Rentals

[scottprestons]

Heard several on here say they have rent houses. Thinking of getting into this, any advice, or lessons learned? Thinking first one would be around $110,000. What is different interest rate for loan vs standard mortgage?

[Omerta]

Hello!

I've owned rentals for many years. Here is some quick advice:

• The purchase price should be AT MAX 100x the rent you will get each month. 50x is better. So the $110k house needs to rent for AT LEAST $1,100 a month.
• Mortgage rates are normally 1~1.5 points higher for non-owner occupied.
• If the house is older than 20 years, be prepared for interesting repairs... as in parts no longer available. I bough a half dozen houses built before 1960; they all had casement (cranking) windows. But the company that made the crank is long out of business and the gears are aluminum. And after 50 years, they strip out. So for lack of a $5 crank, I had to put in a $300 window.
• Tenants are harder on a house than owners. Things are going to break.
• Down payment... again this house is going to cost you money to keep it in repair. So of your rent check, AT LEAST 25% needs to be held back. In other words, for a $1000 rent, your mortgage payment AT MAX is $750 a month.
• Remember the fair housing laws. The various housing authorities will rip you a new one in fines if you appear to violate any of their rules, and it will cost you a fortune in legal fees to fight them.
• Follow building and repair codes. Same reason as fair housing.
• Perform a criminal and credit check on all applicants. Good tenants and sociopaths both interview well.
• Know the market! Don't be the most expensive house, nor the cheapest.
• Hire a CPA to do your taxes. There are some fantastic breaks for owning real estate.

That's just a starting point... you're welcome to PM me.

[scottprestons]

Excellent advise I really appreciate it. As I get close to pulling the trigger I will probably pm you a lot, lol.

[Littleroc]

I own 3 rent houses and take care if them myself, those were excellent points by omerta, I like owning them close to where I live and try to go as upscale as possible but not the most expensive in the neighborhood, most of mine have had the same tenants for many years, that has been helpful, I keep them up and keep rents affordable for those that are in the houses, they are all single family units

[scottprestons]

How long on loans did you all do, 15 years or 30 years or something else and why? Do you all find most of reason is to build equity? Based on omerta's #'s above that would seem to be the case until it is paid off.

[Imsecretlyaninja]

I own three, I like littleroc stay with upscale homes. What I have done over the years is never sale a house. My wife and I just save and buy a bigger house and start renting the old house. Be very very picky about your renter and advertise a higher rent than you intend to get to be able to weed out undesirables.

[Omerta]

In my case, you're exactly right. My rentals are to provide retirement income (and the occasional dip into the hobby world as well.) So for now, they pretty much break even. I set them up with 30 year mortgages but pay extra each month they're occupied and don't need repairs. The objective is to pay them off the day I turn 65.

A warning if you have a mortgage on the rental: make sure you have money in reserve. Tenants move out, and at the worst times. And during the financial collapse in 2009, I had 10 empty houses, but still had to make 10 mortgage payments a month!

[Omerta]

Also, if you're in Pulaski County, consider going to a meeting of the North Little Rock Landlord Association. They meet the third Monday of the month in NLR. I think you can still attend a meeting free then decide to join or not. Good people, lots of good advice.

[cookiemonsta]

That great advice all the way around Omerta. do you have to own property in North Little rock to go to the landlord association? Is there a little rock chapter?

[Guest080719]

Damn, I've been looking for a rent house for 5 months... I guess I was looking in all the wrong places.... haha. My mom has a rent house and it's been pure hell. The tenant has refused to pay rent until the house is completely remodeled, even though she currently lives there. I'm sure there is some way my mom could handle that but she has too big of a heart. So if you have a big heart, remember tenants will come up with any and every excuse.

Cookie monster my boss is a landlord in Hot Springs and Eldorado and I've known him to attend the meetings in North Little Rock.

[RJinLR]

I don't rent myself but I have a good buddy I grew up with who has a couple of houses, and he basically says what the other posters have. That you have to go in with the expectation that you are going to lose quite a bit of money before you make it, so you have to be in for a long game, not a quick way to make money.

Have to acquire the property, make improvements (that continues all the time), fix shit constantly, and then just like another poster says...have empty rental properties at the worst time.

How long did it take some of you guys to make any profit off of this? And my other question is how easy or difficult was it to have the legal stuff drawn up before you took renters? I know Arkansas has landlord laws that are the worst in the country for the renter and best for the landlords, but I'm sure you still have to really make sure to cover your bases.

[Omerta]

Originally Posted by cookiemonsta

do you have to own property in North Little rock to go to the landlord association? Is there a little rock chapter?

There is a Little Rock chapter, but the NLR one has more members and has better speakers. You can join either one.

[Omerta]

Originally Posted by RJinLR

How long did it take some of you guys to make any profit off of this? And my other question is how easy or difficult was it to have the legal stuff drawn up before you took renters? I know Arkansas has landlord laws that are the worst in the country for the renter and best for the landlords, but I'm sure you still have to really make sure to cover your bases.

The legal issues are pretty straightforward and easy to take care of. This is a case where going to a Landlord Association meeting before really getting started might help. The members are all very eager to help others... believe it or not, while we're all competitors, we all want to share information to weed out the bad tenants.

As far as profit, that goes to what your aim is. In my case, I didn't want immediate profit, I just wanted to collect several houses that pay their own way. As a result, I have mortgages on them all and after vacancies and repairs, my houses break even. But on the year of my 65th birthday, all the mortgages pay off and bazinga! I'll be making good bucks then.

Something Tsar alluded to: it can be easy to feel sympathy and let tenants take advantage of you. You have to still firmly to the notion that this is a business. I've had tenants lose their jobs, deaths, etc., and I have done things to help them: find a cheaper rental, give good refs, etc. But while I am open and friendly with my tenants, I am not their friend.

Still, I have good memories of my houses. Some of the providers here have seen them... and I've had a couple of dates in empty rentals .