Investing in Residential Real Estate

Where to begin

This is all just my opinion. You should compile much other info.
My family business was construction. Commercial and Residential. Growing up, parents at one point owned a lot of residential properties. 40 doubles a 20 1bdr apartment complex and some commercial properties as well. I am in the real estate industry full time. When i was 22 i bought a run down 5 plex since then a duplex. These are my experiences.

If you have to pay a mgmt company only do it for the rental aspect. If you pay them to handle repairs it hasbeen my experience it will kill any profits you hope to gain and the workmanship is usually less than desired. Also take note. most mgmt firms get paid for placing tenants so they often move them from one landlord to another. (Im sure not all prop mgs are like this.)

Again repairs should at least be controlled by you. I find that if your rents are middle of the road your tenants will stay at least 2 years and that should be your goal. Because no matter when they leave cleaning and painting at a minimum will be required.

Situs. Rental location will have a lot to do with your landlord experience. Location factors into rent which in turn factors into value. Or, in other words, better locations get better rents thus making the property value more and can generally attract a better tenant. You decide what type of rental property owner you want to be.

i have had many friends want to partner with me to do Sec 8 rentals and i have always refused. While i admit they can be very lucrative the headaches associated can be equally painfull. I have personally seen AC compressors stolen, copper plumbing and wiring ripped out of walls and general property damage that would require a full renovation. If you choose to do this my advice is to approach it as a full time job. (Which will be difficult for the years while you build your sec 8 empire.

Each rental property should at least pay for all expenses and have at least some vacancy factored in as well.

Single family homes usually dont make for good rentals IMO. If one tenant moves out you are 100% vacant.

Read about Gross Rent Multiplier for help determining values. Get a Realtor with experience in this area and a licensed Home Inspector that has a construction background.

I can only speak of my experiences but they got half of the first months rent plus i paid 25 per person on the lease to have their credit run.

I was never really clear what they made on the repairs when they handled them. We would get a receipt from that side of their business. Always thought it was high so we took it over ourselves.

No but they did manage all our units at one time under a contract. i think it was a 1 year deal. We used them for 3 years.

But after a while you learn they have other clients and start to suspect that they move tenants around.

Example Tenant moves in on 1 year lease in January. In april defaults on lease and leaves skipping on the last months rent at the very least. Than we would see them at a property managed by the same company owned by another landlord.

This is where we stopped and where we began to learn that higher dollar rents generally brought higher dollar tenants

someone i know suggested requiring a security deposit equal to the monthly rent will help keep the undesirables out.

I kind of fell into it. I bought a condo in the warehouse district as a second home. After owning it for a few months someone approached me letting me know how much rent I could get from the movie people that are in town filming lately. I jumped at it and have had no issues since. Though it sucks not to be able to use it, especially for weekends like this one with the final four in town, the rent I'm making is doubling the mortgage. I have someone working on Tarantino's Django movie right now.

I'm actually looking to buy another one right now because of the way this has worked out. However, I'm hesitant to extend myself in case these tax credits ever go away.

Before you bought your second place was the mortgage on your primary residence fully paid off?

quote:

---

Before you bought your second place was the mortgage on your primary residence fully paid off?

---

If you are talking to me the answer is no. With rates as low as they are I saw no need to pay off my mortgage on my primary home as my financial advisor is doing better than the rate for whick I am locked. (I talk in past tense because I am building right now so it is currently on the market)

However, my condo is financed as a business loan and is in the form of an llc. As a result, it is at a higher interest rate with a 7 year arm. I am separately and conservatively investing about 15-20k annually in case the interest rate increases at the 7 years. This way I can pay it off if its the smart thing to do at the time.

I have a partner. The LLC was originally formed for that reason. My bro in law is a real estate attorney so I had him draft the articles of incorporation. Purpose was just to protect each of us and detail what happens with the unit in case of certain situations. (ie. one of us doesn't pay, one of us dies, etc)

Now that we are renting it I'm glad its in an LLC as well for obvious liability reasons.

The LLC is a great idea. Keeps the liability limited to just that particular property. You need one LLC for each.