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Old 03-05-2004, 10:03 AM
Jenna's Avatar
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Do you own investment property?

Hi ladies,
My DH and I are very close having our mortgage paid and we are considering the purchase of another house as an investment property.

Do you own properties that you don't live in? We are not looking to become rich in any way. We are actually hoping to keep the rent down, so we can give a leg up to one or more couples just starting out. It was a struggle for us when we first got married and then we had a baby and things were very difficult financially.

Do you think it is a smart thing to consider being a landlord? We aren't sure right now. You hear horror stories from others, but we don't know how it would be to actually experience it.

I would love to hear your opinions and advise!

Thanks so much for your help,
Jenna
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Old 03-20-2004, 04:53 AM
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When I had my real estate license I purchased a small trailer on a nice spot of land specifically as a rental. I was leery at the time, myself, but the price was so good I figured it was worth the land investment at least.

Well before I even closed papers I had a lady contact me that wanted to rent it. Now 8 years later it will be paid off in two more months and the SAME lady has been there all along.

She has gotten behind a time or two in rent, but overall we have been very blessed. My husband has only had to make minor repairs and she has taken very good care of it. She LOVES the property and treats it as she would her own (planting gardens, etc..)

So for us it has gone well

I would recommend a good lease agreement. Ours stipulated that rent was due on the 15th, and that after the 20th a late fee would be added ($25.00).

Also, we required a $250.00 deposit with first month's rent (we rent this for $350.00).

Our mortgage on the place was $250.00 for 8 years, so the other hundred we used to pay taxes, make repairs, etc..

Another thing we did was every Christmas send her a card with a coupon to use for $50 off rent one month to thank her for paying promptly.

Good luck! This is now one of our primary ways to cover our son's college expenses he'll have next fall.
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Old 03-20-2004, 07:30 AM
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Rental Property

Jenna,
My DH and I have 2 single family houses that we bought several years ago and rent out and we are extremely pleased with the results. We did this AFTER we paid off our own mortgage. I highly recommend it but I also recommend that you learn as much as you can BEFORE buying anything. wwww.Mrlandlord.com is a great learning tool and so is "Real Estate Investing from A to Z" by William H. Pivar which you can get from the library. Good luck and don't be discouraged by negative comments envious people might make (this happened to us).

Mari
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Old 03-20-2004, 08:11 AM
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Another alternative

Rental property doesn't just have to be property someone lives in. If you have the opportunity, investigate what kind of income you could expect off rural pasture and field land. There are any number of farmers looking for more pasture land that they can run stock cattle on (make sure it has some type of water on it) or pasture land that has a hay crop on it.

Another long term investment would be buying up acreage that is undeveloped. We recently paid more than $3,000 an acre for 19 acres of rural pasture and pond and wooded/timber that we will use for cattle, but is also close enough to a subdivision that if we choose to sell, the price will be much higher than what we paid for it.

Doesn't cost you anything to see what a real estate agent has for sale in areas where you are that is not ready for occupancy by tenants but would be very attractive to farming groups.

Also keep an eye peeled for foreclosures or land through auctions. If you can keep a cool head during the process, these types of sales can be real bargain.
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Old 03-20-2004, 09:11 AM
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I used to be a landlord, and I am quite happy not to be anymore. My first mistake was having property 1500 miles away from me (where my family lived, but I didn't any longer). That made it so much harder to take care of problems that came up or even try to collect rent. I had 3 renters over about 9 years--two were pretty good about taking care of the property, one not as good. I did have trouble collecting rent occasionally (and charged a flat fee if they didn't pay by a certain date).

Also, because I was far away, I had to go back and check things out occasionally--and invariably I found significant problems that would have been easy to solve if I caught them early, but much more costly since the renters didnt' tell me and they grew into big problems. Also, since it was where my family lived I originally thought it would be a good way to write off some of my trips there, but my time with my family was often spent trying to take care of rental house issues (rather than burden their already busy lives with it) so time I planned to spend with my family was compromised.

Bottom line, I probably wouldn't do it again--I didn't like being the bad guy threatening eviction when they were months behind on rent (it was a house that rented for $650/mo) and they always had a good reason why they were behind--it just didn't get me the money any faster. And actually evicting someone (varies by state) but it can take a long time and alot of work.

Also, I didn't like the panic calls late at night that something was flooding or terribly wrong--because I wasn't close enough to check it out. But also, I'm not sure I would have wanted to drag myself out of bed or away from work to see if it was really as bad as they describe and get it solved ASAP.

However, I do have other friends with rental property and many have had very good experiences (with local properties). Just make sure you charge enough deposit to cover damage and get a place that would be more likely to keep renters for a longer amount of time--rather than something too low-income that would be subject to renters that were just scraping by--thus a higher risk for not paying bills and needing eviction. Also, I'd suggesting buying something that is already in a state of good repair--unless you or your family members are quite handy and able to do it all yourself--otherwise it can get expensive.
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Old 03-20-2004, 09:42 PM
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No! No! No! My husband and I just got out of the rental business in December, after losing $10,000. You have to be tough to be in this business or people will take advantage of you. We also fixed up a house to sell at a profit. Well that really didn't happen. We sold it on a land contract and the people took off in the middle of the night. It took a long time to find them so we could foreclose. We also started this when my second child was born. And now we have four. My husband would have to go over after work to mow lawn or other maintenance. We just don't have the time for this. We got into it because we feel that we were being greedy, a need for more stuff. Well we learned our lesson, and are still paying for it. God spoke loud and clear. Sorry that this is so negative but if I had a chance to change one thing in my life, this would be it.

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Mom to Emily (12), Becca (7), Holly (3) and Will (1)
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Old 03-21-2004, 06:04 AM
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Thank you so much for your advise, everyone!

Dh and I have been reading books that we took out of the library on the subject. One of them was "Real Estate Investing from A-Z", thanks Mari.

After much prayerful thought and educating ourselves, we have decided that this idea is really not for us. We are trying to think of other ways that we would be able to help others, now that we won't have a mortgage payment.

Mari, we have been quite reluctant to discuss the fact that our mortgage is almost paid for. I have seen the reaction of others when my parents paid off their home. It was only 12 years after they bought their home and some people seemed genuninely happy for them. However, there were those who were angry.
I don't want to have to deal with that! I think this will be our own little pleasure. My immediate family knows, and we are going to keep it that way.

Thanks again, I appreciate your help very much,
Jenna
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Old 03-21-2004, 06:52 PM
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Investment Property

Congratulations on paying off your mortgage. I've been listening to Crown.org's program called Money Matters. They recommend it is prudent to have at least three? months expenses set aside for emergencies such as being layed off, illness, etc. I'd set aside a little nestegg before venturing into purchasing real estate. I'd also take this opportunity to pay off any credit cards starting with the ones with the highest interest.

As far as the house goes my recommendation would be to research, research, research. If the property you are considering is already a rental, there has to be a history. Interview both the tenants residing in the property and previous tenants. Check out the location for other rentals and talk to the renters and owners. Check with the police on the area the house is in and if there have been problems at the house or in the area. Have the property throughly inspected for possible hidden defects and upcoming repairs (especially major ones). Check with your accountant to see how it fits into your budget. Also, remember the tax deduction you had with your home isn't the deduction you'll have with the rentals. The best rule of thumb is to take your time, keep a pencil on hand for all the questions you are going to have; and research before you sign. Real Estate classes might be worthwhile if you are going to invest in more than one property. It will alert you and answer many questions. Time is on your side. ;-)
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Old 03-22-2004, 06:08 AM
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Thanks for the advise, vm miller!

We have been following Suze Orman's advise for a number of years now. She recommends at least 8 months of expenses, since it is taking about that amount of time to find a new job, in the case of job loss. We have no credit card debt, car loan or anything else, so it should be relatively easy to save 8 months of expenses. Once we have done that, we will reevaluate this situation. It isn't looking like we will be going into real estate though. I think we will just take it slow and consider all options. We have spoken to aquaintances we know who have done this and the pitfalls seem overwhelming. We don't want this to be a full time job.

Jenna
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Old 03-22-2004, 07:23 AM
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shocking Renting

My grandparents own two houses and a mobile home that they rent out and the money comes in really handy for them, they are older so we now take care of these rental property's for them. We have some trouble finding good renters who will pay on time and our rent rates are cheaper than anyones elses around. We have had good renters and bad renters, but overall it has still been a good source of income for them, just get a good contract, make sure you get a deposit and first months rent up front, I definantly agree about the late fees it does help with most of the renters. You will have to count on wear and tear, they usually do pretty good cleaning but you still have to go in and clean the oven /refrigerator, we always clean the carpet, and we have repainted several times due to kids writing on walls, or just regular wear nd tear. I would keep the money you make at least for the first year in an account to replace, heating/cooling equipment and appliances.
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