landlord 101

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diymirage

diymirage

HP@idle > hondaHP@redline
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i know i asked this a few years ago, that situation fell through but it looks like i might become a landlord here before the years end

this is my situation, i picked up a little property earlier this year and i have been fixing it up with the intend to sell for a profit
but the more i think about it, the more it makes sense to me to keep it and put a renter in it

i can then take out a mortgage on it to liquify it, use those funds to build the next one and have a tennant pay the mortgage


so, what do i need to do as a landlord to protect myself?
what are the do, the donts and the big no-no?
anything to stay clear off, or any way to attract "good" renters?


the property is a 3 bedroom 1 bath 1100 square foot home
 
Ask high enough rent that the "bad renters" can't afford. I wouldn't be a landlord for any amount of money. People get in that you can't turn away and you can't get them out. They destroy your property and you have to pay to rebuild it. Good luck.
 
toolmanmike said:
People get in that you can't turn away and you can't get them out. They destroy your property and you have to pay to rebuild it. Good luck.
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thats a real concern

ive been watching the tax sales (you know, people dont pay their property taxes so the government takes their house) quite a few of those are still occupied, makes me wonder if they werent rental that just cut their losses

i know there are companies that act as intermediates, you just supply the building and they put in the renters and deal with them
i wonder if that might be a good investment?
 
Don't do it, just don't do it. Mike got it right. If you love spending money and rebuilding it every 3 months to a year.
 
Start a LLC. Karrin and I did exactly what you are starting. We ended up with 8 rentals and flipped a couple homes. Here is the rub...You have to profusely screen your renters...make sure they have references and check them including employment references. We had 3 bad experiences that almost pushed us out of the business, but we got through it. We bought 2 small properties for cash really cheap. Our first one was a 2 bedroom on a good lot for 18 K. It needed a ton of work, but we buckled down and got it done while both working full time jobs with overtime. We paid cash for the second one with our overtime and the rent from the first one. (We never financed anything) The windfall at the end when you sell all the homes is what really makes it all worthwhile. Use the rent for supplemental income and for your LLC and try not to finance anything! Don't comingle keep that business separate from your personal finances except when you add to the business from your earnings. Bite the bullet and don't take any away. We have one house left and ironically it is the first one we started with. We are selling it no money down to my wonderful cousin's son. This house has paid for itself 5 times since we started. It's no cakewalk but it's worth every minute of it in the end.

Ill give you a short version of the worst...We had a "professional squatter" with good references (fake) move into this 18K home. She had 2 girls. She paid the first month's rent and security deposit, and we waived the last month's rent in good faith as it was month to month anyway. That is the last dime we ever saw. We took her to court several times and a sympathetic judge overlooked her conniving in favor of her girls. We could not get her out and we were struggling as this was our first. Karrin finally did some incredible sleuthing and found out she was on a full state aid package from Indiana but was living for free on us in Illinois. She had a phony P.O Box in Indiana. Karrin turned her in to the Indiana authorities and she had to move back to Indiana to get her free ride on the taxpayers.
 
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I have had rental houses for close to 40 years. The environment has changed a lot. Everybody has bad credit now. It is a hard business, but you can make a lot of money. As said above, picking renters is the key. Go visit where they live before you rent to them.
 
This was an eviction some years back, up the street. A real bunch of idiots. Loose dogs, lots of junk cars a constant stream of people and animals. This was taken from Bing maps

This duplex now has two good families living in.

eviction.jpg
 
Pay attention when reading Jeff Adler's post...Notice he never had a mortgage? Yeah.. Where would he be if he'd had a mortgage when Miss "Professional Squatter" showed up???
I "had" a rental.. what a PITA.. I've been a renter, I never treated someone else's property like my rental was treated... Selling it was the best thing I ever did... Thank God I sold it before Covid when the government decided paying rent was optional..
 
We had some rentals. Looking back the stories seem comical. At the time it wasn't the least bit humorous. Timberland pays better out here and the taxes are less.
 
1WildRT said:
Pay attention when reading Jeff Adler's post...Notice he never had a mortgage? Yeah.. Where would he be if he'd had a mortgage when Miss "Professional Squatter" showed up???
I "had" a rental.. what a PITA.. I've been a renter, I never treated someone else's property like my rental was treated... Selling it was the best thing I ever did... Thank God I sold it before Covid when the government decided paying rent was optional..
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thats a great point

the thing of it is, i only see two option to move along here

i can sell it (hopefully for a profit) and build the next one, and keep snowballing like that

or, i can put a renter in it, pull a mortgage and use the mortgage to build the next one while the renter pays the mortgage

option two should be the one with the most income potential...but of course, higher yield = higher risk
 
1WildRT said:
Pay attention when reading Jeff Adler's post...Notice he never had a mortgage? Yeah.. Where would he be if he'd had a mortgage when Miss "Professional Squatter" showed up???
I "had" a rental.. what a PITA.. I've been a renter, I never treated someone else's property like my rental was treated... Selling it was the best thing I ever did... Thank God I sold it before Covid when the government decided paying rent was optional..
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We had a guy that I worked with that was a well-paid supervisor. He had a dog and a few month old newborn and a one other child. We rented him a 3 bedroom on a nice double lot with a one car attached garage. This was our second. It was a repossessed HUD home that we spent months rehabbing. It was pretty damn nice when we rented it out. We had no huge problem getting the rent but Mike suddenly informed us they had bought a home in a small town a few miles away. When we went to inspect our house for repairs for the next renter we found out why he moved. His dog had fleas it was summertime when white tube socks were popular. (What ever happened to that? LOL) We went into the house and in a matter of seconds my socks were dark brown from fleas. Complete infestation. Then we found 12 55 gallon plastic drums behind the garage full of used diapers with urine and baby **** and household food garbage filled on top with rainwater. He stopped his rural garbage pickup! He refused to talk to me at work and go clean it up. We bombed the house and crawl space multiple times and got rid of the fleas. I was especially pissed about the fleas because we completely renovated the crawl with construction grade plastic covered with pea gravel, new plumbing and lighting. It was a nice tall crawl space and this made it easy to work on and no dirt or sand. We also insulated down under to keep the bills down. I found a guy in town with a skid steer with the barrel claw attachment. I took the day off and he loaded my mom's farm truck 3 times with the barrels. I strategically backed up into Mikes driveway at his new place and did hole shots until all the barrels full of **** where in his driveway. While I was there I noticed his dog was in a nice new kennel outside.
 
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diymirage said:
thats a great point

the thing of it is, i only see two option to move along here

i can sell it (hopefully for a profit) and build the next one, and keep snowballing like that

or, i can put a renter in it, pull a mortgage and use the mortgage to build the next one while the renter pays the mortgage

option two should be the one with the most income potential...but of course, higher yield = higher risk
Click to expand...
your age will make a big difference here as the younger you are the better. There are also a lot of tax advantages to doing this. If you must do a mortgage try and make sure your payment is 1/2 the rent. You can also look into the foreclosed HUD homes in your area. You will probably not qualify for a HUD unless it has already been foreclosed on. (if that is still a policy. We did this a long time ago). The interest on a mortgage will defeat the purpose if you are going dollar for dollar unless you have a good chunk of down money. Thats all I have good luck. This can be a retirement enhancement if you play your cards right.
 
jeff alder said:
your age will make a big difference here as the younger you are the better. There are also a lot of tax advantages to doing this. If you must do a mortgage try and make sure your payment is 1/2 the rent. You can also look into the foreclosed HUD homes in your area. You will probably not qualify for a HUD unless it has already been foreclosed on. (if that is still a policy. We did this a long time ago). The interest on a mortgage will defeat the purpose if you are going dollar for dollar unless you have a good chunk of down money. Thats all I have good luck. This can be a retirement enhancement if you play your cards right.
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im 41, but i dont think you're looking at this right

the mortgage would go on the place that we own free and clear now
it would only free up the equity that we have in the house now, to build a new one
 
diymirage said:
im 41, but i dont think you're looking at this right

the mortgage would go on the place that we own free and clear now
it would only free up the equity that we have in the house now, to build a new one
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gotcha...You are correct I thought you meant mortgaging the rental. I read post #1 wrong. I hope these real life's experiences help you though.
 
1)Sell house.
2)Buy raw land with timber
3)Remove timber for thinning/home site
4)Get home site approved
5)Sell acerage with approved home site

Trees don't pay the rent late. Raw land won't be calling you at 3:00 in the morning because the toilet backed up during their house party.
 
Rule #1- NEVER rent to friends, family or acquaintances.

#2- ALWAYS follow through if the lease is violated in any way. Late rent gets a 3 day eviction notice on our properties.

#3- Have a great, ironclad lease. Include a "survivability" clause to make sure a judge can only throw out portions of the lease and not the whole thing.

#4- Review your lease at least annually, and any time a "trigger" occurs. The last clause we added was "tenant must report any and all fires to landlord within 24 hours".

#5- Make sure your security deposit is appropriate but not outlandish.

#6- Thoroughly research what is and is not legal in your state, and word the lease accordingly.
 
I had a rental house for 6 months. I bought a new house and figured I'd "clean up" renting the old place. I cleaned up alright. They trashed the house and when they moved out I sold it. I could completely rebuild the place every 6 months.

A friend of mine has multiple rentals and has for years. He said when someone applies for the rental, they are always the third inquiry. That way when you don't rent to them they can't sue you for discrimination. "Hey, I rented to one of the first two there before you."

Also he always pulled a credit report on a potential renter, and then asked them what he could expect to see.

Number 5 above, the appropriate security deposit, make the deposit not as much as the rent. That way when the lease is up or when they want to bail, they can't say, oh we'll just not pay the last month and forfeit the deposit.

Good luck with all this. I wouldn't do it again.
 
#7- Have a thick skin. This is business. Some people aren't cut out for it. Don't be a dick, but have a thick skin.

#8- Be prepared. You get good renters and you get bad renters. That's "the business". Don't let one or two bad ones scare you away However, if you keep getting bad ones, it might be some other factor.

You are almost in "the sweet spot" with the property in question. 3/2 about 1100-1250 sq/ft is it. Provided it is in a good neighborhood.
High enough rent to weed out most that can't afford it, but not grand enough to attract "white glove" renters.
 
I'll just repost my response from years ago, still true.
Biggest regret, - not researching the prospect tenant enuff, NOT GOING TO SEE HIS PRESENT ABODE, knocking on the door to peek inside, to make sure it was tidy, and they actually lived there. - CUZ - - I/We were too lazy, it was inconvenient, I had more important things to do.
All very wrong .
The grief we had was because we got lazy, - and paid BIG .

We don't regret being landlords, just regret at times, we were lazy !


www.forabodiesonly.com

Any successful Landlords on here??

I may need some advice. I am in the process of buying another home and need to make a decision on what to do with my present house. Plan A is to sell it but I am preparing for Plan B in the event it does not sell within a reasonable amount of time. In the event of plan B, how does one go...
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IF, IF,IF ( I never would) have a rental house, I would find a guy as big and badass as "Mr. T" and hire him to be my enforcer!!!!!! Anyone here remember Mr. T and the A Team!!????
 
My folks had numerous rentals when I was young. It was good for some pocket change for me when they had a tenant leave. Other than that I learned being a landlord wasn't my bag. Having a regular job and spending off time on the rentals? No thank you.
 
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