Request Advice for Prospective Landlord (Me)

[Spiffster]

We have a big chunk of money sitting in the bank that we would like to get working for us soon. I live in the Littleton (Denver) area and I have been looking at some homes very close to where I live that I think could be great investment properties (rentals).

To summarize:

I have ZERO experience as a landlord.

Looking in the low 200k range for houses... possibly consider a condo in the <100K range.

We would likely employ a management company as my wife and I are full-time already.

We have 50k in savings on top of our emergency fund that can be invested.

We anticipate that we could (easily) rent prospective homes in the 225K range for about ~1800 judging by current rental market in our area. (craigslist)

Thoughts? Tips? Things to look out for? Much appreciated. Thanks!

[riverwed070707]

Having rented a couple houses on very different ends of the spectrum in terms of size, location and cost, my $.02 is that when it comes to rentals bigger is not better. Small, low-cost houses rent easier and longer than bigger, nicer, newer, more expensive houses. Of course being updated and having modern fixtures helps with appeal and brings more prospective buyers but the reality I learned is that in general the people who want to live in a family-sized home can either afford to buy one, is looking for a short term lease or there is a reason they can't afford to buy one and you don't want to rent to them. Sure there are exceptions but they are few and far between. Smaller houses are great for college kids, grad students, couples just starting out and figuring out jobs and where they want to settle. The market is bigger, the expenses (maintenance, upkeep, insurance and taxes) are all cheaper and your profit margin is bigger.

For example between my two houses, I could rent a 600 sq foot 2-br house with a $50k mortgage and $1000 annual taxes for $750-850/month or I could rent a 2,600 sq ft 3 br, 2 ba, finished basement house with a $160k mortgage and $3k taxes for $1,100/mo and the only people who wanted to rent it were adults who had foreclosed on their homes or college kids who wanted to live with 5 friends. Additionally, I could pick up 3 rental houses for the price of one and make more than double what I could on the one larger home.

[Spiffster]

^^^ This! This is why I love this forum. Priceless information like this is exactly what I need. Thanks riverwed!

I think Im going to shoot for a smaller house in the mid 100s, since there is simply nothing available near me for less. I want to be close to the property for many reasons, one big one being that I know the area very well.