Anyone here revenue property?

dfranks
dfranks Posts: 207
edited March 2008 in The Clubhouse
We are in the process of purchasing second home to be used for rental income. Anyone have any hints or suggestions of things to look out for?

I have owned rental property before (rented out basement I lived upstairs)
So I am aware of all the rental laws and plan to follow them to the Tee.

It is a thrilling and scary process all rolled into one right now.

thanks in advance
Post edited by dfranks on
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  • pearsall001
    pearsall001 Posts: 5,065
    edited March 2008
    dfranks wrote: »
    We are in the process of purchasing second home to be used for rental income. Anyone have any hints or suggestions of things to look out for?

    I have owned rental property before (rented out basement I lived upstairs)
    So I am aware of all the rental laws and plan to follow them to the Tee.

    It is a thrilling and scary process all rolled into one right now.

    thanks in advance

    I have four rental properties in Philly. Not in the greatest neighborhoods but the rent is substancial for my outlay. I'm turning a nice profit every month.

    I couldn't be bothered with the whole rental bit, so I have Re-Max as my property management. I give up 6% of the monthly rent but it's worth every penny. They handle everything from advertising the property, showing the house, proper credit checks, minor repairs, water bills, etc. & just make my life a whole lot easier. Nothing like a check showing up in my mail box every month.

    The renters don't know me from atom & that's the way I like it. No phone calls at 3:00am complaining about a clogged toilet here!!!
    "2 Channel & 11.2 HT "Two Channel:Magnepan LRSSchiit Audio Freya S - SS preConsonance Ref 50 - Tube preParasound HALO A21+ 2 channel ampBluesound NODE 2i streameriFi NEO iDSD DAC Oppo BDP-93KEF KC62 sub Home Theater:Full blown 11.2 set up.
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  • tonyb
    tonyb Posts: 32,951
    edited March 2008
    Just make sure the rent you are able to get can cover your cost on a monthly basis plus a little extra for repairs and times that it may be vacant.
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  • ohskigod
    ohskigod Posts: 6,502
    edited March 2008
    Look up how you handle the income tax stuff just so you know. Rental Income, whats a capital improvement (changes cost basis when you sell), repair (write off loss on the rental income schedule [a?,,not sure, my software does it automatically] ). Also, dont forget to depreciate. when you sell it, you will have to reduce your cost basis for depreciation wether you actually take it or not yearly (little fact I learned last year). Its actually a wonderful write deduction on the rental income schedule.


    I had one for 2-3 years. rented my parents house when my Dad passed. it was a pain in the **** and factoring everything in I wasnt making a profit. Renting it to friends was also not the best decision I ever made..LOL. Dont rent to anyone you know well, DO NOT MAKE THE MISTAKE I DID. its a sh*tty situaltion for all parties no matter how hard you try.

    sounds like Phil's management plan is frikkin wonderful, but I am assuming you might need multiple properties to make it worth it (???) Luckily for me, I sold when the market was soft, but before it REALLY got soft.
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  • bdaley6509
    bdaley6509 Posts: 1,167
    edited March 2008
    I held on to our starter home and got lucky. We've had the same original, on-time paying renters since day one. That being said, I HATE hearing from them. It doesn't happen often, but when it does, I know it's going to cost me. I signed up for American Home Shield Warranty, and that covers most of the expenses when things break. AHS already paid for a new H2O heater and A/C unit last year alone. Worth the 300 bucks for the warranty IMO.
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  • amulford
    amulford Posts: 5,020
    edited March 2008
    bdaley6509 wrote: »
    Worth the 300 bucks for the warranty IMO.

    No ****. Gotta link???
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  • bdaley6509
    bdaley6509 Posts: 1,167
    edited March 2008
    amulford wrote: »
    No ****. Gotta link???

    http://www.ahswarranty.com/
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  • CAvolleyballguy
    CAvolleyballguy Posts: 156
    edited March 2008
    Already been said.

    property management company.

    make sure you have at least a slight positive cash flow.

    make sure before you purchase, check the vacancy rates in the area if available, if you have a friend in rental property real estate they can get the data for you...

    from there you can figure out your true cash flow... ie. if you charge 2000k per month, you cant figure 24k per year in gross rev, if the vacancy rate is 1.5 months per year on average your real gross will be 21000. if your total bills are 22K, you need to keep looking or drive down price or raise rent price to make a small positive cash flow work, but if you raise rent, your vacancy rate will be higher.... hope it helps

    Good for you...

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  • dfranks
    dfranks Posts: 207
    edited March 2008
    I like doing my own maintnance, and I am skilled tradesman, so I would probably pass on the management company for now. I have done the math with what it is currently rented for and right now it will not cover mortgage/taxes. The same renters for 8 years up and 3 yrs down. They are also aware that I am upping the rent to the going rate for this area and # of bedrooms.

    I am not concerned about vacancies as there is currently less than a 2% vacancy rate in our city and good rental's are hard to come by.

    If all goes well the property will just break even and that is fine with me considering our house prices are going up 10-15% per year here with all the demand.
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  • SKsolutions
    SKsolutions Posts: 1,820
    edited March 2008
    Hire a local pro to help with the purchase. Even if you do your own maintenance, it's unlikely that you will have enough positive cash flow to pay a management company. Your vacancy and appreciation rates are similar to the ones in my area. Low vacancy, and high demand usually mean low cap rates. You can't pay a 6% fee on an 8% cap rate property. Here in metro-Boston, you usually lose money for the first few years, unless you know the rents are below market, or know of ways to maximize the potential.

    You must be buying in a very solid area, with great upward potential. You make less at first, but it's the best long term investment. You can always condo later.

    Be sure to check your /.gov site, and check the rules and statues of tenancy. Some states are VERY tenant friendly. CA, and MA are among the worst, or best, depending on your view. Congrats, and good luck.
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