Real Estate Investing & Slumlords

Turk

Lt. Ron "Slider" Kerner
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Jan 21, 2008
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I want to get into some day trading here and there. I have a bit of cash that I can play with but at the same time I'd rather not lose my money either. No risk, no reward kind of thing. I'd rather save up and buy rental properties honestly. Trying to pay off my house and buy another. use the cash from the rental to pay the new mortgage. Put extra toward principal of the loan. Rince and repeat.

So I've done a ton of research on rental properties. In the end, you are going to make 5 to 8% ROI, not including interest payments. Unless you leverage loans at a very low rate, and pay rental properties with long term mortgages, you will make a lot more money in the stock market with a lot less effort.

I was dead set on doing the rental property thing, but in the end, the math didn't work out.
 

willizm

Very Nice, Very Evil
May 13, 2009
12,829
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The Woodlands, TX
So I've done a ton of research on rental properties. In the end, you are going to make 5 to 8% ROI, not including interest payments. Unless you leverage loans at a very low rate, and pay rental properties with long term mortgages, you will make a lot more money in the stock market with a lot less effort.

I was dead set on doing the rental property thing, but in the end, the math didn't work out.

I agree on that but in my situation we bought a foreclosed place with a sizable chunk down in north plainfield. The guy down the street rents at $2200/month so his kids can go to good schools. My mortgage is $1068 so even if we rented it out at $2000/month we would be making some pretty good ROI and for the months we didn't have a tenant it wouldn't be that hard to fill the gaps. I'd like to do the same thing again. Find a foreclosed place in a good area for cheap, fix it up, live in it for a few years, Rent it out and repeat. It's a bit of a PITA but people always need a place to live especially in good neighborhoods where there isn't many places available.
 

Turk

Lt. Ron "Slider" Kerner
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Jan 21, 2008
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I agree on that but in my situation we bought a foreclosed place with a sizable chunk down in north plainfield. The guy down the street rents at $2200/month so his kids can go to good schools. My mortgage is $1068 so even if we rented it out at $2000/month we would be making some pretty good ROI and for the months we didn't have a tenant it wouldn't be that hard to fill the gaps. I'd like to do the same thing again. Find a foreclosed place in a good area for cheap, fix it up, live in it for a few years, Rent it out and repeat. It's a bit of a PITA but people always need a place to live especially in good neighborhoods where there isn't many places available.

Yeah, a ton depends on what price you acquire the house for.
 

OffshoreDrilling

This is my safe space
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HVAC Guy
Aug 28, 2007
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Homer Glen
and then you've got to find good tenants repeatedly, fix the place up again after they trash it, all the maintnenance on the property that you've got to take care of yourself or pay someone to fix, emergency repairs when something breaks in the middle of the night, taxes, HOA that never goes away. IMO unless you have a lot of free time or can make it into a full time job managing your properties, that's still a lot to gamble vs a long term investment you can essentially sit on and never need to do anything with.
 

willizm

Very Nice, Very Evil
May 13, 2009
12,829
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The Woodlands, TX
and then you've got to find good tenants repeatedly, fix the place up again after they trash it, all the maintnenance on the property that you've got to take care of yourself or pay someone to fix, emergency repairs when something breaks in the middle of the night, taxes, HOA that never goes away. IMO unless you have a lot of free time or can make it into a full time job managing your properties, that's still a lot to gamble vs a long term investment you can essentially sit on and never need to do anything with.

Well, I'm doing that too. I've been investing in my 401k since I was 21-22. All things that lead to money have inherent risks. I've got to do my part to make sure my tenants are good candidates. My sister has a rental property and it's turned out well for her but they really screen their people.
 

OffshoreDrilling

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Aug 28, 2007
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I don't have a place to live that I own myself yet, but I like the idea of it :dunno: Id like to make enough money to work for myself and have slumlording be part of it. My friend that recently passed away and his father owned about 20 section 8 properties in the city of Chicago. 2 and 3 unit buldings, they make a killing on it and have a small plumbing business that they tend to day to day as well cherry picking only the jobs they want. they also buy and sell a lot of the properties too
 

syP

Not Banned
May 24, 2007
30,096
357
Downers Grove, Illinois
I thought about doing this to my condo when we actually find a single family home that we want.

I can triple or even quadruple what my mortgage is in rent (minus HOAs) but I have a very very hard time trusting people... one bad tenant and you are fucked, in most cases. I also do not have the time nor the energy to do that, unfortunately.
 

cacicgtp7

Some Military Dude
Nov 9, 2008
4,762
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Boston, MA
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My wife and I were about to do this in Denver. Were looking at a house that we were going to live in for about 2 years and then rent out for the next 5-7 (since the military will move us away from it no matter what). After looking hard at all the numbers and going through scenarios that were realistic it just didn't seem worth the pain and effort.

Denver real estate prices are out of control so the amount of overhead we'd have in the house was huge, plus if you don't get a renter for a month here or there it's substantial amounts of money since it's around 2,200 a month missing. Fixing it up wasn't a concern because it was a new build but there's a lot of pain and unnecessary stress that goes into home ownership from afar. Biggest part of course is buying a place that you want to live in and then renting it out to someone who's inevitably going to trash it and not treat it like you would your own home.

That's almost a deal breaker. Buying a property to just rent out that's lower income or a fixer upper has much less emotion in it and thus is a better buy but can cause more headaches in maintenance required.


Bottom line: I'm going to sink in in mutual funds and call it a day.
 

willizm

Very Nice, Very Evil
May 13, 2009
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The Woodlands, TX
Just like everything in the market, the property you have in the area you rent it and the price it is will drive the type of individuals you will potentially be renting out to. Low income housing vs $2000+ monthly rent will have vastly different types of individuals so I'd hope the later would bring the tenants that have a sense of pride in their living conditions and won't trash the joint.

Whats the typical contract look like? Don't you usually take 2 months rent as security and first months rent up front?
 

radioguy6

TCG Elite Member
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May 23, 2008
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background checks are a good idea and of course you can write up whatever you want in a contract. Higher price points usually bring in quality tenants.

So many of the houses in my neighborhood are rental properties and my plan is to rent out mine too. Mailbox money every month.
 

OffshoreDrilling

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Aug 28, 2007
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I thought about doing this to my condo when we actually find a single family home that we want.

I can triple or even quadruple what my mortgage is in rent (minus HOAs) but I have a very very hard time trusting people... one bad tenant and you are fucked, in most cases. I also do not have the time nor the energy to do that, unfortunately.

as for an investment, a 1br condo is probably the worst thing to buy. a 1br is going to rent somewhere $1000-$1300, privately owned places bs an apartment typically go for less because they offer less amenities. Subtract what your monthly HOA is from that amount, special assessments, your taxes, 10% if you are going to have someone manage it, insurance, what a plumber, electrician, HVAC tech is going to cost for an emergency repair because I sure know I couldn't make it somewhere at at 3am to fix anything when I have to wake up for work, reasonable wear and tear a security deposit won't cover and all those costs when you don't have a tenant paying rent. you might come up $500 ahead at the end of the month. I can work a couple hours of overtime a week and cover that amount of money.

Not saying don't do it, you already own the place. Unless you own more
than a few properties, a 1br is probably a poor choice to buy as an investment though. In the suburbs condos don't really gain any significant value either. Have to look if your HOA allows rentals as well. Something with a larger profit margin, I.e. house, is what you want for the purpose of an investment.
 

OffshoreDrilling

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Just like everything in the market, the property you have in the area you rent it and the price it is will drive the type of individuals you will potentially be renting out to. Low income housing vs $2000+ monthly rent will have vastly different types of individuals so I'd hope the later would bring the tenants that have a sense of pride in their living conditions and won't trash the joint.

Whats the typical contract look like? Don't you usually take 2 months rent as security and first months rent up front?

typically one month rent, and the first months rent is due at the time of signing the lease. I wouldn't even consider a place that wanted two months rent for a security deposit. you're essentially at the owners discretion on how much of that you get back. Mr landlord can fuck off if he thinks he's keeping that much money. If I left a place absolutely 100% perfect as the day I moved in, id expect 50% of my deposit back at best
 

willizm

Very Nice, Very Evil
May 13, 2009
12,829
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The Woodlands, TX
typically one month rent, and the first months rent is due at the time of signing the lease. I wouldn't even consider a place that wanted two months rent for a security deposit. you're essentially at the owners discretion on how much of that you get back. Mr landlord can fuck off if he thinks he's keeping that much money. If I left a place absolutely 100% perfect as the day I moved in, id expect 50% of my deposit back at best

When I rented the condo in Vegas I never had an issue, didn't trash the place and left with 1 months heads up. I went month to month after my 6 month agreement. I think I had 2 months rent as a deposit on the place and got all of that back after the final walkthrough. When 2 months worth of rent is on the line maybe it makes people act a little more accordingly. I dunno.
 

cacicgtp7

Some Military Dude
Nov 9, 2008
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Boston, MA
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Never heard of 2 months rent security deposit. That would be a little insane. Out here you'd need someone to front you almost 5 grand in deposits. For a 12 month lease there's no way I'd do that.

I always just see 1 month deposit and first month's lease. Then an extra deposit for pets if you have any or allow any in the contract and potentially a pet fee per month but that depends on the landlord. We are currently subleasing a place and we just have a deposit for the pet of $400 to cover carpet things.
 

CuzzinOlaf

TCG Elite Member
May 16, 2014
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Spring Grove
Rental properties are great if you're making more for rent than the mortgage and have good tenants (obviously). I definitely lucked out with my rental and couldn't ask for better tenants. They've made improvements, bought a home warranty and ended up getting me a new water softener, replaced the riding lawn mower I left for them to use with a new one, yada yada yada. They're an older couple with a bunch of income and it looks like they have no plans on leaving anytime soon since they love the house and want dibs if I ever decide to sell.

I thought about another property but haven't explored it yet as my new thing is buying a nice UP of Michigan house to put on VRBO and let it pay for itself when I'm not using it.
 

willizm

Very Nice, Very Evil
May 13, 2009
12,829
10,150
The Woodlands, TX
Never heard of 2 months rent security deposit. That would be a little insane. Out here you'd need someone to front you almost 5 grand in deposits. For a 12 month lease there's no way I'd do that.

I always just see 1 month deposit and first month's lease. Then an extra deposit for pets if you have any or allow any in the contract and potentially a pet fee per month but that depends on the landlord. We are currently subleasing a place and we just have a deposit for the pet of $400 to cover carpet things.

I didn't really care since my client paid for it anyway :rofl:
 
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