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rental properties
Posted on 7/14/09 at 7:28 pm
Posted on 7/14/09 at 7:28 pm
Anyone have experience with owning rental units/properties? I want to learn more about the market in the BR area. I want to get in the "game." Thanks for your time.
8
Posted on 7/14/09 at 8:07 pm to hedgehog
I think it would be more trouble than it is worth. I also wouldn't want my extra cash tied up in real estate anytime soon.
From a personal experience, my dad owned a trailer park growing up (he just leased the lots to people who owned trailers/he didn't actually own the trailers). His only maintenance was cutting the grass. The only problem he faced was when someone didn't pay rent, it was hard to evict them because they didn't have the cash to move their trailers.
From a personal experience, my dad owned a trailer park growing up (he just leased the lots to people who owned trailers/he didn't actually own the trailers). His only maintenance was cutting the grass. The only problem he faced was when someone didn't pay rent, it was hard to evict them because they didn't have the cash to move their trailers.
Posted on 7/14/09 at 8:09 pm to hedgehog
Yeah, I've done that. Only advice I can give is be prepared for it to consume your time if you have more than a few units. You won't believe what tenants will expect you to do or the time of day (or night) they expect you to do it.
Good luck!
Good luck!
Posted on 7/15/09 at 8:56 am to hedgehog
quote:
Anyone have experience with owning rental units/properties? I want to learn more about the market in the BR area. I want to get in the "game." Thanks for your time.
Used to rent a house. It was a nice property in a good area and the rent was high enugh to attract people who weren't likely to tear the place up. Goals were positive cash flow, tax loss most years, and appreciation along with the equity that would grow. I was confident that home prices would go up at that time, and made money when I sold the house.
You would want to be confident that prices in the type of unit you're considering will go up. That may be hard to find at this time, but they're out there. If you're young enough and skilled enough to do most of your maintenance yourself, that's a plus.
Posted on 7/15/09 at 9:18 am to Old Smokey
quote:
If you're young enough and skilled enough to do most of your maintenance yourself, that's a plus.
+1
If it is an older place that will need maintenance and you are calling a repair service out there for every little thing, all of your profits are going to be eaten up by repairs. If you have the time and the skills to do this yourself it will definitely help out.
Posted on 7/15/09 at 9:39 am to hedgehog
I just cant figure out who rents houses in the BR market. Rent on a 1600 sq foot house seems to be running close to 1800 a month. Who would want to pay that? Thats the main thing that has kept me in an apartment. If Im going to throw money at rent I will at least not do it at almost 2X the cost of what the mortgage would be on the place. I have seen many markets where it makes more sense to rent but BR is not one of them.
Posted on 7/15/09 at 9:44 am to Catman88
I knew many people in college that rented 3-4 bedroom houses for rent in that range. They would each take a bedroom and split the rent worked out nice for most of them.
Posted on 7/15/09 at 10:11 am to Catman88
quote:
If Im going to throw money at rent I will at least not do it at almost 2X the cost of what the mortgage would be on the place.
You are trying to compare the cost of a mortgage note to the cost of rent as being apples to apples when they aren't even close.
Home ownership costs include
1.closing costs
2. maintenance
3. taxes
4. selling expenses
5. eta Insurance
None of these costs come into play if you rent.
If you need a house for a year or two, renting is usually the better financial choice even with the higher rent payment vs. note payment b/c of the reasons listed above.
This post was edited on 7/15/09 at 10:21 am
Posted on 7/15/09 at 10:11 am to bayoudude
Yea I guess it makes sense for college students but even then... Makes more sense for someone to buy the house and have lower payments and to turn around and sell it in 4 years with a profit in most cases. But for the avg starting family or any family in BR doesnt make much sense to rent a house unless you really dont want to pay for maintenance but hell its still cheaper to pay for maintenance here.
Posted on 7/15/09 at 1:37 pm to Catman88
a 1600 sqft house in Springlake off bluebonnet goes between 210k-250k the mortgage payment there would be between 1300 and 1700 with taxes and insurance. Sounds to me they are probably close to breaking even with maint and such maybe even losing some depending.
I plan to rent my townhouse in Lake Beau Pre in the near future. Rent for my size unit is about $350 more a month than my mortgage payment so it seems to be worth while. I have noticed that they don't stay empty very long so on the surface it seems like a good plan. More research will be done before I do this, In the end I may just sell it though who knows.
I plan to rent my townhouse in Lake Beau Pre in the near future. Rent for my size unit is about $350 more a month than my mortgage payment so it seems to be worth while. I have noticed that they don't stay empty very long so on the surface it seems like a good plan. More research will be done before I do this, In the end I may just sell it though who knows.
Posted on 7/15/09 at 1:43 pm to hedgehog
My mother owns a 4plex and the maintenance is pretty constant. It's an old place with no/minimal amenities.
One month she is happy, the next she wants to sell it and forget it. Vacancies are the worst for her.
One month she is happy, the next she wants to sell it and forget it. Vacancies are the worst for her.
Posted on 7/15/09 at 1:45 pm to hedgehog
quote:
rental properties
Anyone have experience with owning rental units/properties? I want to learn more about the market in the BR area. I want to get in the "game." Thanks for your time.
My dad owns a 28 unit complex near LSU...I managed the property while I was in school at LSU. Basically pays out over 150K per year in profits. Just remember that real estate prices are a function of rents. Figure out what percent return you are looking for and then price some properties according to this return. See where people are asking relative to this analysis and make an offer accordingly.
Posted on 7/15/09 at 1:48 pm to rcocke2
It's not a bad play in the current market to make a business out of renting. If you can find something paying out 8% or more, I would seriously consider it.
Posted on 7/15/09 at 1:49 pm to hedgehog
I am getting burned on my duplex in a historic section of Baton Rouge, FWIW. Has been a lot of pain. I would have been better off getting a part time job at McDonalds instead. I'm going to turn it into a single family in 4 or 5 months though and move into it, so I'm not too peeved.
Posted on 7/15/09 at 1:54 pm to JFremani
The people that I know taht are making money of of rentals own older homes that were aquired through family deaths and have been paid off for a long time. Having to pay a mortgage plus worry about maintenance would not be my ideal rental property situation.
Posted on 7/15/09 at 2:00 pm to bayoudude
quote:
The people that I know taht are making money of of rentals own older homes that were aquired through family deaths and have been paid off for a long time. Having to pay a mortgage plus worry about maintenance would not be my ideal rental property situation.
Why fool with rental property if your money only returns you, say, 5 or 6%. That is why you don't buy something unless you get a great deal. If you do find a great deal and can clear 8,9,10% returns then you have a good use for your money there. I would continue to wait in the current market. Prices of real estate should, for the most part, be a function of rents.
Posted on 7/15/09 at 2:05 pm to rcocke2
quote:
My dad owns a 28 unit complex near LSU...I managed the property while I was in school at LSU. Basically pays out over 150K per year in profits.
That complex is paid for already, to be making that sort of money.
Posted on 7/15/09 at 3:03 pm to JFremani
quote:
That complex is paid for already, to be making that sort of money.
It was purchased years ago with cash, then remodeled. So no, there is no debt. Also, it is taxed at the rates from years ago. It was such a steal at the time.
Posted on 7/15/09 at 3:33 pm to rcocke2
quote:
The people that I know taht are making money of of rentals own older homes that were aquired through family deaths and have been paid off for a long time.
quote:
It was purchased years ago with cash, then remodeled. So no, there is no debt.
In both of these situations one would have to look at alternative investments to see if they really are making anything vs. what they would have made simply in interest had they put that $$ in the bank.
If you have an apartment complex worth $5MM and it is making you $150K a year you'd be better off just taking that $5MM and putting in the bank earning 4% interest ($200K+). No stress, no payroll, no lawsuits, just $200K a year.
Posted on 7/15/09 at 5:03 pm to hedgehog
What is it you are trying to accomplish with this particular investment strategy, and are you liquid enough to where you are not using bank funding?
The valuation on an income basis is a simple Rate of Return / Present Value of Discounted Cash Flow Stream Calculation. You need to be careful with respect to location and the sensitivity to rental rate market conditions. Tons of people were burned during the mid 1980's when RTC dumped the mass of investment properties in the open market. You most likely do NOT want to end up in a distressed section 8 marketplace and having to deal with HUD or any other municipal / government entity for tenants or rental supplements. Given the uncertainty in the real estate markets and the Obama Bail out everyone craze going on right now, this would be a valid concern in underwriting.
When looking at the terminal value of the property at the end of the rental stream, make sure to be conservative. Most underwriters discount investor properties to 20 / 30 % max @ termination. Tenants tend to destroy everything possible.
I will say if done correctly, real estate is a great way to insulate yourself from hyper-inflationary market conditions. Given the current borrowing rates, It could be a great mid-range / long term Investment. - Good Luck
The valuation on an income basis is a simple Rate of Return / Present Value of Discounted Cash Flow Stream Calculation. You need to be careful with respect to location and the sensitivity to rental rate market conditions. Tons of people were burned during the mid 1980's when RTC dumped the mass of investment properties in the open market. You most likely do NOT want to end up in a distressed section 8 marketplace and having to deal with HUD or any other municipal / government entity for tenants or rental supplements. Given the uncertainty in the real estate markets and the Obama Bail out everyone craze going on right now, this would be a valid concern in underwriting.
When looking at the terminal value of the property at the end of the rental stream, make sure to be conservative. Most underwriters discount investor properties to 20 / 30 % max @ termination. Tenants tend to destroy everything possible.
I will say if done correctly, real estate is a great way to insulate yourself from hyper-inflationary market conditions. Given the current borrowing rates, It could be a great mid-range / long term Investment. - Good Luck
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