Your tips for investment property?

Hello all. I've been kicking around the idea of parking some investment money on real estate for income purposes. That is buy the property and have our local property manager rent it out and handle tenants, etc. However, I've pretty much only bought and sold real estate for my own home. As such, I've started to read some books and sites geared toward investment properties.

Anyway, I'd imagine there are some veterans on the board that could provide some dos and don'ts to someone new to this. If you've got any tips, I'm all ears.

Thanks much.

 

I have been a small-time landlord (1 property) since 2007. I honestly wouldn't go with a property management firm unless you can absolutely trust them. I've read too many horror stories of PMs just throwing in warm bodies and the owner's having to pony up $$ to evict and repair after the deadbeats left.

At the very least you should run your own property for a year or so. This will give you some time to get to know the business better and just help you find a PM later on.

The single biggest piece of advice I can give you is to screen, screen, screen. Set up some requirements for renting a property from you and stick to them. Do not let someone worm their way into your house without meeting all of your qualifications. Unless you like spending time down at the courthouse trying to get deadbeats out.

Good luck.

 

Thanks DivvyDiv. Fortunately I know of a good real estate office/property management firm who I've dealt with them for about a decade. We bought our last home with them and I lease commercial space for my office through their company. Straight shooters all around.

Agreed, though, my biggest concern is getting a nutcase tenant in there that trashes the places and/or causes legal headaches. In talking to my main contact at the aforementioned land company, I asked them about tenants once. He said, in his experience, about 97% are just fine and you never hear from them except to drop off a rent check. The other 3% are a nonstop 24/7 problem. I'm not sure where he got the figure, but he's been in the business a long time.

Out of curiosity, what screening do you do for your property? I'm sure credit, criminal, and employment check would be standard, but what beyond that?

 

One of the biggest concerns with an investment property is the type of tenants that you get. I agree with DivvyDiv that screening is one of the most important tools that you have as a landlord to limit or manage your risk. As stated by yourself credit, criminal and employment checks need to be completed for any potential tenant. In addition it is always a good idea to get references from at least 2 prior landlords that the tenant rented from.

 

Mainly credit / income. I want to make sure that they can afford the place. The checks I run also come back with criminal history and judgements, but I've never had one come back with anything on it. I do list that I screen on the info sheets, so I'm pretty sure most crooks self-screen and go to other mom and pop landlords that don't.

 

I was thinking of buying a small apartment and renting it out. Just be very careful to calculate all of the costs associated with renting it, these obviously depend on where you live but there is always some upkeep fees, taxes, certain reparations which will have to be made sooner or later, if you use a property manager he will of course not be free etc.

I did the math with a couple of apartments in the city which I was looking at. Turned out to be a roughly 2-3% yearly income, that is with nothing allocated towards the reparations and with a calculation that the apartment will be rented out for full 12 months per year. I decided to step away and just keep pushing money to the stock market, the profit/risk ratio just wasn't worth it with these apartments.

 

Thanks Divvy, this is something I have been considering doing but on a small scale. It might be something as limited as a duplex or three family until I see how it works.

 

I have been reading some horrible stories about tenants and at this point I am not considering buying rental property. Maybe down the road but I don't think I would even rent to my own family!

 

It's a big risk. You never know what your tenants will do to your property.

 

I was once firm on doing this sort of thing but recently I have been seeing accounts of some real horror shows. I would buy either a two or three family dwelling but don't want to end up stuck with the tenant from hell since I would be living there.