, (pay or quit, not served by you, does not force tenant out.). Then a court date for a hearing, where in both sides are presented. Then if (if mind you) the judge finds in your favor, a 30 day notice (again served by your agent, again does not force tenant out). Then, the sheriff can be contacted and (for a fee) will physically evict in 72 hours. Takes about 2 months. You will be obliged to keep all tenants possessions safe and whole until he retrieves them, if I remember, for another 30 days. That's pretty much as I remember it.

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One thing with management companies, we acquired a few from people who had management companies doing all the work. They get their money first, you get anything left. We attempt to work with people, appliances we get the "scratch and dent" (10% off) from Lowes and Home Depot, we shop around. A property management company don't bother. If a tentant needs a stove, they buy a stove whatever the cost, your paying not them. Same way with evictions. Again we have success and failures but we attempt a verbal warning first, then a notice and try to work out a deal. Evictions not only cost the money in lost rent but time, paperwork, and typically if someone is getting evicted they most certainly don't leave the place in tip top shape. A property management company sticks to the law and if it isn't there by the due date they start the process. Whether we have to meet the tenant at the bank, work, etc it is still cheaper then an eviction.

It can be rewarding, it can be a nightmare. Because we do the work ourselves and can afford it, our rents are below average for the area. Our average tenant stays 15 years. One thing for sure, everyday is an adventure. Good luck.