Advice on handling a rental property

[Jito463]

Originally Posted by Esaias

Stay away from late night infomercials and dvd/book sales, too.

And most importantly of all, never trust advice from the internet.

[jfrog]

Originally Posted by Godsdrummer

In order to make rental properties work you must have the right frame of mind. Best to put some of the rental money aside for repairs because this will be a constant occurrence regardless how good of renters you have. Being responsible for repairs over $100 means that they can take that off the rent legally. At least that has been my experience.

Being in construction I know several that have rental properties, one of them made a comment to another that was getting out of being a land lord because of always having to repair and maintain when renters moved. It was said you got to just expect things and go with the flow.

Looks like I'm going to have to check into Tennessee law on them making repairs less than $100 and if I am always responsible or if that can be stipulated in the lease.

[jfrog]

Originally Posted by Esaias

Being successful REQUIRES* being around people who do this for a living AND are successful themselves. Otherwise, it's 'taxes, tenants, toilets, and trouble' lol. If you structure the lease agreement correctly, and you have the best property for the best price, you will wonder why you didn't do this sooner. If you DON'T structure it properly you will wonder why anybody does this and how anybody possibly makes any money doing it.

*By 'requires' I mean a sine qua non, a 'not without which'. It is just about impossible to make money consistently in real estate without having a mentor or mentors who have been there and done that successfully themselves. Unless you're a genius or a natural born tycoon of course.

Stay away from late night infomercials and dvd/book sales, too.

I wish I had the luxury of being around successful rental owners but I don't. Thus why I am asking for advice from everyone.

However, this house will be great to learn on as my dad owns it outright so it's mostly going to be an exercise in maximizing profits and minimizing headaches. It's hard to imagine losing money on the home in the long run no matter what kind of repairs need done as long as I can keep someone paying rent in it.

Is there any online resources you know of to help with structuring a rental agreement?

[jfrog]

Originally Posted by Jito463

And most importantly of all, never trust advice from the internet.

When it comes to advice you listen. You don't have to act on it. But you see if you think it will work for you. You see if there is something mentioned that you haven't thought of before.

For better or worse I'm on board with trying out this rental property thing. Hopefully for the better but if it's for the worse then at least I learned in a fairly inexpensive way. But either way it doesn't hurt to ask for advice and ideas even if I don't end up using all of them.

[jfrog]

Originally Posted by Esaias

Screen the tenants. Have them complete a credit report application before leasing. Require them to have good credit, make it clear beforehand. All minor repairs are tenant's responsibility, explain it clearly and put it in writing. Everything must be in writing, period. If their kid flushes a baseball down the toilet, their responsibility. If they break a window, their responsibility. Require a security deposit up front. Keep the deposit money separate, no commingling of funds, and return it to them if they end the lease satisfactorily.

Set the rent at a competitive rate. Don't go cheap, you'll regret it, not just income wise but you'll wind up with damage to the property. Late on the third, default by the tenth, out by the end of the month or whatever your state allows. No return of deposit if in default.

Maintain insurance on the property for certain. If you can, make sure the appliances are in GOOD working order, if not new. This saves on having to do repairs.

If you own the house free and clear, after 6 months of having it leased out refinance it for the equity and use that money to buy another house to lease out. From what I've seen average returns here in Texas run about 250-400 per month after paying mortgage, taxes, and insurance. Ten houses nets you around 3 grand or so a month in income, write off depreciation, pay no income taxes. After ten houses, bundle them into a sale, jumbo loan refinance, etc for about 150000-200000 and start investing in multi-family units aka apartment complexes. Cash on cash return for multifamily run a bit less than single-family but net incomes and especially capital gains on a good value-play scale astronomically. Did I mention pay no income taxes due to depreciation?

Whoever said put money in wall Street is probably still working a job.

You speak as if you have done this before? If you don't mind to tell me your experience in the business it would be helpful. If you don't want to do that in public I don't mind a private message. I can keep a secret too

In the future I may be looking into taking on more rental properties but for the first year I plan to just do the one for my dad and see how it goes. So advice there is appreciated too. I can probably handle the financial aspects once I decide to get serious about acquiring more rental properties.

My bigger concern is that I'm not as much of a handyman as I probably should be to undertake this endeavor. However, my best friend is very handy and can give me plenty of advice and occasional help with that kind of stuff. I also have at least one uncle I can lean on for advice and occasional help there when things arise.

So I think I will be okay there but I will only find out for sure by trying it. I know I can't be hiring someone to do the repairs everytime something breaks. It will eat up twice as much money that way than most of the repairs would otherwise cost and that will eat greatly into any profits I may have.

[jfrog]

Originally Posted by Esaias

Screen the tenants. Have them complete a credit report application before leasing. Require them to have good credit, make it clear beforehand. All minor repairs are tenant's responsibility, explain it clearly and put it in writing. Everything must be in writing, period. If their kid flushes a baseball down the toilet, their responsibility. If they break a window, their responsibility. Require a security deposit up front. Keep the deposit money separate, no commingling of funds, and return it to them if they end the lease satisfactorily.

Set the rent at a competitive rate. Don't go cheap, you'll regret it, not just income wise but you'll wind up with damage to the property. Late on the third, default by the tenth, out by the end of the month or whatever your state allows. No return of deposit if in default.

Maintain insurance on the property for certain. If you can, make sure the appliances are in GOOD working order, if not new. This saves on having to do repairs.

If you own the house free and clear, after 6 months of having it leased out refinance it for the equity and use that money to buy another house to lease out. From what I've seen average returns here in Texas run about 250-400 per month after paying mortgage, taxes, and insurance. Ten houses nets you around 3 grand or so a month in income, write off depreciation, pay no income taxes. After ten houses, bundle them into a sale, jumbo loan refinance, etc for about 150000-200000 and start investing in multi-family units aka apartment complexes. Cash on cash return for multifamily run a bit less than single-family but net incomes and especially capital gains on a good value-play scale astronomically. Did I mention pay no income taxes due to depreciation?

Whoever said put money in wall Street is probably still working a job.

1a. I would love to do a credit check. I don't know how I can do one. I also don't know what paperwork I need to have them fill out for one. I will have to look into this.

1b. Is it possible and or affordable to do a background check on them as well?

2. I've heard that about the security deposit. I'm assuming that's typically a legal requirement. That should be easy to do though. I can just have a separate account at my bank from my checking and label it rental deposit and not touch it.

3. I plan to be very strict with rent timeframes. I also had planned to write some kind of late fee into the agreement for each day they are late.

4. I like the appliances idea but I'll cross the bridge for new appliances if I'm called on to repair them too often. It's crazy to invest in new appliances when you may not need to IMO.

[jfrog]

Any other place to advertise rental properties than craigslist or the newspaper?

[Esaias]

Originally Posted by jfrog

I wish I had the luxury of being around successful rental owners but I don't. Thus why I am asking for advice from everyone.

However, this house will be great to learn on as my dad owns it outright so it's mostly going to be an exercise in maximizing profits and minimizing headaches. It's hard to imagine losing money on the home in the long run no matter what kind of repairs need done as long as I can keep someone paying rent in it.

Is there any online resources you know of to help with structuring a rental agreement?

First of all, check this link out - https://www.biggerpockets.com/rei/real-estate-clubs/

Then, read this: http://www.lifestylesunlimited.com/7...nagement_tips/

Then, read this: http://www.lifestylesunlimited.com/h...as-a-landlord/

Then, read this: http://www.lifestylesunlimited.com/damage_control/

Then, read this for a different take on repairs: http://bbs2.mrlandlord.com/display.php?id=14144710

Then, go here and lurk around and find investors in your area with whom you can interact, as well as learn more information on real estate for free than you will ever get by buying any so-called 'system': https://www.biggerpockets.com

As for myself, I do not own single family rental property but I do have some multifamily property. While the details are different, the basics are really very similar if you have an overall template you are working with. But that requires finding mentors, people who have been there and are currently doing it successfully. Successfully being the key word. Lots of investors out there who did not and are not doing it successfully, as measured by their satisfaction - or lack thereof - with their investing career.

You have a leg up already with a house that is mortgage free, that gives you not only a lease option for passive income but also an equity option for ready available capital should you decide to buy more properties. Also, it gives you some time to do it right and not rush into anything that may turn into a headache later on.

Honestly, the FIRST thing I would do is set about finding someone who is successfully doing what you want to do, in your general area, and then copy what they are doing. And that applies to most any endeavor. Investors are generally more than willing to share their knowledge and experience with people they can see are eager to learn and capable of actually doing something. They know that if they help you get a leg up, it will come back to them one way or the other.

[Armapeet.Singh]

Dont not make allowances for them to stay past their time if they don't pay. Landlord is no a place for emotions.

There are professional scammers out there that can creates a good story, checks references and screen, screen, screen.

[Jito463]

Originally Posted by jfrog

Any other place to advertise rental properties than craigslist or the newspaper?

Search on Google for rental properties/home rental/etc, and see what websites come up. See where people in your area tend to be listing their properties.