6 ms·

As someone who had pondered becoming a part time landlord as an investment, this is a really interesting read.

0x445442 9y ago
My parents were landlords when I was growing up and I thought about getting into it myself. When I was looking into it I think 8% was the ballpark ROI most landlords were shooting for. Remembering back to what my parents went through my thoughts were Meh, I can find other ways to put my money and myself to work.
Norandomguy 9y ago
Some random advice to you or anyone else: it's not as easy as you think. The housing boom over the past 20 years makes everyone belive that real estate is the path to easy wealth. But being a landlord takes work and offers a market return. There is no magic. Those people who tell you "I just collect the rent" haven't been doing it long enough.
- falcolas 9y ago
  Or they turn over a good portion of that rent to a third party to do the actual maintenance and management of the properties (a big business in and of itself).
  - bbcbasic 9y ago
    3% and tax deductible? It's probably worth it.
    - cmclaughlin 9y ago
      10% is standard
      - mcguire 9y ago
        For property management? That's what I'm paying; they handle everything, including hiring subcontractors for maintenance and repairs. Works out well, if they're good about picking renters.
  - ams6110 9y ago
    If you are thinking of using a management company, know that they have it pretty well figured out. Their fees will take almost all of your rental income after mortgage and taxes and insurance. So you'll end up with property that the tenants paid for (no small thing) but no real cash flow.
    - irishcoffee 9y ago
      I use one now, 80 bucks a month. I only used one because I was a brand new landlord and wanted training wheels. Turns out all I need them for is a rent-collector broker. I interface directly with my tenants to address all issues. While I still make a small profit even after the $80 fee, I think whenever these tenants decide to leave, I may strike out on my own, maybe make a little more money.
      - phil21 9y ago
        That's not what most folks use them for. If you use them for maintenance and generally fielding complaints they get expensive quick. You are in the very extreme minority of people able and willing to perform maintenance and repair work yourself. We're a dying breed it seems. For most it's simply not a realistic option, due to the lack of "real world" experience/skills most in the position to buy an investment property are in. This is why it's generally considered a poor investment choice for most people just looking to put money somewhere. If you are willing to roll your sleeves up and have some handyman skills? You'll certainly enhance the return on your own capital that way. I see such businesses (and they are businesses - not remotely passive) as a means to ensure your money is working for you, which feels much more satisfying and honest to me than just stuffing it into some ETF somewhere.
        icebraining 9y ago
        It's not just skills, though, it's also the time it takes. Like all side businesses, it'll consume quite a bit of your "free" time until you can live off it and quit your job. Many people aren't interested in getting a second job, they just don't realize that's what they're doing.
  - scurvy 9y ago
    Never do this remotely. Far off management companies for far away properties will take you to the cleaners. Only buy and rent local properties. Ignore your friends and coworkers talking about the screaming deals they are getting in the desert properties. Stay local and you'll do OK. It's OK to use a management company to find a tenant, show the place, run credit, Etc. Don't use them after that though.
    - dvtv75 9y ago
      About ten years ago, I read a news article about a management firm in Auckland, New Zealand, who collected rent, conducted monthly inspections, and had found the greatest tenant. SO, when the tenant moved out and the landlord decided to inspect the place himself, he was surprised to find a large amount of damage and a badly overgrown yard. It seems that the management firm had collected the rent (through automatic weekly debit), taken their percentage, and done nothing else. I'm afraid it was so long ago that I don't remember anything specific.
      - scurvy 9y ago
        It's usually much more subtle than that. Repair bills for this and that on a regular basis. Then a big ticket item like new fridge or plumbing repair. Later you'll find that the fridge wasn't actually replaced, the plumber is the manager's brother, and that the property management company goes out of business and resurfaces with a new name every 5-6 years.
- ryanmarsh 9y ago
  Opportunity is missed by most people because it is dressed in overalls and looks like work. Yes, being a landlord isn't "easy money" but if you're willing to work a little you can make a lot of money slowly. I've never seen someone loose their ass on a rental property, I'm sure it happens but you'd have to ignore the fundamentals. You can download plenty of spreadsheets online that will calculate whether a property cash flows or not before you even call the real estate agent. You insure everything, and put the cheapest everything into fixes. Source: I grew up fixing and painting my dads houses in between renters.
trentmb 9y ago
Just dump some money into VGSLX and call it a day.
- sportanova 9y ago
  The difference is leverage + tax benefits
  - deleted 9y ago
    [deleted]
  - bbcbasic 9y ago
    And unlike stocks you can conceivably seek alpha in choosing a property, location, timing etc.
    - trentmb 9y ago
      That sounds exactly like 'picking' stocks.
      - bbcbasic 9y ago
        Except you have a high level of transparency and no one else is trading your house while you had it
        trentmb 9y ago
        > Except you have a high level of transparency If you get a background check of everyone in the neighborhood > no one else is trading your house while you had it My share is my share- what other people do with their shares has an impact on mine- kinda like what your neighbors do with their property has an impact on the value of yours.
  - trentmb 9y ago
    Margin, Leveraged ETFs, Roths.
lordland 9y ago
Been a landlord for about 13 years. People here say it's hard - I disagree - it's often very easy, until suddenly it's not at breakneck speed. You'll have weeks, sometimes months of easy and then suddenly a pipe will burst and it will consume 100% of your time. Or a furnace will fail. Or a dishwasher will explode. You could probably figure that out on your own, though. If you still have interest in being landlord, here's something nobody will tell you: you will see people at their lowest, and you will see people at their worst. I had a tenant argue with me over a door they kicked in from the inside, "Why should I have to pay for what I did when I was drunk!?" I had a tenant weep openly while she explained she had to break the lease because she had terminal cancer and was moving into hospice. I had a tenant cry while he explained that he lost his job and had to break the lease because he couldn't afford to house his family there anymore. A few months ago I had a very nice family move out of one of my rentals and the young wife teared up because she "hoped that one day they could buy the property from me." - The husband worked for a large corporation and had been unwillingly transferred out of state. The nice family with perfect credit and references will turn out to be dirt-bags who wreck up the place. Sure, you've got that security deposit but you'll still spend hours doing the labor yourself or managing contractors. My best tenants were a group of college kids who rented my biggest property out and left a year later with the place in better condition than when they moved in - they had no credit or references, but I had a good feeling about them. The point is, is weighs you down, if you're a even a little bit kind-hearted. I started selling property off last year. I don't want to be a landlord anymore.
- grecy 9y ago
  Thanks for a very helpful and informative post. If you don't mind me asking, did you make decent money?
  - lordland 9y ago
    That's a complicated question. If you're just looking to improve your monthly bottom line, rentals is probably not your best bet. I purchased distressed property in a growth market, buying up places I knew I could go into on weekends and fix up myself. After fixing them up and renting them out, I'd average between $200-$300 a month in profit (per property, after accounting for mortgage, taxes, and property maintenance.) If you work in IT (like I do), that's not exactly life-changing money, and as a function of time-in vs profit out, you'd probably be better off just doing some contract on the side.. at least, in the short term. In the long term, after holding on to a bunch of properties for 13 years, having other people pay my mortgages plus market appreciation, I've generated a ton of equity. Now that I'm cashing out, if you consider my time and my initial investment, I'm doing a great deal better than market. Had I have had the stomach to stay in and pay off those mortgages, I'd probably be doing even better. The price of my sanity, I guess.

My parents were landlords when I was growing up and I thought about getting into it myself. When I was looking into it I think 8% was the ballpark ROI most landlords were shooting for. Remembering back to what my parents went through my thoughts were Meh, I can find other ways to put my money and myself to work.

Norandomguy 9y ago

Some random advice to you or anyone else: it's not as easy as you think. The housing boom over the past 20 years makes everyone belive that real estate is the path to easy wealth. But being a landlord takes work and offers a market return. There is no magic. Those people who tell you "I just collect the rent" haven't been doing it long enough.

falcolas 9y ago
Or they turn over a good portion of that rent to a third party to do the actual maintenance and management of the properties (a big business in and of itself).
- bbcbasic 9y ago
  3% and tax deductible? It's probably worth it.
  - cmclaughlin 9y ago
    10% is standard
    - mcguire 9y ago
      For property management? That's what I'm paying; they handle everything, including hiring subcontractors for maintenance and repairs. Works out well, if they're good about picking renters.
- ams6110 9y ago
  If you are thinking of using a management company, know that they have it pretty well figured out. Their fees will take almost all of your rental income after mortgage and taxes and insurance. So you'll end up with property that the tenants paid for (no small thing) but no real cash flow.
  - irishcoffee 9y ago
    I use one now, 80 bucks a month. I only used one because I was a brand new landlord and wanted training wheels. Turns out all I need them for is a rent-collector broker. I interface directly with my tenants to address all issues. While I still make a small profit even after the $80 fee, I think whenever these tenants decide to leave, I may strike out on my own, maybe make a little more money.
    - phil21 9y ago
      That's not what most folks use them for. If you use them for maintenance and generally fielding complaints they get expensive quick. You are in the very extreme minority of people able and willing to perform maintenance and repair work yourself. We're a dying breed it seems. For most it's simply not a realistic option, due to the lack of "real world" experience/skills most in the position to buy an investment property are in. This is why it's generally considered a poor investment choice for most people just looking to put money somewhere. If you are willing to roll your sleeves up and have some handyman skills? You'll certainly enhance the return on your own capital that way. I see such businesses (and they are businesses - not remotely passive) as a means to ensure your money is working for you, which feels much more satisfying and honest to me than just stuffing it into some ETF somewhere.
      - icebraining 9y ago
        It's not just skills, though, it's also the time it takes. Like all side businesses, it'll consume quite a bit of your "free" time until you can live off it and quit your job. Many people aren't interested in getting a second job, they just don't realize that's what they're doing.
- scurvy 9y ago
  Never do this remotely. Far off management companies for far away properties will take you to the cleaners. Only buy and rent local properties. Ignore your friends and coworkers talking about the screaming deals they are getting in the desert properties. Stay local and you'll do OK. It's OK to use a management company to find a tenant, show the place, run credit, Etc. Don't use them after that though.
  - dvtv75 9y ago
    About ten years ago, I read a news article about a management firm in Auckland, New Zealand, who collected rent, conducted monthly inspections, and had found the greatest tenant. SO, when the tenant moved out and the landlord decided to inspect the place himself, he was surprised to find a large amount of damage and a badly overgrown yard. It seems that the management firm had collected the rent (through automatic weekly debit), taken their percentage, and done nothing else. I'm afraid it was so long ago that I don't remember anything specific.
    - scurvy 9y ago
      It's usually much more subtle than that. Repair bills for this and that on a regular basis. Then a big ticket item like new fridge or plumbing repair. Later you'll find that the fridge wasn't actually replaced, the plumber is the manager's brother, and that the property management company goes out of business and resurfaces with a new name every 5-6 years.
ryanmarsh 9y ago
Opportunity is missed by most people because it is dressed in overalls and looks like work. Yes, being a landlord isn't "easy money" but if you're willing to work a little you can make a lot of money slowly. I've never seen someone loose their ass on a rental property, I'm sure it happens but you'd have to ignore the fundamentals. You can download plenty of spreadsheets online that will calculate whether a property cash flows or not before you even call the real estate agent. You insure everything, and put the cheapest everything into fixes. Source: I grew up fixing and painting my dads houses in between renters.

trentmb 9y ago

Just dump some money into VGSLX and call it a day.

sportanova 9y ago
The difference is leverage + tax benefits
- deleted 9y ago
  [deleted]
- bbcbasic 9y ago
  And unlike stocks you can conceivably seek alpha in choosing a property, location, timing etc.
  - trentmb 9y ago
    That sounds exactly like 'picking' stocks.
    - bbcbasic 9y ago
      Except you have a high level of transparency and no one else is trading your house while you had it
      - trentmb 9y ago
        > Except you have a high level of transparency If you get a background check of everyone in the neighborhood > no one else is trading your house while you had it My share is my share- what other people do with their shares has an impact on mine- kinda like what your neighbors do with their property has an impact on the value of yours.
- trentmb 9y ago
  Margin, Leveraged ETFs, Roths.

lordland 9y ago

Been a landlord for about 13 years. People here say it's hard - I disagree - it's often very easy, until suddenly it's not at breakneck speed. You'll have weeks, sometimes months of easy and then suddenly a pipe will burst and it will consume 100% of your time. Or a furnace will fail. Or a dishwasher will explode. You could probably figure that out on your own, though. If you still have interest in being landlord, here's something nobody will tell you: you will see people at their lowest, and you will see people at their worst. I had a tenant argue with me over a door they kicked in from the inside, "Why should I have to pay for what I did when I was drunk!?" I had a tenant weep openly while she explained she had to break the lease because she had terminal cancer and was moving into hospice. I had a tenant cry while he explained that he lost his job and had to break the lease because he couldn't afford to house his family there anymore. A few months ago I had a very nice family move out of one of my rentals and the young wife teared up because she "hoped that one day they could buy the property from me." - The husband worked for a large corporation and had been unwillingly transferred out of state. The nice family with perfect credit and references will turn out to be dirt-bags who wreck up the place. Sure, you've got that security deposit but you'll still spend hours doing the labor yourself or managing contractors. My best tenants were a group of college kids who rented my biggest property out and left a year later with the place in better condition than when they moved in - they had no credit or references, but I had a good feeling about them. The point is, is weighs you down, if you're a even a little bit kind-hearted. I started selling property off last year. I don't want to be a landlord anymore.

grecy 9y ago
Thanks for a very helpful and informative post. If you don't mind me asking, did you make decent money?
- lordland 9y ago
  That's a complicated question. If you're just looking to improve your monthly bottom line, rentals is probably not your best bet. I purchased distressed property in a growth market, buying up places I knew I could go into on weekends and fix up myself. After fixing them up and renting them out, I'd average between $200-$300 a month in profit (per property, after accounting for mortgage, taxes, and property maintenance.) If you work in IT (like I do), that's not exactly life-changing money, and as a function of time-in vs profit out, you'd probably be better off just doing some contract on the side.. at least, in the short term. In the long term, after holding on to a bunch of properties for 13 years, having other people pay my mortgages plus market appreciation, I've generated a ton of equity. Now that I'm cashing out, if you consider my time and my initial investment, I'm doing a great deal better than market. Had I have had the stomach to stay in and pay off those mortgages, I'd probably be doing even better. The price of my sanity, I guess.