Author Topic: Need Advice On Buying Rental Property: Pros and Cons  (Read 1899 times)

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Re: Need Advice On Buying Rental Property: Pros and Cons
« Reply #15 on: November 15, 2012, 08:58:25 AM »

Online Roy H.

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Oh, an important point to remember.  Just because you legally evict someone and are awarded a monetary judgement, does not mean you will ever actually receive that monetary judgement.  You will probably be out whatever rent is due you, so don't things drag on too long before you start the eviction process.

Yeah, that's a great point.


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Re: Need Advice On Buying Rental Property: Pros and Cons
« Reply #16 on: November 15, 2012, 09:20:01 AM »

Online Moranis

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Oh, an important point to remember.  Just because you legally evict someone and are awarded a monetary judgement, does not mean you will ever actually receive that monetary judgement.  You will probably be out whatever rent is due you, so don't things drag on too long before you start the eviction process.

Yeah, that's a great point.
especially with a new tenant.  If it is someone you've had awhile, you might give a bit more leeway because a car accident, health scare, etc. can be really problematic for lower income families. 

Also, if you do go the lower income tenant route, you aren't going to find very many people with impeccable credit, but certain things showing up shouldn' be as much of a concern, like medical bills.  If they fall behind on those, not nearly as big a deal, as if they fall behind on rent.  You just need to use your common sense on that type of stuff.
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Re: Need Advice On Buying Rental Property: Pros and Cons
« Reply #17 on: November 15, 2012, 09:21:35 AM »

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Re: Need Advice On Buying Rental Property: Pros and Cons
« Reply #18 on: November 15, 2012, 09:28:13 AM »

Offline Chris

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My advice:  Learn the law, know the law, apply the law.

Never, ever mess around with a tenant's security deposit.  Most states require you to keep this in a separate interest bearing account, and it can't be touched until the tenant moves out.  When they do move out, if you're keeping part or all of the deposit, send a specific, itemized list of damages and costs to repair.  Otherwise, you can be in hot water legally (double or even triple damages to the tenants).

Don't ever change locks on a tenant or resort to "self help" in evicting them.

If you're going to use a sample lease you find online, make sure you ask an attorney to look at it before using it. 

Also, make sure you take the time to get a good tenant.  Have a background check done by a 3rd-party agency if necessary, and don't take Section 8.

This is what I was going to say.  And I would highly recommend if you are looking in MA...RUN.  Seriously, it is not a landlord friendly state.  Yeah, you can make money, but you need to be prepared for more headaches than you can imagine. 

From what I understand, other states are a little more landlord friendly.

Re: Need Advice On Buying Rental Property: Pros and Cons
« Reply #19 on: November 15, 2012, 10:25:18 AM »

Offline hardlyyardley

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Three points:

Have plenty of cushion in your cash flow projections

Doing it for tax benefits is like the tail wagging the dog

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Re: Need Advice On Buying Rental Property: Pros and Cons
« Reply #20 on: November 15, 2012, 11:33:56 AM »

Offline bdm860

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Any and all advice is welcome. I have good, steady income, good (not great credit) and about 20k in the bank.

Are you looking for a multi-family property? Like something with 2-3 units?  And if so would you be living in one unit while renting out the others? Or renting them all out?

Or are you looking to buy a single family home, and just rent it out or possibly flip it?

I ask this because I've always heard a lot of lenders will require at least a 20%-25% down for an investment property that you're not living in.  And if you’re in the Northeast, a dilapidated house in the slums is likely going be valued at more than 80-100k, your 20k down payment might not cut it.  So maybe talk to a lender first, as I think many of them have different guidelines and lending practices for a primary residence vs an investment property.  A 20k down payment might get you a good primary residence, but not an investment property.

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Re: Need Advice On Buying Rental Property: Pros and Cons
« Reply #21 on: November 16, 2012, 10:07:23 PM »

Offline Ogaju

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NICE THREAD Wish I had read something like this before my experience.

No, dont do section 8.. it is a nightmare and you will fidn out that the experienced section 8 renters have more smarts than you. If you can, make them pay the water. They can kill you with water usage. I am telling you, if you do not do this right you will be financing folks you do not know for months at a time.

Check the plumbing and the electricity of the property you are buying.

Check with the local city bldg dept to make sure that there are no code violations or any improvements that have not been signed off by the city. I really thought there was no way you could buy property in violation, but I found out the hard way.

Dont buy a fourplex.. they present a whole set of problems.

Stay away from one bedroom units. Folks that rent one bedroom units do not hang around that long. They are usually transients.

Re: Need Advice On Buying Rental Property: Pros and Cons
« Reply #22 on: November 16, 2012, 10:18:22 PM »

Offline Celtics18

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My parents rent an apartment in their owner occupied house out to a woman on section 8. They always get their rent, and have had no significant problems with her.  It seems like they have a very good tenant/landlord relationship.

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Re: Need Advice On Buying Rental Property: Pros and Cons
« Reply #23 on: November 17, 2012, 09:28:44 AM »

Offline mgent

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My advice:  Learn the law, know the law, apply the law.

Never, ever mess around with a tenant's security deposit.  Most states require you to keep this in a separate interest bearing account, and it can't be touched until the tenant moves out.  When they do move out, if you're keeping part or all of the deposit, send a specific, itemized list of damages and costs to repair.  Otherwise, you can be in hot water legally (double or even triple damages to the tenants).

Don't ever change locks on a tenant or resort to "self help" in evicting them.

If you're going to use a sample lease you find online, make sure you ask an attorney to look at it before using it. 

Also, make sure you take the time to get a good tenant.  Have a background check done by a 3rd-party agency if necessary, and don't take Section 8.


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Most of my successful friends say that's a mandatory rule.  My own observations make it hard to disagree.
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Re: Need Advice On Buying Rental Property: Pros and Cons
« Reply #24 on: November 17, 2012, 09:42:23 AM »

Offline Brendan

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FYI - advertising that you don't take section 8 can get you sued, I know of one case in CT where this happened and the landlord lost and had to pay a settlement. (Don't know all of details.)

Use a lawyer for any legal action: leases, notices, evictions. Etc.

Property maintenance is harder than people think. Saying you are handy isn't enough, I'd plan to have significant out of pocket expenses, especially in first few years. (Every house I've had has some sort of upgrade needed in first few years that inspection didn't predict.)

Getting rid of bad tenants is really, really hard so:
1. Be careful bringing them in
2. When you have a good one, especially multi-year one, take the certainty over marginal increase in rent. My aunts have a tenant in a multi family who has been there for years, and they don't raise her rent because: they know she pays, she takes care of the place (like its her own) and she has brought in family to fill vacancies in other units in the building. This certainty and good relationship is worth a lot - so if you get that, don't jeopardize it for short term cash flow.

Re: Need Advice On Buying Rental Property: Pros and Cons
« Reply #25 on: November 17, 2012, 09:58:40 AM »

Offline crownsy

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My advice:  Learn the law, know the law, apply the law.

Never, ever mess around with a tenant's security deposit.  Most states require you to keep this in a separate interest bearing account, and it can't be touched until the tenant moves out.  When they do move out, if you're keeping part or all of the deposit, send a specific, itemized list of damages and costs to repair.  Otherwise, you can be in hot water legally (double or even triple damages to the tenants).

Don't ever change locks on a tenant or resort to "self help" in evicting them.

If you're going to use a sample lease you find online, make sure you ask an attorney to look at it before using it. 

Also, make sure you take the time to get a good tenant.  Have a background check done by a 3rd-party agency if necessary, and don't take Section 8.


^^^
Most of my successful friends say that's a mandatory rule.  My own observations make it hard to disagree.

Yea just be aware that's HIGHLY illegal, it's the same as discriminating based on race according to federal housing laws.

Not saying it isn't done ALL the time, but you pretty much have to "get creative" on how you ferret out if they are section 8.
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Re: Need Advice On Buying Rental Property: Pros and Cons
« Reply #26 on: November 17, 2012, 11:48:19 AM »

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I should have specified...when I said get references, I meant previous landlords.  Ask the condition of the unit when they left it, as well as their payment record.  Remember, "Normal wear and tear," which  is expected, is subjective...you may or may not get a ruling in your favor over "improvements" they have made.  Make sure to have a good lease drawn up stating what they are and are not allowed/expected to take care of.
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