Setting up rental "business"

[snowcannon]

Hey guys (and gals), was hoping to get some advice/your experience about renting out...
How much (%) should one put aside from monthly rent for repairs, vacancy and other stuff/situations? I know taxes and insurance varies a lot depending on location, but should be fully paid for by the rent anyways.
Is this a good idea?: buy an older cheaper property (50% down), fix up a bit, re-mortgage or take out a home equity line on it to build/buy something else for yourself and rent out first property. In the end income from rent will have to be enough to cover all deductions and mortgage payments.
Is my thinking way off? Too risky?

 

[arff]

You talking like rental homes or duplexes.

Year long lease

 

[snowcannon]

Single family home

 

[JayT]

Re: Setting up rental "business"

If you can find Excellent renters to sign a year lease...its a good investment. However if you end up with a string of bad renters you're going to pull your hair out and wonder why you ever did it in the first place. All your extra money and time will go into repairing the place. My brother-in-law has a few rental properties and he's had his share of headaches believe me.
Mostly related to rent not being paid on time and people smoking in his houses and just treating them like trash

 

[Big A]

Make sure you get actual references for your renters, I had a couple rentals and that was my biggest problem and the reason why I will never have another residential rental. I found most renters are lying pieces of **** and will just use their friends as fake references and have no respect for anyone's property. Imho, if you wanna make money in real estate, buy older houses, put some elbow grease into them and flip em.

 

[JayT]

Re: Setting up rental "business"

The problem is, a lot of people who rent don't have their chit together which is why they are renting in the first place. That often means they are not going give a crap about you or your property. Bear in mind I say a lot of people, not all. There are definitely some good people out there that are renting just because that's what they want to do or a particular situation that they are in at the time. The key is to find those people!
I agree with big A though, buy a property put some elbow elbow grease into it and flip it. Way less headache

 

[Cableguy]

Re: Setting up rental "business"

screen your renters by looking at their vehicles inside and out if they are messy inside there cars/trucks, keep looking

 

[Dragonalain]

I have a rental property. Good renters are hard to find, Seems the good ones have their **** together and buy their own houses. It’s been almost 4 years since I bought it. If a guy really adds the dollars up its worth it. 18 more years and I should have a 400g payday. Would I buy another one? Only if I could pay for it in full, paying interest sucks balls.

 

[arff]

Single family home

We have a few
Find good renters
Keep a close eye on making sure utilities are paid
Offer to change furnace filter free every 3 months. Easy way to check the conditions of you place.
Use home/renter paperwork and forms. You can purchase official ones.
Allow money for insurance, taxes, mortgage payment and sone repairs.

 

[Cyle]

Have a few, compared to many i've been lucky and had mostly good ones. Only problems having been collecting rent, from one in particular. Don't count on rent being paid on time and be prepared to have to cover house costs in case. I've not put a dime into any repairs, although i'm only renting nearly new homes. The way I see it is 20-25 years of renting and the house is paid for, and shouldn't be much in way of repairs before then. But if house prices ever skyrocket again, may sell em all a 20-30% price increase would be too tempting to resist I think.

IMO it's totally different then flipping, hard to even compare. Once you've bought the house and found renters, it's hands off. Flipping can be like a second job, and it's a lot of risk outside your control with prices, and in current market there is very few opportunities to make good money unless you can buy 600-800k houses in cash. Even then, unless you have a lot of experience, it's a bad idea. A rental requires no experience.

 

[snowcannon]

Re: Setting up rental "business"

Lots of good advice here. As to flipping homes, not sure if I'm willing to sacrifice my free time after my day job to fix a house. Also don't enjoy moving. Wouldn't want to be "jumping" from house to house every year.
Rentals may not provide as much of a return, but at least I have time to sled

 

[JayT]

Look online, there's a lot of good instructionals of how to find a good renter. There are definitely a few things that you can do to see red flags

 

[snowcannon]

Look online, there's a lot of good instructionals of how to find a good renter. There are definitely a few things that you can do to see red flags

Doing that. Figured it wouldn't hurt to ask here for some advice based on personal experience.

 

[Bnorth]

As said find good renters. The SA rental group on FB is full of losers, don't waste your time. We use kijiji or post flyers on the church bulletin boards. If you can find a place with a suite or easily suited do that so you have two incomes. A good sized main floor rents for almost as much as a full house here. IMO you need to have enough income to cover all expenses (property tax, city utilities, mortgage & interest, repairs and updates, lawn care/ snow removal) as well as a % return that is greater than you earn in a balanced portfolio. Take the RE equity growth as a bonus; don't count on it.

 

[52weekbreak]

Renting a single family dwelling is a marginal thing depending on (most as outlined above):
1. How big the mortgage and expenses are;
2. How well you find good renters;
3. How your purchase price compares to the local market (how good a deal did you get and is the market increasing)

Something not mentioned here is making sure the Tenant buys insurance and you ask for notice of cancellation.

It should be close so you can easily keep an eye on it.

 

[snowcannon]

As said find good renters. The SA rental group on FB is full of losers, don't waste your time. We use kijiji or post flyers on the church bulletin boards. If you can find a place with a suite or easily suited do that so you have two incomes. A good sized main floor rents for almost as much as a full house here. IMO you need to have enough income to cover all expenses (property tax, city utilities, mortgage & interest, repairs and updates, lawn care/ snow removal) as well as a % return that is greater than you earn in a balanced portfolio. Take the RE equity growth as a bonus; don't count on it.

I'll have to chew through your accountant talk

 

[snowcannon]

Renting a single family dwelling is a marginal thing depending on (most as outlined above):
1. How big the mortgage and expenses are;
2. How well you find good renters;
3. How your purchase price compares to the local market (how good a deal did you get and is the market increasing)

Something not mentioned here is making sure the Tenant buys insurance and you ask for notice of cancellation.

It should be close so you can easily keep an eye on it.

I don't expect to make any money (now). As long as the rent covers all expenses including the mortgage, I will be happy. More of a long term investment...

 

[52weekbreak]

I don't expect to make any money (now). As long as the rent covers all expenses including the mortgage, I will be happy. More of a long term investment...

Keep in mind you need to have positive cash flow every month to pay taxes on the rental income and cover incidental repair costs. If you are not a handy person or do not have the time to do the work on the house, you better make quite a bit each month.

 

[snowcannon]

Keep in mind you need to have positive cash flow every month to pay taxes on the rental income and cover incidental repair costs. If you are not a handy person or do not have the time to do the work on the house, you better make quite a bit each month.

That's what I meant. The rent HAS to pay for all bills including a rainy day fund for repairs or vacancies. Repairs I can do myself.

 

[ferniesnow]

That's what I meant. The rent HAS to pay for all bills including a rainy day fund for repairs or vacancies. Repairs I can do myself.

And if the tenant doesn't pay the rent for November and then it still doesn't pay into December and the tenant is still behind, you can't kick them out because it is winter time. There goes your cash flow. It seems the tenants have more rights than you.

Life is simple without renters and their problems and continued BS.......just an opinion from an older landlord.