how about being a landlord - would you do it?

cindy-e · #1 03/26/12, 02:41 PM

Turns out the property we are looking at has another house and 5 acres avail right next door. Renting that house out could make purchasing the one we want to live in (on 11 acres) plus the rental next door (on 5 acres) actually cost LESS per month than the rental we are in now on 2 acres. BUT... do I want to be a landlord... that is the question.

Would you do it? Here is how I see it...
Downside - responsible for the house and it's repairs and you have neighbors.
Upside... you get to choose your neighbors and it makes owning both properties more affordable.

IDK... what do you think?
Cindyc.

nostawmama · #2 03/26/12, 02:47 PM

I like it. The renter market is up right now and so is cost of living so making things more affordable is a great asset in my book. Also you would weed out a lot of problems by telling the potential renters that you live next door, not many people that break the rules are willing to have the landlord that close. Also, things could get to the point where you might want the 5 acres next door in addition to your place.

lemonthyme7 · #3 03/26/12, 03:54 PM

I think it has possibilities. DH and I are looking at places to rent right now - no, we are not selling the homestead. DH has taken a job a couple hours south of us. Kids (24 & 20) are taking care of home while we work to finish paying off mortage quicker in the next couple years. Anyway, we are finding a lot of the landlords are doing credit checks these days so that might be something you want to consider. The potential renter usually has to pay a $35 fee for the potential landlord to run the credit check. The place we are hoping to get, we filled out an application which asks a LOT of questions including bank account number and references personal & work. The gentleman we hope to rent from is activivly calling them too which I think is a good thing. The more you check out your potential renter the better you will get a feel for if they are a deadbeat. Just some ideas for you on screening renters if you do decide to go ahead with this. It also asked for where you rented before and why you left and things such as that although those didn't apply to us as we own our home but we explained all that. Good luck.

hintonlady · #4 03/26/12, 04:06 PM

I would never be a landlord. My grandmother was and warned people about never doing it. Then my mother was and she hated it, caused a lot of stress and wasn't worth it.

For every 2 good tenants there seems to be one very very bad tenant. They can do anything from be whiney and have a list of unreasonable expectations to causing damage to the property while you are forced to evict them.

If you choose to go that route you should really have a good contract, even if you only want month to month or rent to a friend. I have seen things go south on a handshake, even if you trust the people and know them well. Not listing things like pets or number of people in the lease opens the place up to be a flop house when their extended family is between places.

Research the landlord tenant laws in your state, those are always good to know and there are usually some sort of handouts or printable so you don't actually have to go to the courts law library to dig.

Be careful about your budget. It sounds nice that it will help you financially but can you float the entire payment if you have to? Just in case the place is empty between leases or if you are forced to evict a free loader. It isn't a good business practice to hinge your own stability on another income that can dry up without notice.

Be careful with getting too chummy. It may make you more patient when someone loses work or has hard times. Getting too involved as a friend may put you in a hard place when even harder choices have to be made.

I wish you the best of luck. I also hope you find a good, clean, long term renter who pays on time.

pancho · #5 03/26/12, 04:15 PM

I tried it and didn't like it.
Too many headaches for so little money.

Cygnet · #6 03/26/12, 04:16 PM

It can be a real nightmare if you get the wrong tenant.

1) If they break things, you have to fix them. Some people have no common sense or any practical knowledge of basic living skills. For example, if the toilet tank gets cracked and water's flowing everywhere, SHUT THE WATER OFF before it floods the rest of the house. The valve is under the toilet, yes? And if you can't figure out how to shut it off, find someone who does know rather than just leaving a message on voice mail for the landlord to come fix it ... and then not ANSWERING the phone when the landlord calls back.

2) Some people have standards of cleanliness that are less than "standard." To prepare yourself for this, watch a season of Hoarders, plus the Indiana Jones movie with the cockroach scene. Imagine a merge of the two. (I once helped sweep up three black plastic trash bags of roaches out of a 900 square foot house ... and then had to sand the roach feces off the walls before repainting.)

3) Some people are thieves. They WILL steal everything including the kitchen and bathroom vents, the kitchen sink, every light bulb in the house, and the kitchen cabinet drawer pulls.

4) Other people will leave things behind. Things left may be illegal (drugs, drug paraphernalia), difficult to remove (a mountain of hardened concrete, broken down vehicles with no VIN numbers or plates), require storage (if they skip in the middle of the night you have to store their stuff for a set amount of time by law, which means hauling it off and paying for storage), may stink (power out for days, fridge full of food), and may be dangerous (drug lab residue.)

OTOH, you may get a sweet little old lady who bakes cookies for the neighborhood kids and keeps the home model perfect. It's just luck of the draw ...

watcher · #7 03/26/12, 04:16 PM

Not if I could avoid it. Being next door might be a good thing (you can keep a close eye on the property) or a bad thing (they'll be expecting you do fix everything RIGHT NOW).

I only know one person who has ever had a good experience with being a landlord, my FiL. He had people who rented the second floor duplex from him for over 20 years, right up to the time he sold the place. Never had a problem with them. On the other hand new a guy named Jack Frost (yep, really) who had a place next to us which was a horror. For the three years I lived next to it he never had anyone stay in it more than 6 months. One time he fixed it up and rented it out. The people skipped out and when he got into the house it looked like they ran a repair shop from the living room. Brand new carpet, freshly painted walls and the rest was coated in oil and grease.

airotciv · #8 03/26/12, 04:17 PM

My DH and I had a rental about 40 minutes away from our house. What a hassel, we only kept it for 3 years. Now as nostawmama said, having the rental next door, is a good thing. I might go for it, But you never really have a clue who is renting your house, believe me I know. I guess what I'm saying, be carefull and don't rent to relatives/friends. Then, there is the problem of getting them out of your house. I didn't have this problem, but a friend did, 6 months to get the renters (no rent)out of the house and they trashed it.

Edit: Have insurance on the house (rental) had I one renter set the house on fire. Thanks for a quick nieghbor and the Fire departmant only a few blocks away. There was only a few thousand dollars of damage. This is why we got rid of this house. Now here we go! Rules no candles ,that is what set the fire. Rules are good, not that you can enforce them.

Ozarks Tom · #9 03/26/12, 04:26 PM

Yes and No. Yes, for the extra income, and the increased assets & acreage. Also, you can take your time renting it, making sure you're not getting involved with a deatbeat. No, because a lot of renters expect you to be at their service for every minor glitch (I drove an hour across Dallas to put the chain back on a toilet handle). Also, friends and family get their feelings hurt when you won't rent to them (and DON'T rent to them).

If you do rent the place out, make sure you have things covered in the lease that would possibly decrease your value, like inside pets, smoking, number of occupants, vehicles on blocks, etc.

One of the happyest days of my life was the day I signed 6 quit claim deeds, and the divorce papers. 7 problems gone in 5 minutes!

Joshie · #10 03/26/12, 04:34 PM

Usually, you need a really big down payment for rental property (was 30% when my parent purchased rental property). Taxes are higher on rental property.

It sounds good if, and it's a big if, you can afford payments even if the rental property is empty. A friend of mine lost a rental house because they couldn't afford payments when the tenant didn't pay.

haypoint · #11 03/26/12, 04:39 PM

I tried it, didn't like it.
A house down the road, closest neighbor, came up for sale. I bought it because I wanted to be able, as you said, pick my neighbors.
I spent a lot getting it trouble free, new braker box, new water heater, new appliances, new carpet. A couple windows were hard to open, so I replaced windows. Every "quick fix" led to three others.

Every time a renter moved out, I had losses that took every bit of my financial gain. Something different each time. Lots of stories, all long and each with a sad ending.

So, rented I made no money, but had a huge investment at risk. But when it sat empty, I still had upkeep and property taxes to deal with.

I've seen many areas in Michigan lose population and finding good renters is difficult.

But if you do not buy this other home, you will get new neighbors. Neighbors can be an asset or drive you nuts. Be cautious with this one.

TheMartianChick · #12 03/26/12, 04:44 PM

I am a landlord and I have been one since I was 24 years old. I am almost 42 now, so I have had many years to weigh the pros and cons of it. I love the fact that we have an extra income stream that is not tied to our employers. We now have several rentals and each one pays all of its own expenses and provides additional income to support our family. We've always maintained our properties and screen our tenants carefully. We don't deal with the negative issues that others sometimes report with being landlords because we are vigilant.

We'd never consider going back to NOT having rentals because they help us to remain stable financially and pay for some other things that might be considered to be luxuries.

Edited to add: We do own the house next door to us and we have others that are located in the same city that we're in. We also rent three of our properties to relatives and have for years. We know which family members NOT to rent to!

Jokarva · #13 03/26/12, 05:09 PM

We are landlords and have been since 1997, rentals are part of the reason we were able to retire last year at 55 yrs old. Out of our many tenants we have only had to evict one, and they left quietly with no damage done to the house.

Is the house in good shape? I wouldn't want a falling down money pit...you may be willing to live in one but a rental must be safe and habitable. Can it be a pain - yes it can! But you're having your mortgage paid by someone else...that's a big incentive. Plus it's right next door, you can keep an eagle eye on the place. Our rentals are in two different states (we have a property manager), that's the biggest pain for us.

Research the landlord-tenant laws in your state
Screen your tenants thoroughly and don't even consider anyone that's hinky
Charge a reasonable rent (but a large deposit) and maintain the property (repairs are tax deductible)
Do regular inspections, if my tenants break something they pay for it or it comes out of their deposit
Have an ironclad, detailed lease, or rent month to month

If it's livable I'd do it in a heartbeat.

airotciv · #14 03/26/12, 05:19 PM

I'm just going to say be very carefull. What sounds good can be costly.

MO_cows · #15 03/26/12, 05:20 PM

We currently have a "rent to own" situation with relatives and it is going very well. We had a formal meeting going in, and made sure everyone was on the same page and what the expectations were. But we have other relatives I wouldn't think about taking the risk on. (We all have a few of those, don't we? And if we don't, are we "them" to the rest of the family?? lol)

I would definitely do it again, and hope to with all the foreclosure bargains still hitting the market. But renting to strangers I would be very cautious and screen them well. And even if you don't make them lease for a full year or whatever, still sign a written agreement. Even better, a notarized written agreement.

Yvonne's hubby · #16 03/26/12, 05:24 PM

Quote:

Originally Posted by cindy-e

Turns out the property we are looking at has another house and 5 acres avail right next door. Renting that house out could make purchasing the one we want to live in (on 11 acres) plus the rental next door (on 5 acres) actually cost LESS per month than the rental we are in now on 2 acres. BUT... do I want to be a landlord... that is the question.

Would you do it? Here is how I see it...
Downside - responsible for the house and it's repairs and you have neighbors.
Upside... you get to choose your neighbors and it makes owning both properties more affordable.

IDK... what do you think?
Cindyc.

Ok, the upside of getting to choose yer neighbors.... not really. you get to select basically from whoever shows up with the money required. (check out federal fair housing laws that went into effect in 1968)
you also overlooked some of the downsides... like bums who wont pay the rent. Those are the good ones... the bums that dont pay the rent and trash the place while yer trying to get them out are the average ones. Then of course you get the bums who dont pay the rent, and trash the place, and turn your property into a drug haven for all their "friends". If they are really enterprising types, they might even turn the place into a meth lab for you... which after you get them out, you have a useless house until its been "cleaned" which can cost more than the house!

On the flipside, you can get lucky and have good tenants. I have four rental houses, two are rented to good tenants, one I just recently spent about 5k cleaning up and rerented, too soon to tell how this tenant is going to be, and the other is undergoing renovations to get ready for the next bums to trash.

Would I do it again? nope! why am I doing it now? coz I cant figure any way to get out of it short of taking a HUGE loss on the properties.

Jokarva · #17 03/26/12, 06:02 PM

Quote:

Originally Posted by Yvonne's hubby

Ok, the upside of getting to choose yer neighbors.... not really. you get to select basically from whoever shows up with the money required. (check out federal fair housing laws that went into effect in 1968)
.

Some rentals are exempt from Fed Fair Housing Act, there are discrimination/ADA rules you still must follow but we've never found them a problem. Don't know the OP's state though...so can't speak for state law.

plowjockey · #18 03/26/12, 07:05 PM

Don't rental properties have some good tax write-offs?

We are looking into one, but will have MIL as a long term tenant.

We're getting killed on income taxes.

Sawmill Jim · #19 03/26/12, 07:20 PM

Well we bought the house next door tossed the bums and have let it fall almost down

Got a nice trailer to put on it and getting rid of all sawmill things . Going to build me a shop to play in

I always wonder why folks can pay more to rent than to buy .

PD-Riverman · #20 03/26/12, 08:10 PM

I have several rentals which is why I do not have to punch a clock. Example I have a home I rent out right in front of my home I live in----across the drive---both homes face each other. The renters that are living in that home have been there for over 8 years, have payed me over $60,000, never been late, have no problems with them. I been renting that home for over 12 years and it was payed for when I started renting it. Another example, I bought a good looking used mobile home for $8,000 In 2000, its been rented all but maybe 2 months in 12 years. Got a little over $60,000 out of it minus the $8,000 I payed for it, spent less than $2,000 in new carpet, painting, AC repair etc since I bought it---Sounds like $50,000 in my pocket. Thanks for Renters!!