How many of you have rentals (i.e. you're a landlord)? Are they worth it?

[Gailete]

We have a rental property that should be paid off in less than a year. We have two mortgaes, one for buying the place $30K and one for the costs of fixing it up - new roof, windows, etc. Technically the one mortgage should be finished in a tad over a year and the other in September of next year but I'm paying extra each month. We handle it our selves, in the years we have had it we have only had two renters, both not being real good about paying the rent on time, but they don't ruin the property and the current renter actually paid his rent 'early' for him - 9 days late for us, 6 days earlier than his usual payment.

When paid off we should be getting about $400 extra a month that we can use and the rest to be saved for expenses to the place. It was bought spcifically to be a source of income in retirement and it looks like that will be the case. When times were super tight over the last 15 years, it was tempting to put it up for sale. We wouldn't want another one though. Not to many apartment manager types in our area.

[Atretes1]

I have 2 rental properties now. I bought one last year and one this year. They are both on 15 year loans. I can make the mortgage payments on both of them with collected rents with an extra $472 in the pocket. I just save that for the next one. This of course excludes maintenance costs which has been minimal so far.

I became debt free and wanted a way to be financially free within 15 years so this is my direction.

[TexasHusker]

I have 2 rental properties now. I bought one last year and one this year. They are both on 15 year loans. I can make the mortgage payments on both of them with collected rents with an extra $472 in the pocket. I just save that for the next one. This of course excludes maintenance costs which has been minimal so far.

I became debt free and wanted a way to be financially free within 15 years so this is my direction.

You have the right idea and are on the right track.

I became "financially free" (able to quit my job and live on my businesses/investments) at age 46, and if you peel back the layers of how that occurred, real estate was at the foundation of it.

Really what got it started was the substantial equity in my own home that I had built. I was able to use that equity to do some really cool things that got the ball really rolling.

[LivingAlmostLarge]

I have 2 rental properties now. I bought one last year and one this year. They are both on 15 year loans. I can make the mortgage payments on both of them with collected rents with an extra $472 in the pocket. I just save that for the next one. This of course excludes maintenance costs which has been minimal so far.

I became debt free and wanted a way to be financially free within 15 years so this is my direction.

How much did you buy the house for and how much do you rent it for? That's the sort of rental I want. With a lot of positive cash flow. Hence why I don't think my house where i live is rental quality.

[TexasHusker]

How much did you buy the house for and how much do you rent it for? That's the sort of rental I want. With a lot of positive cash flow. Hence why I don't think my house where i live is rental quality.

Money is so cheap to borrow, I tend to go with a 30 year fixed. That way you are generating a lot more positive cash flow to buy more properties.

Of course you aren't paying them down as fast, but that's just my philosophy.

I think in the end, you are far better off getting more properties sooner. More cash flow makes this easier. With a paid-off rental, you are really allowing a lot of money to lay around unused.

The real power of rentals and real estate is in leverage.

Example:

I bought a $150,000 house once with $30,000 down. So my out of pocket was $30,000 basically. 10 years later I sold the home for $170,000. Meanwhile the renters had paid off around $19K of the house. So in 10 years, I made $40,000 off of a $30,000 investment. I also had some positive cash flow and tax savings!

[LivingAlmostLarge]

Money is so cheap to borrow, I tend to go with a 30 year fixed. That way you are generating a lot more positive cash flow to buy more properties.

Of course you aren't paying them down as fast, but that's just my philosophy.

I think in the end, you are far better off getting more properties sooner. More cash flow makes this easier. With a paid-off rental, you are really allowing a lot of money to lay around unused.

The real power of rentals and real estate is in leverage.

Example:

I bought a $150,000 house once with $30,000 down. So my out of pocket was $30,000 basically. 10 years later I sold the home for $170,000. Meanwhile the renters had paid off around $19K of the house. So in 10 years, I made $40,000 off of a $30,000 investment. I also had some positive cash flow and tax savings!

I agree about the 30 year fixed. We used to have a guy on here Phil who would invest in SFH with positive cash flow and would always refinance it to 80% and cash it out and invest in SP index funds. He would only refinance if the rent was more. He'd buy homes that were 5 years old and try to keep around 20 years and sell before big ticket stuff hit. He was very savvy.

I think it would be awesome if I could find homes for $150k and with rents that would be free cash flow. I think the cash flow could be used to buy other homes. But right now I don't have the extra cash to buy homes or time to research and invest.

I actually talked to my property manager and he told me where we live he thinks is not a good investment right now. It was before. His wife sell RE and she's mostly selling to foreigners who don't care about cash flow or appreciation. More like just a place to park money. His advice to me was to get into properties with positive cash flow to minimize risk.

[Gailete]

We took a 15 year mortgage on our place, otherwise it wouldn't have been paid off until I was 77 which means it wouldn't have been helping in my 'retirement' finances much! I'm getting excited about seeing those numbers going down as there is only a year or less to go.

[~bs]

I do. I think it generally is. As with anything else, there are risks/rewards. I think in general, buyng a rental now is a mistake. need to wait until the economy cycles.

[TexasHusker]

I do. I think it generally is. As with anything else, there are risks/rewards. I think in general, buyng a rental now is a mistake. need to wait until the economy cycles.

I kind of have to disagree.

I paid way too much for a house in 2005 right before the crash of 2008. Bought it for $240,000, financing $180K. As a vacation home, it does about $38-39K a year in rents. Of course, I have to back out repairs and maintenance, utilties, taxes, insurance, interest, and of course the payment.

Even after all of that, I still cash flow around $18K a year. All total, I've positive cash flowed around $160K since 2005, and now the note is down to around $149K, translating into a profit of around $191,000 from an investment of $60,000, plus about another $15K I put into it in the beginning. So $191,000 profit on a $75,000 investment.

Finally, the home's worth as rebounded nicely - it is worth around $300K today - so add another $60K in unrealized profit, boosting the total profit of $251,000 off of an investment of $75,000.

Find me a mutual fund that does that and I'm all in!

[Gailete]

I do. I think it generally is. As with anything else, there are risks/rewards. I think in general, buyng a rental now is a mistake. need to wait until the economy cycles.

I too have to disagree. Perhaps looked at broadly it seems the time isn't good for investing in rental property, but that doesn't mean you might not run into a sale. Are you going to say, great price and I can make a bucketful of money, but the time isn't right, so I will pass? Hardly. If this is something that you want to do, have the money for a downpayment, then why not?

[~bs]

I too have to disagree. Perhaps looked at broadly it seems the time isn't good for investing in rental property, but that doesn't mean you might not run into a sale. Are you going to say, great price and I can make a bucketful of money, but the time isn't right, so I will pass? Hardly. If this is something that you want to do, have the money for a downpayment, then why not?

I really think it depends and I'm speaking in generalities. Assuming average prices and not sale prices. During the last downturn, housing prices dropped dramatically in many areas, so if waiting a few years means you can purchase a property at deep discount, then that is the better option than buying now, renting a few years, then having the market drop out from under you.

I think your argument makes more sense for a primary residence that you plan on living in 'forever', and not a rental property.

[TexasHusker]

I really think it depends and I'm speaking in generalities. Assuming average prices and not sale prices. During the last downturn, housing prices dropped dramatically in many areas, so if waiting a few years means you can purchase a property at deep discount, then that is the better option than buying now, renting a few years, then having the market drop out from under you.

I think your argument makes more sense for a primary residence that you plan on living in 'forever', and not a rental property.

Actually you are buying a rental for INCOME. What the value of the home is a year from now isn't really part of the picture. You get the income regardless, which is one reason it is so attractive.

[Gailete]

If you have a rental that isn't causing you fits and supports itself with some leftover, the drop in the real estate market shouldn't bother you a bit. Did you notice how many were running out to buy homes when the values were down last time? Not many I would think. All I heard and read about were people who were scared to death because they were underwater on their mortgages as they hadn't done any due diligence in the first place. It was the ones that made around $100K/ year and yet had bought themselves a $500K home because their banker said they could afford it that I had no sympathy for. Why were they blaming the banker instead of blaming themselves for buying a house they couldn't afford and had failed to run the numbers before signing on. Everyone was terrified. Same as like when the stock market drops 2000 points. Everyone wants to sell out instead of seeing it as an opportunity to BUY stocks.

For some reason, many don't use their heads and pure common sense when these things happen, so why would anyone want to wait for years to invest in rental property, if you have the money to do it now, if you have found a good property at a price you can afford as well as make some money each month. Depending on how much you get in free cash from the rental, perhaps by the time the bottom drops out of the housing market again, you can get a rental property, and this time on 'sale' so hopefully a better price with more cash flow.

[Eagle]

I guess you could say I'm a RE worshiper, it's done very well for me and all my family members who own it as investment, it's provided my income for going on 8 years now with a much more lavish lifestyle than I ever had working.

Nice 97Guns! How many rentals do you own? How'd you get started? What advice would you give to someone just started out?

[Eagle]

I use a management company, but I also own the management company.

I chose vacation rentals for several reasons:

1. I've got cool places to stay.
2. The yields are slightly better than traditional residential houses.
3. They don't require my hands-on management.
4. There is the potential for greater capital appreciation.

Very nice! Any suggestions for someone just starting out?