The Rental Property Thread

AngryCorvair wrote:

Keven wrote: Time to argue about single family homes vs apartments/condos.

no it isn't!

An argument isn't just contradiction.

(hopefully I got the right reference??? I'm not trying to start a fight, just playing along!)

@Toyman: That is awesome. And yes, $22000 a month on paid off properties is real money, that's an awesome retirement nest egg. And if/when they get tired of managing them they can either hire a management company or sell them on and live off the proceeds which should be considerable. This is very much the kind of "get right slowly" thing that the average middle class American can do. We don't need the bulk of the crap we spend our money on and if we plan ahead with stuff like this a 15 year retirement window gets very real.

Here's what I want to know.

Say I want to get into rentals and I don't own my own home yet, and I don't have a big down payment.

Would a bank even considering giving someone a mortgage in that case?

There are some really cheap places in my city, especially HUD homes.

In reply to PHeller:

Depends, In my case I've gotten loans for 2 rental properties while still paying mortgage on my personal dwelling.

PHeller: I imagine you will need at least 20% down, possibly more.

What kind of up front costs would I be looking at if I went from not owning any property, to purchasing a $20,000 move-in-ready property that needed work, but passed inspections?

There is a local property, 3 unit multi-family, 3 kitchen, 3 bathrooms, 4 bedrooms, in a good location (Commercial Zoning), and low taxes ($950 per year).

SWMBO normally has clients who rent a single bedroom for $350 a month, and a two bedroom for $450 a month in the bad parts of town. If we took the low end and said $300 (smallest single bedroom), $350 (nicer single bedroom), and $400 (two bedroom) we'd be making 1,050 a month or $12,600 a year. After taxes that'd be $11,650.

Refugee clients for the three years my girlfriend has worked for her organization are excellent at paying rent, even if it is higher than it should be for a house in bad condition. They can be messy, but rarely damaging, and don't have much in the way of belongings, so not much to move in or out.

How much to most attorney's charge to write up a lease agreement?

dculberson wrote:

AngryCorvair wrote:

Keven wrote: Time to argue about single family homes vs apartments/condos.

no it isn't!

An argument isn't just contradiction. (hopefully I got the right reference??? I'm not trying to start a fight, just playing along!) @Toyman: That is *awesome*. And yes, $22000 a month on paid off properties is real money, that's an awesome retirement nest egg. And if/when they get tired of managing them they can either hire a management company or sell them on and live off the proceeds which should be considerable. This is very much the kind of "get right slowly" thing that the average middle class American can do. We don't need the bulk of the crap we spend our money on and if we plan ahead with stuff like this a 15 year retirement window gets very real.

By argument I meant converse about the pros and cons. When I was looking for a home I was 100% against HOA because the prices are ridiculous and the quality of work sucks. Then I started seeing the numbers (low insurance, lower prop taxes) and started thinking maybe an apartment might be the best first bet. I would keep renting my townhome (that I live in, rent is cheap) but I think buying a rental apartment could be a good start.

In reply to PHeller:

The lease agreement we used was downloaded off the internet. No lawyers were involved, but signatures were witnessed by a Notary.

Banks are now very interested in the owner having some skin in the game so a down payment is probably going to be required unless you have stellar credit. 20% is fairly standard. They aren't going to really care if you already own a home, but they do get a little worried about writing loans on homes that aren't owner occupied. They got burned on a lot of those when the housing market melted down. I would love to refinance the rental now since it's at 6.5%, but am running into problems. They will refinance it, but the rate isn't going to be much better than it already is. Don't expect to get the super low rates if you aren't going to be living in it.

As far as costs other than the purchase, the biggie is insurance. The bank is going to require a policy on the house to protect their investment. I also strongly recommend a general liability policy. I carry one for a $1,000,000. It basically picks up where your other insurances leave off.

Other than that you need to be prepared to cover any repairs on the rental. If a $4k A/C unit craps out, you need to be prepared to replace it. That means having the cash on hand or some place you can borrow the money from.

Another thing you might need to look into is renting to you wife's clients. The organization she works for might see that as a conflict of interest.

Still looking into this.

I found a place really close to my home town, where my parents, grandparents, cousins, all my family is, and many of my closest friends.

$64,000, Two-Unit, both are live-in ready. That's anywhere from $150 to $300 per month mortgage depending on down payment.

Now, I'm not serious about this, but just to bump the thread:

Lets say I purchase a 2-Unit home. One unit is awesome, big, and doesn't really need anything to attract a decent rental price. The other is small and nearly worthless. Rent the bigger of the two for the cost of mortgage, taxes, insurance, make the tenant pay utilities, and live in the other for the cost of my utilities. Would it be possible to live for free?

Heck at that kind of pricing it should be possible to make money off the place while living in it. Getting a lender to make the loan would be the only challenge, but it's doable with a decent down payment.

Bumping this topic back to the top with a specific question - who should I use to do the background/credit check?

I see there are several places listed on Google, but I'd like some feedback on who is good and/or who to avoid.