Rental Properties

Can you legally do that? Make sure to take pictures of the inside of the house before they move in so if they trash the house you jave proof.

did this, but currently living in my soon to be rental with cash

only going to rent to grad students like me who are autistic like me. like meeeee

too much work for you if your initial, and only, question is how much work it is.

that's if you buy outright. if you mortgage the property, especially in an area with high rent and low/lower housing prices, then you can make a profit within a couple of years even. areas like that are typically in blue collar neighborhoods where it takes people years to save for a down payment so they have to rent in the mean while.

every cookie cutter lease will have the tenants liable for any damages exceeding regular wear and tear. if the damage isn't repaired prior to them leaving the property that's what the deposit is used for.

however, realistically speaking there's not much you can do to them if they fuck up the place and leave. even if you sue them (costs time and money) and win you'll have difficulty getting your money back.

that's why you have them pay two month's rent as a refundable deposit

Most people that rent are broke as fuck. They tear your shit up and if you take them to court it's just a civil case where there is no real punishment if they don't pay up even if you get the judgment.

I own 6 properties (4 in Columbia, SC, 2 in Augusta, GA.) Two of them have paid themselves off, the four remaining ones are at 50% paid or better on their mortgages. Here's my advice.

First, listen to . A rental property may provide you a dedicated source of income immediately, but until you pay the mortgage off, you're still not technically pulling a profit.

Second, get a good rental agency. Doing everything on your own is a surefire way to get fucked. Do you know, 100%, what the Landlord/Tenant laws are in your state? Do you have a plumber, locksmith, electrician on retainer? Do you know how to draw up a proper lease? No? Rental agencies do.

Second (part 2:) DO NOT EVER LET YOUR RENTAL AGENCY TAKE MORE THAN 15% OF YOUR GROSS. A good, properly run agency should be able to administer your rental for the cost of about 2 months rent. If they're taking more, they're cheating you. If they're taking less, I would be concerned about their quality.

Third, make sure you have set a proper leasee profile. You can determine everything about your tenants, so long as they don't break Federal or state law (race, color, religion, national origin, age, sex, pregnancy, familial status, disability, veteran status, and in some cases, sexual orientation.) If you're in a university town, you can specify that if they're a student, they must be a graduate student. Is there a military base in/near the city you live in? Tell your agency to give preference to actively serving personnel. While there are extra rules meant to protect them, you will always get your rent on the 1st because if you bitch to their commander, they might lose a stripe.

Fourth, be forward with your capital expenditures. Don't skimp on repairs, and when needed, replace items with higher end or industrial grade products (for instance, if you offer a washer/dryer, don't go cheap. A higher quality one will reduce the number of repairs AND allow you to charge more.) (CONT)

Fifth, get to know local realtors, especially if you want to expand beyond a single rental. A good relationship with realtors will allow you to take advantage of their knowledge of local real estate markets, and might save you some dosh on your next buy.

Sixth, like fifth, get to know your tenants. If you're "the landlord," then you're just blank name that they pay hundreds (or thousands) to every month. They won't give a shit. If you're "Billy," they'll think about that. Also be good to your tenants. One of the things I do with all new tenants is to sit with them and buy them lunch after they sign the lease. I always tell them "This is your home, I want you to be happy with it. Hit me up if you need anything." This has always been a help.

(CONT)

Seventh, and finally, back to #1. You will NOT make a lot of money initially. Everything you have coming in from your property should go back into the property until you hit 50%. Always have a war chest. You have no idea how slow a payout from an insurer can be if there's a fire, flood, or other damage. In time, your equity will grow, as will your profit. Don't get greedy and let the business run itself.

pretty much everywhere you'll look people will discourage you from becoming friends with your tenants as a general rule.

I think his general point is to show that you're human. If tenants objectify you into this evil landlord figure, they're more likely to fuck with you or screw you over. Also, renting out properties is a sales deal, so salesmanship rules apply. So having your customers like you is pretty important.

I didn't say become a friend, I said get to know. It's about breaking the facade of the absentee landlord who doesn't give a shit about you or yours. If you're a guy with a face who they know is responsive and respectful, they're going to take care of your property because they know you'll take care of them. I don't do things like visit and hang out, but I do send holiday cards, and every year when my tenants resign their lease, I still take them to lunch. In my 14 years, I've had probably 30 different tenants, and with the exception of one of them (an asshole undergrad who was on meth,) I've never had a problem.

Thanks user, that's it in a pinch. I don't want to be their buddy, I want to be "Billy" [my name really is William,] the landlord who really does want you to be happy in the house you're renting. I've known too many other owners who've hidden behind their agencies and they have issues because their tenants think of them as "that asshole who I cut a check to."

I bet you have a background in sales. Either that or you've done a good job educating yourself on sale techniques. Regardless, you sound like you know your stuff.

How do I find good places to rent?
My family already owns and rents out some property, but since we are a family of architects we built those ourselves.
Should we continue that practice or look to buy new units?

Lot's of good advice already in the thread.
This. Depending on how overheated the housing market is, you're looking at 20-50 years until you turn an over-all profit on cash (meaning you have the original price of the house available again, adjusted for inflation). The beauty is that all the while you still have your original property, an investment safe from inflation. If you account appreciation, property is a brilliant deal. The thing is, if you're in the renting-out business, you're not going to ever sell, so the value of the house is a non-factor to you. You can maybe use it as collateral, but that's it.
>Run the numbers. It's always numbers.
Also this. Are you ready to renovate the whole thing after 10 years? Did you account for inflation? Is everything insured or could something catastrophic lose you the house? How about income tax? The biggest mistakes are to not save up for maintenance and renovation and to not account for vacancy in your model calculations. With long-term tenants at least assume 1/24th vacancy, better 1/12th. With students, you're looking more at 1/8th or even worse.
>two month's rent as a refundable deposit
That isn't worth shit. They'll string you along for a month before you even realise they'll never pay. Then you still have to get them out, renovate their damage, find new tenants - 2 months is not going to get you far. Around here 3 months are standard, personally I'm running with 4, but that is indeed pushing the financial capabilities of most tenants. They don't have money upfront, that's why they rent.
Don't befriend them, but be on good personal terms with them. A mutual back-scratching deal. They want a home, you want money. No need to be rude or to exploit one another. I tell all my tenants to tell me their problems *before* something bad happens. If they don't pay without alerting me first, they're out, but if they ask we can work something out.

Alright, OP finally.
>rent out to students near a university
I have looked into that heavily, although I haven't found the right arrangement yet.
The charming thing is, you take 1 house and cram 3-4 tenants in, hopefully getting more money out of them than you would get out of a single tenant. It's dicey though to get the numbers right. Each needs a room in addition to a communal room and kitchen. But the price should still be affordable to a student. From my experience the watershed is above 3 tenants. 3 pay pretty much the same that a family renting the whole house would, only the latter is a much better and safer deal. If you can get 5 in, it really starts to get fun. You need the right type of property. Small-ish rooms, additional bathrooms, etc.
Keep in mind that you likely have to provide additonal services - if you're operating a revolving door of students, *you'll* have to pay for energy, water, internet access, etc. The communal furniture and kitchen are your responsibility, maybe you'll even have to provide beds and cupboards to the rooms. And even if they're well-behaved (which they won't), everything will degrade much faster. More people in the house, none of them sees it as a permanent residence and cares one bit, nobody cleans regularly, etc.
You'll have to frequently advertise vacancies (if you put in a family or an old lady, you're looking at decades of stable tenancy), make showings, sign leases, take care of bitching neighbours or internal conflict among your tenants (first and foremost: noise complaints), make sure multiple payments are on time, etc.

Unless you have the ideal property (close to campus, perfect room sizes, etc) I still don't think renting out to students is worth it, unless you really don't care and cram 5 people into an absolute shithole.

>rental agency
Well, if you have to, you have to. But they do take a big cut of what's essentially your profit. 2 out of 12 months your property works for someone else? I don't think so.
I do everything myself and you really feel the difference in your wallet. Well, I'll have to admit, I do have a law degree, so I definitely know what I'm doing (in theory - in practice I'll have to learn something new almost every month).
Good advice by that poster apart from that though. And yes, you really are playing the long game with real estate.

>Should we continue that practice or look to buy new units?
Run the numbers. What does it cost you to buy land and build a house vs. what it costs you to buy housing (and maybe renovate).
>How do I find good places to rent?
Real pros just run the numbers. I've worked with people who look at the morning news paper's realty section. Given the address they know what kind of rent they can get, then they look at the advertised price, add renovation, divide by rent, muliply with an adjustment factor. The result is a number of years until the property turns a profit. If they like what they see, they call and seal the deal via phone without seeing the property once.
Semi-pros like us have to look at a hundred properties to find one that suits us. Put in the footwork. You'll quickly pick up on what's appropriate prices in your area. As architects you'll know all about how to evaluate a building already.

Slums are the best.Houses are cheap as fuck and the poors have no other choice. For instance.In poor america you can buy a 1500sqft 3 story house with basement for under 40k and rent it out for $700-800.Thats enouth to pay the mortgage and have a tiny profit.

>buy for under 40k and rent out for $700-800
In what world does real estate amortise in 5 years? There's gotta be some major catch. That's literally too good to be true.

>Lot's of good advice already in the thread.
>
>This. Depending on how overheated the housing market is, you're looking at 20-50 years until you turn an over-all profit on cash (meaning you have the original price of the house available again, adjusted for inflation). The beauty is that all the while you still have your original property, an investment safe from inflation. If you account appreciation, property is a brilliant deal. The thing is, if you're in the renting-out business, you're not going to ever sell, so the value of the house is a non-factor to you. You can maybe use it as collateral, but that's it.

Why cant you sell the house after renting it?

The catch is its a slum where most speak spanish. Gets even better with multi-units where could charge 450 per unit in a 4 unit building.

What about people trashing your place? Or crime? Collecting rent without getting shot?

How do you handle the liabilities?
LLC for each house?

Also how did you do the financing?

get a good property manager and tenants.Charge more and put up security system and lengthy forms to weed out the total losers.

bump

>Why cant you sell the house after renting it?
You can, but why would you? It would only make sense in very narrow circumstances. Your property would have appreciated faster than your inflation-bound rent has gone up, so relative profitability tanked. Then you can think about selling and buying cheaper real estate with a better ratio. But every transaction takes ~10%, so there's little incentive to flip property needlessly. Unless you need the money - why cash out? Unless something catastrophic is going to happen, the value is only going to go up. With every sell you're swapping an infinite series of inflation-adjusted payments for a finite amount of money that starts to depreciate the next day.
Well, there may be other circumstances, I guess. I've seen friends sell their early acquisitions. If you make some dumb choices early on, you may want to sell whenever the next larger renovation comes up just to avoid the hassle on a sub-par object.

Like I said, that only applies if you're in the renting business. There's also a huge business that buys run-down houses and flats cheaply, renovates them with their own crew and re-sells immediately. It's just a completely different business model than renting out.

What liabilities? Everything that's mine is insured (building against fire, flood, tornado, pipe bursts, vandalism, lightning strike, etc). My tenants pay the insurance via operating costs anyway. The only liabilities I carry are centered around finding tenants who are not shitheads. Takes a little bit of effort, but pays off big time. If you get loyal tenants who stay for decades it's well worth putting in two additional months at the start where you don't take the first applicants but keep searching. Sure, the roof could collapse at any moment, but I have regular maintenance done and I put money away every month for future renovations, so I'm not really scared of any of that.

A holding LLC becomes attractive after a certain point for tax reasons. This is getting into legal advice, so disclaimer: Check your local laws. No two places are completely alike. I rented out privately first. At >10 objects they qualify me as commercial and I had to abide more rules and laws (consumer protection, all that jazz). Since marginal tax rates are progressive, it really depends on your income when you want to put everything into an LLC. They're great for carrying forward profit for future investments without the government taxing the shit out of money you want to re-invest anyway.

I bought my first property (run-down downtown flat for ~105k + 35k renovation) with 100% equity. After that you have unmortgaged property as collateral plus a rental income stream, so banks are up for pretty much whatever. (Beware, LLCs have a harder time getting credit, for obvious reasons). Since you try to keep profits down for tax purposes, you're basically forced to buy new property every 5-8 years anyway, so soon you get a nice ball rolling.

property manager here
didnt read the thread in reality students are fine they generally do wear your property out more than normal

get ones you can control GET DEPOSITS

women - hair and make up stains
men - house on fire lol

It's going to be a shitload of work, and/or you aren't going to make much money.

Ideally you'll be able to do the majority of maintenance work yourself. This will be a shitload of work. Particularly if you're renting to college students who are more likely to tear the place up. If you have to hire people to do work on the place, that's going to eat up your profits real quick.

Why would you through trouble of buying a house and renting it and worrying about renters when you can just put that money in the stock market (indices) instead and earn from compounding down the line?

Does that not make more sense?

I'd like to know why it does not.

It doesn't make any more or any less sense. It's just a different kind of investment. Ideally you'd have both. When it doubt, diversify.

>Why would I go through the trouble of buying indices and worry about their performance every day when instead I could have physical property and guaranteed hedging against inflation?

You swap a one time payment for an infinite series which you can cash out of at any time without losing money. There is very little risk in real estate. Both the house prices and the rent follow the consumer price indices, so your will never have to worry about inflation. If you deal with financial instruments you have to first outperform inflation and then try to make profit and pray to god you don't miss the ideal selling point. Markets could crash at any moment, causing you to lose even large parts of your invested capital. Real estate has also the neat property, that you get payouts each month. With stock you have to sell or hope for good dividends twice a year.

Real estate is a very safe stable investment with little (but existing) potential for massive profit (depending on city development).
The stock market is a very volatile investment with great potential for massive profit but very notable danger of big losses as well.

Hedge and do both.

Is there any way of moving your property into an LLC after you have 100% equity?

Also, opinion on using leverage to amass a large portfolio?

Also, any book recommendations for real estate?

Why would you not want other people paying for your mortgage?

At the end you own the property and then have massive potential for large profits

Besides , at least here in a\America, the number of people renting is steadily increasing

Most likely because they are the milenila generation who thought it would be so tolerant to get a African dance degree

bump

9/10 thread let's bump this badboi. Check out bigger pockets podcast and website, loads of info for starters and pros. I'm gonna get a multi family to start once I move out of my parents house and save enough from my first job. Getting money in index funds+real estate is gonna make me jizz 24/7. Who knew getting pretty wealthy was so simple. Irresponsible people actually sicken me.

There's shitty rents which only make 250$ a month and then there's business rents which make 1500-2000$ dollars a month.

Thanks for the advice, but you clearly do not live in a military base city. Soldiers trash everything they touch, every bar/hotel/restaurant have specific policies for them

>Why would you not want other people paying for your mortgage?

Because you still have to find these people.

Because the mortgage makes you pay more than the property is worth.

Because the property is itself expensive.

Because you have to ensure you are getting these renters all the following 20 years you are paying your mortgage.

Because you have to go through trouble of collecting money from ones that don't pay.

Because you have to fix the place up once youth trashes it.

Many reasons.

Much easier to just put the money in indices and let it sit and compound.

I'm not a professional though, but I understand that it becomes much more worth while if you are managing 10 properties not only 1.

To add to that, if you want to make money off real estate so much, why not invest in REITs along with the global indices?

Would really like to hear a professional opinion.

Nice bait

I live in one (Columbia, SC) and my properties are in two (Columbia-Ft. Jackson, and Augusta GA-Ft. Gordon.)

I deliberately give my preference to troops, normally NCOs with families. These are guys who have careers on the line, and trashing a rental property and then not making the landlord whole will get you an Article 15 (if it's expensive enough, an Article 32 and a court.) Hell, if you're late on your rent and your top catches wind of it, you might lose a stripe.

The reason that bars, hotels, restaurants have rules to mitigate this is that troops on TDY or exercise are on the government's dime, and thus not personally liable for shit, as long as they don't commit any crimes. Renting a property? That's 100% on the troop.

Just realized that somehow, another of my replies didn't post, so here they are
No, got a background in chemical engineering. Did time as an EOD tech, now working for a high energy materials handler (bomb guy) for a mining and quarrying company. I learned this from the first decent landlord I knew, back when I was in college. He treated me fairly, got to know me, and I looked him up after I bought my first unit to ask advice. A lot of what I posted is stuff he told me years ago.

I'm not a lawyer and paying $12k to make $68k a year is well worth it. I really do not have the time nor the energy to maintain my properties each and individually.

that's not going to cover it tho. i have heard stories the original guys that rented the property were all gone and they simply re-rented to some punk ass fuckers that organized parties in the house.
they fucking tore up the floor to barbecue in the living room or something.

OP....never invest in anything that eats or needs fixing.

What would I major in to learn how to analyze profit potential or whatever it would be called? Or do you have any books or resources you could point me to?

“Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world.” — Franklin D. Roosevelt