Buying an investment property with cash - where to start

[syracusa]

My husband and I are looking to buy a first rental property (apartment/condo) with cash, to supplement family income. No banks involved.

We both have full time jobs but mine is becoming increasingly stressful, rapidly turning into something I would like to get out of eventually, if I could. There is also a strong possibility that the choice will be made for me and that I will lose my job about 2 to 3 years from now. In the meantime We're desperately trying to soak up everything I make and live on what husband makes alone but it's not easy with 2 kids and 15 year mortgage in "nice school district" area.

For now we are only interested in replacing a part of my income that I know for sure I will lose in Fall of next year. We will have enough money by April / May next year to make the purchase, so we now want to start the research process.
I have read articles about making the first step in real estate but most seem to be written with a bent designed to discourage people from going down this road.

Yes, I know there will be repairing expenses.
Yes, I know you must have thick skin when it comes to tenets and you must choose them well.
No, we're not looking at profiting from appreciation of property, or flipping or anything like this - only a little income stream.
Yes, we know there will be months of vacancy but without a mortgage I don't think the hit will be that terrible.
No, we are not the handiest, greatest DIY-selvers in the world but we plan to fix anything we can ourselves and learn in the process, and what we can't we will contract out and that's that.

How and where should we do the research before buying?

Any tips as to where to start would be greatly appreciated.

[Green43]

I have gone down this road and my observations:
I would personally buy a ranch or one story unit, they are easier to maintain, less to heat or cool with no zone thermostat and usually only one regular furnace and A/C, and they are attractive to more prospective renters for ease of access (older individuals) and ease of moving in/out. They generally have a straight layout so less walls to re-plaster when the old bed frame didn't quite make it around the corner...
Hard surface flooring will keep the carpet cleaning (or replacement) at a minimum, trust me they will be nasty on turnover.
Paint is a wonderful thing, I personally hate to paint, luckily my wife loves it so it is her job on turnover..
In my neck of the woods, radon gas is a concern, I had my rental mitigated and then advertised it as such, got a little higher rent for the fact, paid for the mitigation+.
Just a few ideas, hope it helps.

[syracusa]

You mean....look for a unit with hardwoods or tile floors?
That would be nice but at the price we're looking this might not be an option.

We couldn't get an all_ hardwood house for our own residence, let alone for a rental.

I hear you on the nastiness of those carpets. I hate them with a passion.

My husband says we wouldn't want a single_ family home because it involves too much maintenance (yard,etc) which we would not have time for. But the ranch idea is appealing - so easy to get in and out of.

[97guns]

use craigslist to gauge the rental market that your looking at, you do not want a ton of new daily pages, if you look at detroits rental market on CL you will see dozens of pages of rentals popping up daily, you can not compete in this kind of rental market. buy as new a property as your funds will allow

[syracusa]

Thank you, 97guns.

I am looking at the metro Atlanta and immediate suburbs market.

We are definitely aiming for as new as possible but we will not have more than 80,000 dollars cash by then. Maybe a bit less.

[97guns]

i wouldnt let wall to wall carpeting be a deal breaker, you can always put in cheap high wear flooring later when the carpet wears + write it off. i can have a whole house tiled for around 3K, i tile the living quarters and carpet the bedrooms

[syracusa]

i wouldnt let wall to wall carpeting be a deal breaker, you can always put in cheap high wear flooring later when the carpet wears + write it off. i can have a whole house tiled for around 3K, i tile the living quarters and carpet the bedrooms

Tile in the living too?

Either way, it is clear that maintenance must be a priority; but it is my understanding Americans love their cushy carpets. If potential renters see tile in the living, could they be put off?

[snafu]

Who is your target tenant? For example if you buy a SFH near a college or university, your target would be 3 - 4 yr, grad students or possible new instructors. If you buy a unit near a hospital your target tenant are likely nurses or tech support staff.

Rachel [SA Blog section] is buying 3 & 4 connected units and rents to Section 8 clients http://girlnextdoor.savingadvice.com...ed-job_177019/

Is it possible to temporarily convert your basement to a rental apartment and try-out being a landlord with a much smaller commitment?

I suggest you start tracking possible rental units for district and type of unit, compliance requirements zoning etc. possibly cost per sf + or minus amenities after the New Year to fully understand the vagaries of your market by the time you're ready to action your plan. You may find it useful to look at on-line tenant application forms to devise a questionnaire to help identify suitable tenants. You might find referrals for paralegal and accountant who specialize in RE.

[97guns]

i have 2 properties that i put high wear flooring throughout the entire house, 1 is laminate flooring and the other is tile. you get tired of changing carpet every few years when a tenant moves. i did not have a problem renting a house with 100% tile flooring, potential tenants did not even question why there was no carpet. they see a nice clean unit and that is all they want. once you have a high wear flooring in you dont mess with it again. i am in the rental business to make money, dont really care how comfortable they are.

i set my rents just under what the market is getting and have never raised the rent on a tenant while living there, i have several tenants with me for 5 years

[SavingSteve]

The most important thing is the location. The rest is cosmetic and can be fixed.

There are dead beat tenants out there and fantastic tenants out there. Make sure your propeerty is located where the fantastic tenants all want to live! Sounds obvious but a lot of people I think buy in dead beat areas because they think they cant afford anything in a nice area.

Buy the best place you can afford in a highly desirable area so you can rent it our really easily when it goes vacant. If you can pick and choose your tenants you'll have fewer problems.

Keep 1 year in reserve if you have no mortgage. That means rent + Prop Tax + Insurance + 10% Maintenance Budget.

[Petunia 100]

Have you considered paying off the mortgage on your home and financing the rental?

You might keep your eyes peeled for duplexes. A single story duplex provides two rents and doesn't cost twice as much as a single family home.

[syracusa]

Have you considered paying off the mortgage on your home and financing the rental?

You might keep your eyes peeled for duplexes. A single story duplex provides two rents and doesn't cost twice as much as a single family home.

Petunia,

We don't see any advantage in financing the rental. We have a good 15 year interest rate on our house and we would pay more for financing the rental, plus we would have to refinance our home to change the payment.
Yes, duplexes are great but not many around here.
We also want something with minimal outside maintenance as we both have full time careers and 2 kids to raise (often while we're working from home when they return from school) - quite the mess.
So something with a decent HOA fee is what we're looking for.

I know there is no such thing as "something for nothing" but with this unit we want to get as close to this situation as possible and put the "as*" in passive income, if at all possible. Of course, in reality the modest profit will not really be for "nothing". I am, after all, investing my sweat and exhaustion in there when I could have chosen to be a SAHM like all those I see around, and have our family live the laid back lifestyle but with minimal financial security.

My husband's position is as volatile as any private sector job and mine is currently highly endangered unless I get over a huge bump in a couple of years and then it can become highly secure.
Unfortunately, chances are I won't as they raised the bar to the point where you have to pay in sweat, blood and your health for this "highly secure" job, which in the future might not even be that highly secure after all.
In fact, right now I am typing on my iPad from bed, where I sit sick with severe bronchitis bordering on pneumonia , after exerting myself like crazy for my job. I have kept it only for its very high level of flexibility, for the fact that I can do it very well, at least a certain part of it, and for the fact that I would prefer sheer poverty to a corporate 8-7 (counting traffic) office job.

So we want to start with this one unit and depending on where we are a few years from now, maybe get more units by financing them.

[ScottRUnderwood]

If you don't have any idea about it then i think you should consult with some real estate agent in local area and start searching for the best and affordable property to invest, it will be good for you to contact agent to minimize your risk and to assist you in this.

[syracusa]

If you don't have any idea about it then i think you should consult with some real estate agent in local area and start searching for the best and affordable property to invest, it will be good for you to contact agent to minimize your risk and to assist you in this.

Thank you, Scott, for confirming what we had in mind.
My husband feels we need an agent as we are not "in the know" about rental properties around here; neither do we have the time to do THAT much research. This would be a first time for us and if it works out, we hope to add some more in them future. It will be a while though until we have enough units to allow me to replace my full time job with a part time one.
For the first one, we surely need an agent but we're not quite sure how to go about getting a good one.

On a related note, I have a question about projected prices of rental properties over the next year or so.
I read somewhere that banks and other financial institutions who bought rental units with cash at bargain prices, by the hundreds, if not thousands, are driving the prices up.

I wonder what kind of chance do we have in finding something decent if we are in competition with these financial monsters. Are prices going up? Is there anything decent left?

Any views on this would be appreciated.

[Bright]

I have no advice but want to follow the discussion. We are also looking at cash rentals.