[Never_Enough]

I've been house shopping for myself, but lately thinking perhaps it would be a better idea to buy something with the sole purpose of renting it out to generate income for myself.

I have zero experience with being a landlord or buying property to rent.

If I went to the buy to rent route, whatever I bought would be considerably less than what I would buy to live in. So we're likely not talking about the affluent areas in my tri-county area.

Am I going to be biting off more than I can chew if I buy something to rent out?

[smoosh]

Buying to rent out can generate a good source of stable income. However, a lot things you have to consider and evaluate before you go this route.

First, where are the properties located? Is the neighborhood growing and population in the area is increasing? I’ve flipped (well, bought, repaired, and rented out) houses before; I’d buy a run down home in a well-populated area, make the necessary repairs, and rent it out. I’d look for homes in areas surrounding large cities, evaluate the state of the neighborhood, and determine profitability by performing a simple cost-benefit analysis. One thing you have to consider in your cost-benefit analysis is what, if any, repairs might be required during tenancy. Also, if you plan on being the landlord, buy in a location in somewhat close proximity to you. You will run into issues during tenancy (e.g., water leakage) that’s too costly and unnecessary to have repaired via a contractor, and you know you can make the necessary repairs yourself. You’d want to be able to drive right over.

Second, buy within your means. If you’re considering buying and renting out, you should be currently living comfortably. This certainly isn’t a project you should get into if you’re moving around all over the country. Likewise, don’t cheap out and purchase a home requiring many repairs in a crappy neighborhood simply because it fit within your budget. You will run into issues with finding a good tenant.

Ultimately the success of your purchase will depend on location, price, and condition of the home. My suggestion is to spend the next full year searching and evaluating prospective homes, if you choose to go this route. Buy a home with a lot of potential (i.e., growing population in the area, good neighborhood, home is reasonably priced, etc.). You can make a lot of profit in this business, but you can also flatline and come out even. It takes a special kind of person to lose money from this venture.

[overcoil]

Renting single property can be a disaster. It's one thing if you inherited a property and had a GREAT renter.
Are you a lawyer? if you have familiarity with renters laws and were good at home maintenance like replacing a water-heater or installing a door or had a truck to move washers and dryers...

[NicoleLusts4BMW]

Remember its the number of doors you have. One property is not worth the hassle. With that said look into a duplex or more doors.

[bd307]

Are you not comfortable with the mortgage or do you not have a stable job? What makes you have that thought of renting it out instead of residing there yourself?

[PINeely]

You need more than one for it to be very profitable, but most people start the same way: one property. So I will work with that assumption. Unless you're Bob Vila I wouldn't buy one that needs a lot of repairs, that stuff gets complicated and costly in no time ESPECIALLY when you start getting into A/C and electricity. That was my first mistake in the business, I'm a very handy guy but some of it was just over my head and I ended up having to pay people. Didn't lose money but didn't make any either, all I got was a story so learn from me, hahaha.

Smoosh has great advice for area shopping. If you have a college neighborhood nearby you will get young families and professionals who make ideal tenants (low maintenance, reliable, long-term renters) and when you don't have them there's always college students or recent grads to fill the gaps. Remember with one property you need to have someone in that sucker every month! Otherwise you're losing money to the bank that your property isn't making back. Don't forget to factor lawn care into your rent price.

Do your due diligence when selecting tenants! I cannot stress this enough. A single bad tenant will completely undo everything with only one property, there's not really a safety net if it falls flat. Get check stubs and references if you have to, it's worth it. Usually if something is up with a tenant you don't find out until they miss rent for two months and you go over there to evict them. Oh look they also broke the dryer, tore a hole in the wall and ruined the carpet, and by then it's far too late.

[Clark_Kent]

Before you dive headfirst into real estate investing I would suggest doing some research on BiggerPockets. It's an awesome resource for first time investors and seasoned investors alike. Good luck!

[Mr Tonka]

It's all about sticking to the proper criteria when buying a rental property. Take emotions out of the process, figure out the ideal property to buy; location, size, comparable rental rate, type of renter, condition, etc....

When you find the right one, buy it. List it for rent asap, get someone under roof that pays on time.

Edit: Buy as many properties with your budget as possible. If you have $150k, buy 3 $50k condos instead of one house. A $150k house may rent for $1500 but a $50k condo rents for around $800. $2400 > $1500 Give a property manager $400/ month to do all the landlord work still be $500 ahead of a single house.

[FriedPiston]

Never_Enough Take a look into roofstock.com

[gatorfast]

Dont do it. Buy yourself a place first and then circle back to this if you are still interested.

[Never_Enough]

Originally Posted by bd307

Are you not comfortable with the mortgage or do you not have a stable job? What makes you have that thought of renting it out instead of residing there yourself?

This is not my first time as a home buyer & my job is stable. I'm simply looking at the making more $ side of things. Buy to rent out then make money & save it. Delay buying to live in then I have more buying power & can buy more house for me to live in. The price range for rentals I am looking at is much less than what I would buy to live in.

[zx10guy]

I wouldn't do it.

I have a place near the beach which sits idle if I'm not using it. I could rent it out and most likely make some decent money. But the risk isn't worth it to me. The place was bought brand new as new construction. Has really nice finishes and I don't want to deal with the risk of someone destroying the place.

Then there are two situations I know of first hand. One is a good friend of mine. He had to move away from the place he had relocated to for work. The house is new construction and was the model home for the development. I had visited him once before he moved out. It was indeed a very nice place. He did his due diligence and checked on the renter he signed a lease with. The renter turned out to be a total nightmare. Eventually fell behind in paying rent. He had to go through the eviction process which took over a month before he was able to get them forcibly out. When he was able to get back into the house, the renter trashed the place. He had to spend thousands to fix the damage to be able to put the house on the market to sell.

The other situation was an ex girlfriend. She got a place as an investment property to rent. Her first tenants were very good. College girls going to the nearby university. They eventually moved out. My ex had to find new renters. She was working with a very respected property management company. They eventually found a renter. A veteran who was receiving VA benefits. He moved in and paid rent for the first couple of months. Then he made excuses about waiting on the VA check and such to the eventually being a dead beat. He also did things to the house which at the time was thought to be harmless. He asked about painting some of the rooms. Well, he did a very poor job of painting the walls. Some of the rooms he didn't even bother to take down the wall paper. He just painted right over it. He also couldn't pay the utilities so he didn't run the oil based boiler/radiator system for the house. He used space heaters which overloaded the electrical circuits as the house is pretty old. This caused major damage to the main service panel. After the eviction, we found that because the house wasn't heated for so long during the winter, the water in the radiator system froze and cracked the radiators. The damage to the radiators alone was $6000.

So yeah....after these first hand knowledge of renting gone wrong, I won't even consider it. The investment part of my vacation property is the value of the property. I made sure I could afford paying for my primary residence and this other property without stretching myself.

[Mr Tonka]

I'm pretty sure everyone knows of someone who's had a bad renter or rental experience. But just as cars get a bogus reputation because of the minority who bitch about them on line, owning rentals can get the same bad reputation. I could offer you positive anecdotal evidence about owning rentals.

[sygazelle]

As expected, the answers to your question are all over the map. People with bad experience may tell you don't. Those of us with positive outcomes will tell you to do it. I'm in the second category and I'd say do it with homework done. When I first started being a landlord I was given a book by a friend called Landlording. I followed the advice closely and had excellent experiences with tenants. Can it be a nightmare? Sure it can. But it can also be fun and profitable.

Getting the right rental property or rental properties is key.

The another key element is getting the right tenant. This book Landlording will give you the tools to improve your odds if you choose to go down that path.

Buy the book and read it cover to cover. If it seems like too much work to follow the advice, I'd recommend you back away. If, instead, you think the advice is sound and you think you can follow it, maybe being a landlord is in your future.

Here's a link to the book:

https://www.amazon.com/Landlording-H...ds=landlording



Good luck!

[bimmer456]

Buy and maybe rent out a room. Air bnb will generate enough income from one room to cover the entire mortgage and then some. I brought my first house and have been able to pay the mortgage without renting out anything but may buy an income property later.

[wrickem]

Why buy one when you can buy 2 and get yours paid for?

When we bought this old 1860's row home (row of 2) it consisted of 2 adjoining mirror image houses. Two separate properties, but sharing a common wall. One house (ours) has 4 floors and the other one has 2 really nice 2 floor apartments, one with a rustic stone feel the other with a modern loft feel. Our side was the crappy house.

The upstairs apartment covered that side's mortgage and taxes while the downstairs apartment covered our house's mortgage and taxes. We used what would have been OUR mortgage payment money to totally gut and trick out our side. 18 years later (man, can't believe we've been here that long) and both houses have been paid for on the renter's dime for over 3 years. Now the rent pays the taxes on both with plenty left over so I can feed my sickness and hoard cars instead of trading them in.

Since the rentals are right there, if there is an occasional problem or anything needing to be done, it's very convenient ... plus we can control who lives on the other side of the wall. We've had nothing but great tenants who have all turned into longtime friends after they move out and buy a place of their own.

[tracer bullet]

New tax laws and standard deductions may play a role in your decision. You need to consider the mortgage amount, tax deductions if any on its interest paid or property taxes, maintenance and upkeep costs (broken water heater, new roof someday). As a homeowner you know that you can go a long time without many expenses and then suddenly there's a big one, eating away at whatever profit you are making.

[jlstyle]

You need to have a primary mortgage of your own residence in order to apply for a mortgage for the investment property. Or at least that is how I worked mine out. Either way, if you are new to RE investment, it is the best to buy the house, live in it, you move to bigger one and rent the old one is the best way to make your portfolio without a risk IMO. Renting is a risky business with possible zero to minus income if you dont play it right.

[overcoil]

I just lifted this off of google w/o really scrutinizing - but the basic theme of the article is something to evaluate.

https://www.nolo.com/legal-encyclope...-vouchers.html

[bd307]

Originally Posted by Mr Tonka

I'm pretty sure everyone knows of someone who's had a bad renter or rental experience. But just as cars get a bogus reputation because of the minority who bitch about them on line, owning rentals can get the same bad reputation. I could offer you positive anecdotal evidence about owning rentals.

That would be my response as well. I also have some good experiences as a landlord. Though there are some expenses (some paid by insurance and some from own pocket). Some are major (water pipe burst and roof) an some are minor (leaky kitchen sink and toilets). You just need to do the ground work and study the market in your regions. Make sure you can absorb the mortgage payments when it is unoccupied - yes it will happen and you need to have a plan and take quick actions when it happens.

Once you got those figured out, you will start thinking about your next one.

[Mr Tonka]

Originally Posted by bd307

That would be my response as well. I also have some good experiences as a landlord. Though there are some expenses (some paid by insurance and some from own pocket). Some are major (water pipe burst and roof) an some are minor (leaky kitchen sink and toilets). You just need to do the ground work and study the market in your regions. Make sure you can absorb the mortgage payments when it is unoccupied - yes it will happen and you need to have a plan and take quick actions when it happens.

Once you got those figured out, you will start thinking about your next one.

Mailbox money is nice.

[bd307]

Originally Posted by Mr Tonka

Mailbox money is nice.

We are quite lucky the renters are using some type of electronic payments so we don't have to worry about losing a check or things like that.