Retire and Become Landlord to Supplement Income?
- Thread starter LoneRanger
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Before I bought I used to have a land lord that owned 14 rentals. I got to be good friends with him. After we got to know each other he told me that he would only rent to couples that were older and had no kids. He said it was the kids that tore up the houses. He did okay. He also owned a pest control company. He was planning on selling everything when he retired and go out and travel.
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Wow, if one is looking for a relaxing retirement perhaps being a landlord isn't it. It did sound too easy in my head when I thought it up.
Some people are cut out for it and some aren't. I know a bunch of landlords, the ones that tend to stick with it have 10+ units. One guy I knew was in his 80's and he still did his own property management. When you have a bunch of units and know a bunch of others in the business, you tend to have contacts for handymen, plumbers, electricians and others that can do repairs reasonably. You get all kinds of tenants, some you never hear from for months, others want to chat you up for 1/2 hour every month.
Commercial property is mostly painless. Residential is orders of magnitude more hassle prone.
Even empty lots can make you money while you wait for stuff to come to it. You think all those pre fab building / car port places, food trucks, etc., can afford to buy those places they're parked on? A small trailer and an empty lot makes a used car lot you can rent out. A fence makes it a repo lot. Free money.
Even empty lots can make you money while you wait for stuff to come to it. You think all those pre fab building / car port places, food trucks, etc., can afford to buy those places they're parked on? A small trailer and an empty lot makes a used car lot you can rent out. A fence makes it a repo lot. Free money.
Sounds like a recipe for losing money.
I bought all my properties during the housing crisis, when foreclosures were everywhere. I honestly have done fantastic with my rentals (7). I bought newer homes in good neighborhoods with great school districts. A few minor issues along the way, but nothing major.
FWIW, you are far more likely to hear "horror stories" than good experiences, because people with things going well typically don't voice it like those with complaints.
FWIW, you are far more likely to hear "horror stories" than good experiences, because people with things going well typically don't voice it like those with complaints.
Originally Posted By: gfh77665
I bought all my properties during the housing crisis, when foreclosures were everywhere. I honestly have done fantastic with my rentals (7). I bought newer homes in good neighborhoods with great school districts. A few minor issues along the way, but nothing major.
FWIW, you are far more likely to hear "horror stories" than good experiences, because people with things going well typically don't voice it like those with complaints.
Yeah, I don't really post my "horror" stories, I just deal with them as they come up. Nothing really major, I've probably done a dozen evictions over the years, but none of them were really crazy like a tenant staying a year. Typically I end up losing about 2-3 months worth of rent plus fix up costs, but that's the nature of the business, you don't expect 100% rental income, typically 90%. Economy must be better, haven't done one in the last couple years. Sometimes it's just a numbers game, the more units you have, the more likely you will eventually run into all kinds of people and situations.
I bought all my properties during the housing crisis, when foreclosures were everywhere. I honestly have done fantastic with my rentals (7). I bought newer homes in good neighborhoods with great school districts. A few minor issues along the way, but nothing major.
FWIW, you are far more likely to hear "horror stories" than good experiences, because people with things going well typically don't voice it like those with complaints.
Yeah, I don't really post my "horror" stories, I just deal with them as they come up. Nothing really major, I've probably done a dozen evictions over the years, but none of them were really crazy like a tenant staying a year. Typically I end up losing about 2-3 months worth of rent plus fix up costs, but that's the nature of the business, you don't expect 100% rental income, typically 90%. Economy must be better, haven't done one in the last couple years. Sometimes it's just a numbers game, the more units you have, the more likely you will eventually run into all kinds of people and situations.
It is definitely no cake walk. There is quite a learning curve. There are a lot of A**h***'S, drug addicts, alcoholics, liars, shysters, scammers, cigarette smokers, and people that just don't give a [censored] about you or your property. Did I leave anyone out? Unfortunately you have a difficult time trying to see into the future to protect yourself from the mayham of these people. On the other side of that, if you have a retirement fund that you have not paid taxes on, you get full depreciation of the purchase price over 27.5 years. So, you can actually take money out of a 401k without paying taxes on it! Its the only reason "Rich" people own rentals.
I am considering renting my house out in about a year, but I don't think I can deal with the potential scum-bag tenant. Between work, school, and BITOG, I have too much going on to go chasing after deadbeat tenants. So, I will be inquiring about property managment companies. It's worth it to me if they charge 10%, or even 20% of the monthly rent. The only thing I will have to worry about is paying for repairs. If I was retired and had the time, then I would save the money and do everything myself.
My boss rents out the other side of our building. Currantly there is an auto body shop in there. Their lease is up in march and he wont be renewing it to them. They have been a huge headach.
Where to start Ranger? I am 66 and have owned rental property for the last 34 years. Residential single-family, multifamily, commercial, empty lot rental, and even one mobile home. Done right it can be a great inflation-adjusted return on investment. Done wrong it can make you want to get out the short sword and sit on a white blanket. Here are some of my observations:
1. Stay away from condos unless you can get into them way rightside up, and you are sure rentals are allowed. HOA fees have a significant negative effect on your ROI, and FHA lending limits will often restrict the percentage of rentals allowed in a development.
2. No modular or mobile homes. Ever.
3. Pick a good area. I have a 4 unit complex in a decent area. Low maintenance costs, rents paid on time, little turnover of tenants. Wife managed bad area 4-plex for my parents. Maintenance costs through the roof, constant struggle to get rents, high turnover, etc. Hard to get good tenants in a bad area, and very hard to train bad ones.
4. Get a good manager/caretaker and pay him well if he works out. Why a manager if you can do it? Because being retired, you should be able to travel if you want to. On my out of state 4-plex, my manager is local, large and handy. I am very generous with him on a monthly basis, and in return he personally handles repairs, finds new tenants, and gets rid of the rare bad ones. Haven't had to do any evictions with him in charge. I think his physical presence is a factor. BTW, it took me 20 years to get to this point. Real estate partner followed by a real estate company couldn't do the job in a cost effective manner.
5. If the numbers don't give you a 10% ROI, avoid it. Buy wholesale.
6. If you have to use a professional real estate company to manage residential property figure you will only get 1/2 of the rents net.
7. If you use a real estate company, use one that only handles rentals. Avoid the normal one that focuses on sales, and does rentals as a side business.
It works when done right. Planners tell you to start your draw of retirement funds at a 4% rate, adjust annually for inflation, and it will probably last 30 years. With those #s, $600k in retirement funds would only give you $24k a year. In real estate if you can net 10%, that nest egg will return $60k a year, will increase with inflation, and will even provide tax benefits.
1. Stay away from condos unless you can get into them way rightside up, and you are sure rentals are allowed. HOA fees have a significant negative effect on your ROI, and FHA lending limits will often restrict the percentage of rentals allowed in a development.
2. No modular or mobile homes. Ever.
3. Pick a good area. I have a 4 unit complex in a decent area. Low maintenance costs, rents paid on time, little turnover of tenants. Wife managed bad area 4-plex for my parents. Maintenance costs through the roof, constant struggle to get rents, high turnover, etc. Hard to get good tenants in a bad area, and very hard to train bad ones.
4. Get a good manager/caretaker and pay him well if he works out. Why a manager if you can do it? Because being retired, you should be able to travel if you want to. On my out of state 4-plex, my manager is local, large and handy. I am very generous with him on a monthly basis, and in return he personally handles repairs, finds new tenants, and gets rid of the rare bad ones. Haven't had to do any evictions with him in charge. I think his physical presence is a factor. BTW, it took me 20 years to get to this point. Real estate partner followed by a real estate company couldn't do the job in a cost effective manner.
5. If the numbers don't give you a 10% ROI, avoid it. Buy wholesale.
6. If you have to use a professional real estate company to manage residential property figure you will only get 1/2 of the rents net.
7. If you use a real estate company, use one that only handles rentals. Avoid the normal one that focuses on sales, and does rentals as a side business.
It works when done right. Planners tell you to start your draw of retirement funds at a 4% rate, adjust annually for inflation, and it will probably last 30 years. With those #s, $600k in retirement funds would only give you $24k a year. In real estate if you can net 10%, that nest egg will return $60k a year, will increase with inflation, and will even provide tax benefits.
The reason you hear horror stories is because every landlord, if he does it long enough, will encounter a horror story. Guaranteed.
Commercial rentals are not a walk in the park. They tend to be vandalized or robbed during non-working hours because the crooks know they're unoccupied and have valuables inside. I know someone who had this happen so he installed security cameras, and crooks promptly stole the cameras and recording device! Then you have cheapskates who come at night to illegally dump their mattress or oversized junk in the dumpster because they're too cheap to pay $25 to dispose of it legally. If the trash exceeds the dumpster's capacity, the garbage truck won't pick it up. So you have to routinely check the dumpster and dispose of the mattress yourself ($$$). Expect this to happen monthly.
You can hire a property manager but many of them are dishonest
Commercial rentals are not a walk in the park. They tend to be vandalized or robbed during non-working hours because the crooks know they're unoccupied and have valuables inside. I know someone who had this happen so he installed security cameras, and crooks promptly stole the cameras and recording device! Then you have cheapskates who come at night to illegally dump their mattress or oversized junk in the dumpster because they're too cheap to pay $25 to dispose of it legally. If the trash exceeds the dumpster's capacity, the garbage truck won't pick it up. So you have to routinely check the dumpster and dispose of the mattress yourself ($$$). Expect this to happen monthly.
You can hire a property manager but many of them are dishonest
I would not want my investments to be tied up in rental properties. There may come a time in retirement when they are badly needed. Its one thing if you were younger and want to build a retirement portfolio. It is quite another to already have that portfolio and to then invest in in real estate which as history has suggested can crash badly.
We purchased a condo in 2010 in south florida about a mile from the beach. At that time monthly rents for 2 bedroom, two bath units in that complex were in the $300 to $400 range. People were renting them out for nickels and dimes to help with the carrying costs because they would lose their socks, shoes, shirt and bloomers if they were to try and sell at that time. It took a few years before the rents and selling prices for the units returned to some semblance of normal.
Maybe a crash like that never happens again, but it might.
We purchased a condo in 2010 in south florida about a mile from the beach. At that time monthly rents for 2 bedroom, two bath units in that complex were in the $300 to $400 range. People were renting them out for nickels and dimes to help with the carrying costs because they would lose their socks, shoes, shirt and bloomers if they were to try and sell at that time. It took a few years before the rents and selling prices for the units returned to some semblance of normal.
Maybe a crash like that never happens again, but it might.
Quote:
The reason you hear horror stories is because every landlord, if he does it long enough, will encounter a horror story. Guaranteed. .... I know someone who had this happen .... they're too cheap to pay $25 to dispose of it legally. ....
Good grief. Wow. Let me grab something for my nerves. The horrors of the mattress in a dumpster. A window knocked out once in a while.
Sounds like annoyances to me - in my book, "horrors" are a child or young parent with terminal cancer, tornado's killing people in their sleep, drunk drivers wiping out families. Illegals murdering people. Young people killed or maimed in war. Consequential stuff like that.
Your friend is clearly an expert. A $25 disposal fee should convince any sane person of the folly of ever owning something that might kick out five figures a month in rents, and seven figures in a fire sale after years and years of rents, ( less long term gain on real estate ), plus all the tax benefits in the meantime.
The reason you hear horror stories is because every landlord, if he does it long enough, will encounter a horror story. Guaranteed. .... I know someone who had this happen .... they're too cheap to pay $25 to dispose of it legally. ....
Good grief. Wow. Let me grab something for my nerves. The horrors of the mattress in a dumpster. A window knocked out once in a while.
Sounds like annoyances to me - in my book, "horrors" are a child or young parent with terminal cancer, tornado's killing people in their sleep, drunk drivers wiping out families. Illegals murdering people. Young people killed or maimed in war. Consequential stuff like that.
Your friend is clearly an expert. A $25 disposal fee should convince any sane person of the folly of ever owning something that might kick out five figures a month in rents, and seven figures in a fire sale after years and years of rents, ( less long term gain on real estate ), plus all the tax benefits in the meantime.
Originally Posted By: Win
Quote:
The reason you hear horror stories is because every landlord, if he does it long enough, will encounter a horror story. Guaranteed. .... I know someone who had this happen .... they're too cheap to pay $25 to dispose of it legally. ....
Good grief. Wow. Let me grab something for my nerves. The horrors of the mattress in a dumpster. A window knocked out once in a while.
Sounds like annoyances to me - in my book, "horrors" are a child or young parent with terminal cancer, tornado's killing people in their sleep, drunk drivers wiping out families. Illegals murdering people. Young people killed or maimed in war. Consequential stuff like that.
Your friend is clearly an expert. A $25 disposal fee should convince any sane person of the folly of ever owning something that might kick out five figures a month in rents, and seven figures in a fire sale after years and years of rents, ( less long term gain on real estate ), plus all the tax benefits in the meantime.
The difference of his horrors and your annoyances is one of semantics.
Quote:
The reason you hear horror stories is because every landlord, if he does it long enough, will encounter a horror story. Guaranteed. .... I know someone who had this happen .... they're too cheap to pay $25 to dispose of it legally. ....
Good grief. Wow. Let me grab something for my nerves. The horrors of the mattress in a dumpster. A window knocked out once in a while.
Sounds like annoyances to me - in my book, "horrors" are a child or young parent with terminal cancer, tornado's killing people in their sleep, drunk drivers wiping out families. Illegals murdering people. Young people killed or maimed in war. Consequential stuff like that.
Your friend is clearly an expert. A $25 disposal fee should convince any sane person of the folly of ever owning something that might kick out five figures a month in rents, and seven figures in a fire sale after years and years of rents, ( less long term gain on real estate ), plus all the tax benefits in the meantime.
The difference of his horrors and your annoyances is one of semantics.
Originally Posted By: SeaJay
Originally Posted By: Win
Quote:
The reason you hear horror stories is because every landlord, if he does it long enough, will encounter a horror story. Guaranteed. .... I know someone who had this happen .... they're too cheap to pay $25 to dispose of it legally. ....
Good grief. Wow. Let me grab something for my nerves. The horrors of the mattress in a dumpster. A window knocked out once in a while.
Sounds like annoyances to me - in my book, "horrors" are a child or young parent with terminal cancer, tornado's killing people in their sleep, drunk drivers wiping out families. Illegals murdering people. Young people killed or maimed in war. Consequential stuff like that.
Your friend is clearly an expert. A $25 disposal fee should convince any sane person of the folly of ever owning something that might kick out five figures a month in rents, and seven figures in a fire sale after years and years of rents, ( less long term gain on real estate ), plus all the tax benefits in the meantime.
The difference of his horrors and your annoyances is one of semantics.
Well those don't really sound like horror. Real horror would be a tenant that smashes the bathroom vanity and leaves the water on then leaves. Fortunately the tenant below was home and called the landlord about the water flowing from upstairs. Not really sure what happened afterwards as it happened to another landlord that I knew.
Can't really think of any real ones. Only one I know that's sort of a horror show is a tenant that's about a year behind on her rent. She just fell slowly behind on the rent and would pay a little but not enough to catch up and before you know it, after 10+ years, she's a year behind on the rent. Landlords don't want to do anything about kicking her out. I told it would be pretty simple to serve her the notice and take it to court and just boot her. Losing a couple months of rent is better than a whole year. I know other landlords that don't mess around, once someone is 7 days late, she automatically starts kicking them out. She gets last and security so by the time they're out, she hasn't really lost anything, she just absorbs the attorney fee which for her is only a few hundred. I see her at court every time I go, she has so many units she won't even say.
Originally Posted By: Win
Quote:
The reason you hear horror stories is because every landlord, if he does it long enough, will encounter a horror story. Guaranteed. .... I know someone who had this happen .... they're too cheap to pay $25 to dispose of it legally. ....
Good grief. Wow. Let me grab something for my nerves. The horrors of the mattress in a dumpster. A window knocked out once in a while.
Sounds like annoyances to me - in my book, "horrors" are a child or young parent with terminal cancer, tornado's killing people in their sleep, drunk drivers wiping out families. Illegals murdering people. Young people killed or maimed in war. Consequential stuff like that.
Your friend is clearly an expert. A $25 disposal fee should convince any sane person of the folly of ever owning something that might kick out five figures a month in rents, and seven figures in a fire sale after years and years of rents, ( less long term gain on real estate ), plus all the tax benefits in the meantime.
The difference of his horrors and your annoyances is one of semantics.
Well those don't really sound like horror. Real horror would be a tenant that smashes the bathroom vanity and leaves the water on then leaves. Fortunately the tenant below was home and called the landlord about the water flowing from upstairs. Not really sure what happened afterwards as it happened to another landlord that I knew.
Can't really think of any real ones. Only one I know that's sort of a horror show is a tenant that's about a year behind on her rent. She just fell slowly behind on the rent and would pay a little but not enough to catch up and before you know it, after 10+ years, she's a year behind on the rent. Landlords don't want to do anything about kicking her out. I told it would be pretty simple to serve her the notice and take it to court and just boot her. Losing a couple months of rent is better than a whole year. I know other landlords that don't mess around, once someone is 7 days late, she automatically starts kicking them out. She gets last and security so by the time they're out, she hasn't really lost anything, she just absorbs the attorney fee which for her is only a few hundred. I see her at court every time I go, she has so many units she won't even say.
Originally Posted By: LoneRanger
Wow, if one is looking for a relaxing retirement perhaps being a landlord isn't it. It did sound too easy in my head when I thought it up.
You own a home?
If you do, you will know it is harder than renting, and if you rent to other people you cannot just ignore it like you ignore your wife's complain.
Wow, if one is looking for a relaxing retirement perhaps being a landlord isn't it. It did sound too easy in my head when I thought it up.
You own a home?
If you do, you will know it is harder than renting, and if you rent to other people you cannot just ignore it like you ignore your wife's complain.
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