Any successful Landlords on here??

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Russ H

Russ H

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Western New York, Cattaraugus County
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 about screening and selecting a good tenant? What kind of tax advantages are there with rental property.

The home I would be renting is a very nice 1800 sq ft one story home on 10 acres with 400 ft of river frontage. In this economy, I fear not being able to sell it for what it is worth within a reasonable amount of time. It is paid off and I am exploring the good/bad and ugly aspects of using it as investment property to help pay for the new home.

It would be much appreciated if anyone who is or has in the past rented property would pass on some real life experiences or advice. It will be much appreciated.

Thank you,

Russ
 
Repairs and maintenance are write-off and depreciation... more when I'm on a real keyboard...
 
Have you thought about using a property management company......let them handle the background and financial checkout of any tenants.....usually charge 10% of the rent cost.
 
I have had rental properties since 1996. With just one property I would go with a management company also but I would be researching them to make sure they actually take care of business.
 
I have a rental home.
You have to report the additional income on a 1040.
You can write off expenses such as repairs though. I am able to write off a few other expenses as well. It's going to vary depending on where your home is.
Now for all new monster, renters. You have 400' of river frontage, there is no way in hell I would rent to any one with kids. To big of a liability. But here's the cravat, you can't say "no kids".
Depending on the location, I wouldn't think selling river front property would be tough. The housing market is coming around.
I've had really good renters, have a wonderful one right now. I hope she never leaves. But I've had some turds too.
I can tell you some horror stories, but I'll just share what I learned.
1.)Make sure all utilities are in the renters name within 5 days.
2.)Renting to lesbians is the same as renting to 2 guys.
3.)No pets!
4.)No commercial endeavors or businesses on the property or out buildings
5.)No black or dark paint.
6.)No blankets to be used as window covers.
7.)No alterations to the house.
8.)Make sure the renter understands you are to be called and ok any outside repairs.
9.)Get a check list and go over everything with the new renter. If they have an issue with something they need to note it then.
10.)Don't forget #1 and #2!
Make sure you get a contract, that piece of paper has saved my butt more than once.
You have to allow for wear and tear, things like carpet and paint.
You're going to have to fix things that break. I've had to replace my furnace, water heater and other things. But you can't get excited about that. Write that off, it's a cost of doing business.
My home has paid it's self off twice now. You just have to be willing to put up with some crap now and again.
 
One big thing is if you depreciate the house when you sell it you will be paying the additional capital gains on what ever has been written off.
 
And what ever you do dont make sure you state in your adds no lesbians unless you want to be sued for discrimination.
 
I was a landlord, no longer. Still have multiple properties, but no longer rent them out.

When I was in the rental business, I found that the state usually takes the side of the tenant in any type of legal action. For example, we had a tenant that we rented an apartment to in a 2 family house. We rented a two bedroom apartment to a man and his wife, who had a 4 years old girl. The paid me the first and last months rent, up front. That was all the ever paid.
They were in the apartment for 10 months and never paid us another dime.
Further I foind out that they had the wife's parents living with them, too, and while they lived there, they also had another child.
4 adults, and 2 children living in a 2 bedroom apartment.

After the 2nd month of none payment I asked them to leave. They refused. I took them to court, and the judge said they'd have to move, but not until they found something else, as there were two children.

Finally, after 10 months (8 months of none payment), they told me they were moving.
When they did, the stole half of the kitchen cabinets, plus I had to sink nearly $6000 into repairs of the plumbing, the electricals,and the walls in the bedroom.

It took 3 years and $nearly 10,000 in legal fees to recover the damages. The were paid by his parents.
 
Frankie said:
I was a landlord, no longer. Still have multiple properties, but no longer rent them out.

When I was in the rental business, I found that the state usually takes the side of the tenant in any type of legal action. For example, we had a tenant that we rented an apartment to in a 2 family house. We rented a two bedroom apartment to a man and his wife, who had a 4 years old girl. The paid me the first and last months rent, up front. That was all the ever paid.
They were in the apartment for 10 months and never paid us another dime.
Further I foind out that they had the wife's parents living with them, too, and while they lived there, they also had another child.
4 adults, and 2 children living in a 2 bedroom apartment.

After the 2nd month of none payment I asked them to leave. They refused. I took them to court, and the judge said they'd have to move, but not until they found something else, as there were two children.

Finally, after 10 months (8 months of none payment), they told me they were moving.
When they did, the stole half of the kitchen cabinets, plus I had to sink nearly $6000 into repairs of the plumbing, the electricals,and the walls in the bedroom.

It took 3 years and $nearly 10,000 in legal fees to recover the damages. The were paid by his parents.
Click to expand...

What kind of background/credit/employment checks were made prior to renting to those individuals??
 
Suggest you do some reading here: http://landlord.com

Find a lawyer (you'll want your lease to be solid)

If you hire a management company, you can only take $3,500/year off for repairs, if you manage yourself, you can take it all (double-check with your accountant - going from memory). Even if you have 10x that much in out-of-pocket-cash-expenses - $3,500. (Yes, I'm still bitter)

If you hire a management company, manage them carefully. I got burned hard by the last management company - basically a license to steal if you don't watch them.

If you can manage yourself, you can do well. If you're looking for 'auto-pilot' income, keep looking.

My $0.02
YMMV
 
64DartGTinAZ said:
Suggest you do some reading here: http://landlord.com

Find a lawyer (you'll want your lease to be solid)

If you hire a management company, you can only take $3,500/year off for repairs, if you manage yourself, you can take it all (double-check with your accountant - going from memory). Even if you have 10x that much in out-of-pocket-cash-expenses - $3,500. (Yes, I'm still bitter)

If you hire a management company, manage them carefully. I got burned hard by the last management company - basically a license to steal if you don't watch them.

If you can manage yourself, you can do well. If you're looking for 'auto-pilot' income, keep looking.

My $0.02
YMMV
Click to expand...

Your advice is well taken.......Thank you.
 
Ive rented my basement out while I lived upstairs. The extra income and write-offs were worth it to me, BUT I lived upstairs so was able to keep an eye on the place.
Also if I ever did it again, I would ask for a criminal/record check. If they balk at it, then they dont get the place.
Also not sure if you can put a clause in the lease that if the Po-Po show up for any reason they can be turfed immediately.

Distance from where you live to the rental property may be a deciding factor as well.
 
Russ H said:
Just so long as their money is green, no problem. It's only business.........
Click to expand...
Yeah, I thought that too.
That's one lesson from the horror story column.

I also had a friend who bought a 3 story 12 unit apartment building. Had a renter who went without paying several months. the last thing this guy did before leaving was pour several bags of quick-crete down the drains and toilet. That just about broke him. everyone had to leave, and the repair was well over $10K.

But, as I said, I have had great renters. Seems like during the hardest part of the recession is when I had the dirt bags.
 
Russ H said:
What kind of background/credit/employment checks were made prior to renting to those individuals??
Click to expand...

I checked with his employer, his old landlord, and even did a criminal background check. Even checked past W2's for 3 years back... Everything said this guy should have been aces. He, and his family were not.

Even the other tenant in the building (2 family house) reported trouble with them, by the 3 month.

Back ground checks are only as good as the people reporting. This took place back in 1982. Background checks and references were verified by phone, and letters. There was no internet at the time.
 
Issue 1- Be prepared to divorce yourself from the property emotionally. It will no longer be a "home", but a rental "house", and business asset.

Issue 2- Get/write a GOOD lease. I do my own, but it takes lots of homework, and should always be a "work in progress".

* most states have a "holdover" provision, where you can charge double rent when a tenant stays past the end of the lease (which you can terminate for just cause, including non-payment), however, usually it's not worth a lawsuit unless there are thousands and thousands of dollars involved. You still have layer fees and may only get a $100 garnishment or worse such as paying a collection agency. Most states have a 3 day/15 day notice and 30 day eviction law. Send notices promptly. It's easy to lose months.

Issue 3- location, location, location. Ours is in a position between two major cities, and near the connecting highway. It almost rents it's self. Not so lots of other properties.

Issue 4- Target market. The "ideal" rental house is about 1200 sq/ft and under $1000/month (at least around here), any less rent and the quality of tenant declines, any more and the "nit-pick" factor increases ("for 1200 a month the knobs had BETTER match, and the irrigation better work, not to mention that big driveway crack and those weeds..." -is something I imagine hearing).

* I'd also be leery of renting the type of property you have for most of the reasons listed already. Another issue with trying to rent an "estate" is that you're likely to have to run empty for longer periods of time betwen tenants.

Issue 5- Management. I agree it's better to do it yourself, if you can. If you can't, perhaps rental real estate is not for you (unless you're seasoned and can micro-manage, but then what's the point?). For tax purposes you have to prove "material participation" or there are some "passive income" issues to deal with.

Issue 6- Dealing with being behind- All of your expenses occur this year. All of the tax based recovery of those expenses will happen next year. Deal with it, and plan ahead.
Expect property tax and insurance to go up by 15% per year. That can be thousands out of pocket, albeit temporarily.

Issue 7- Do your own repairs- We do as much as we can, especially when we have to "reset" between tenants. It's real easy to kill the whole year's profit by hiring out work. Sure you get some or all of it back, but you better get/keep receipts and remember, you only get it back in April, no matter when you spend it. We also set clear guidelines for what kinds of maintenance we expect/encourage the tenants to do (like light bulbs, and yard work), and what they should call us for.

Issue 8- Bad tenants- Just part of the business. Get used to it. We've had two leave under not so great circumstances, and one that was terrible. Each time, you learn something that helps with the next time. OTOH, we've had some that were GREAT. One built a paver deck (with our blessing) and the current ones painted the entry way and installed a new light fixture (again, with our blessing).

I'm sure there's more in my head, but those are what came to the surface.
My wife and I started with zero experience, and are now in year seven.
That experience was a big factor in my decision to buy the mini-warehouse buildings (now in year three), and we are currently looking for another house in the same neighborhood.
For me, the time we spend on the rentals (both the house and the warehouse) are well worth the few extra grand we get each year. I figure we spend about a week per year (a couple hours here...) on the house. Two if we have a tenant change, and I spend about a week per quarter on the warehouse (of course I'm also there working on my cars quite a bit).
 
My brother used to have a couple houses for rent.

One of them, he put a brand new storm door on the kitchen outside door. Had a tennant move in and then out after a year. The new storm door was ripped off of the hinges, they claimed that it wasn't their fault.... Really???


Another house he rented out, the tennants were "starting" to go through a divorce. She locked him out once and he tried to kick in the door and ruined the door frame. they got behind in rent and never caught up, wouldn't leave when he told them.

They moved out the day after he disconnected the cable tv....


Too many problems to deal with renters. Not worth the hassle....
 
One thing I learned from the one that cost me the most. If they look at it and tell you they have cash in hand to move in and want to sign a lease and get the keys right then is dont do it. They need a place right now tonight because they have been thrown out of their other place.
 
Take pictures of everything prior to move in.

Have new tenant walk through house and have them point out condition of items as well as you, then both sign and date a form with both parties notes.
 
Here's where I'm at with my rental property. We have been landlords for almost 3 years. The neighborhood was going south, we had some family issues, and couldnt pass up the house we have now. Also we bought back in 04 with the intentions of flipping the house in a couple years, wrong!
At first every month something needed to be repaired, mostly minor stuff but now I have to drive over, fix it and then be told about something else they forgot to tell me about, so most of the time it was buying some tool I didnt bring with me. I've been called for light bulbs, dog peeing by a vent and they thought it was leaking water, etc. We made about $100/mo and we kind of felt good knowing we where helping someone out.
Then last year we had a major basement leak. The cheapest repair would cost us $7000 for injections down to the footer from the outside. It took three treatments but it was under warranty. It was now costing us $20 a month for them to stay there since that was the difference between the loan amount and what we made a month in rent. We also got hit for $800 from the city to replace the sidewalk.

The basement leaked again early this year so now we are looking at an additional $4000 to trench from the inside.
As we speak we are in the process of short selling the property. We owe $88k and comps for the area are at $49k. So we are underwater by $40k+.
My suggestion would to find a property management company, they usually charge 10% of rent for their services.
The best thing to remember is you have double the worries of an average home owner, 2 roofs to worry about, 2 water tanks to worry about, etc.

Hope this helps in your decision.
 
The good news is you have lived in the house and know what to expect in the way of maintenance and normal wear & tear.
That river and children would still scare the crap out of me. You're hoping future renters are responsible for their kids.
Yeah, the guy standing there ready to move in right away, is on his way to the curb some where else. It may be a divorce or something, but you never know.
the lesbian I referred to earlier, an apartment manager called me looking for a reference, I lied thru my teeth to that poor woman. I told her that the renter paid on time and was the pillar of the earth. I just wanted to pass my problem off on someone else. This was after 6 months of pure hell and no rent from this chick and her girlfriend. When they left, the house was a disaster. I paid 2 ladies $10 an hour for 2 days just to get the place clean enough to bring a construction crew in to start some remodeling.
I have an older retired lady in the house now. I hope she stays a looooong time. Never a problem, She calls if something is broke. Usually to tell me she already had someone fix it. Asks if she wants to do something big (she wanted to add a porch swing, I thought it was a great idea and paid for it). She hangs flowers in baskets on both porch's, in general takes pride in where she lives.
So not every renter is a D-bag, but some are.
 
My wife and I bought our 1st up and down duplex in 1970, we lived in it, and built a 3rd suite in the basement, living there, with people above,, vinyl flooring above our bedroom,, soon learned the value of Carpet on the floors where poss.

After about 6 yrs,, we had it reappraised for $35k more than into it,, re-mortgaged it, used money as down payment for the next house,, same thing,, raised the roof for a Master suite,, re-mortgaged, rented it, after 5 yrs same thing.. The rents coming close to all the mtgs,, We ended up owning 5 properties,, the 5th was essentially free.. REMEMBER,, the mortgage shoulld remain the same, but the rent goes up a reasonable amount every year .. CAVEAT,, if you get an ideal tenant,, do whatever to keep them..

I could tell a lot of horror stories, including me going over and breaking every window out of one house,with my 9 iron.. lol, had a judgement, but sherriff wouldn't kick them out because of kids etc 7mos.... they were gone the next day,, I had some explaining to the cops,, but never planned on making an insurance claim.. Then there was the "cat" people..

Anyway,, what we learned in looking for a good tenant..

View the unit and take applications from all that are interested, noting the candidates you think are good.

The ideal candidate has been employed at one place for several years,, more than five,, the partner works somewhere else for a length of time. Phone the employer and confirm,,

When they give you a reference from the previous landlord,, phone for his reference, then ask the "landlord" the address of the property he has rented,, if he doesn't know,, he's likely a friend or relative of your prospective tenant..

- Go to the place where they currently live,, look over the yard and general condition of where they live..

- If it looks good,, phone the person and tell them you're in the neighborhood, and they forgot to sign the "back".. (bogus), knock on the door and stick your head in their house,, smell, and look,, get their signature,, and tell them their high on the list,, and leave..

It took us a lot of heartache to finally find this very long and tiring proceedure..

EVERYTIME we got slack,, and said,, "Oh ,, they seem nice"" we burned in hell...

Do what ever repairs you can yourself,, and for "insurance reasons" (true) tell them you are going to,, and DO a walk thru every 3 mos.. no exception ( ask me how I know)..

For the new tenant moving in,, give them at least a $100? off the first months rent,, to do a final clean on the kitchen and bathroom areas,, cuz those areas can never be clean enuff for the folks moving in.. so you don't harass yourself if it's not perfect.. (worked for me)

Good luck,, as mentioned,, you got to remeber it's a rental.. a tool to make money..You have to detach yourself from it,, no emotion.. hard,, but true..

hope it helps
 
I like your math- "...the 5th one is free...".

My math shows that if we can get another one that cash flows about the same as the current one, it will cut our bills in half.

The rental currently pays all but $600 a month for both houses, including water, electric, cable, property tax and insurance. Another one will cut that in half, and a third could conceivably put us completely cash flow positive for all properties owned.
 
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