Stop 401k and Purchase a Rental Property?

[Anonymous]

You are not going to make much rental income on a place you purchased recently and started renting. Yes, you will be paying down principal, but it won’t help your cash flow much until rents increase well above the price you paid for the house. Have you looked at what your expenses will be vs the likely rent you would get? You’ll see what I’m mean. It’s a long game, not an immediate cash generator.

[Anonymous]

Anonymous wrote:Landlord here. I thikn it comes down to the value of your time, and also the uncertainty of cashflow. Are you willing to put in the time to deal with repairs and issues that arise at odd hours? The hassle of finding a tenant? Evicting a tenant?

None of this is difficult to do, but it just takes time. If you have that time to spare, then it can work out well. If you don't, then a 401k or similar investment is easier -- just put your money in and no more work needed.

Also varies based on what you rent. I had a SFH in a good school district, but could _only_ find a tenant in summer since families were moving for the school, and no one is going to move mid school-year. So I got stuck when an active duty military family had to break lease early (it's required by allow it) in January because he got reassigned to another city. House sat empty for months, and I'd spend time every week posting up ads and showing it now and then also.

Or the time I had a tenant stop paying rent. I'd be at the courthouse 2x a month for almost half a year, filing paperwork and then showing up in court. You don't get to pick your court date -- they do -- and if you don't show up, your case is dropped. Once I had come back from a trip to Asia the night before and overslept my court date --- well, now the process had to restart and another 4 weeks to get a new court date.

So while it's important to look at the $$ side of things, also consider the time involved. Management companies will charge 10-25%, but it may be worth it.. or not.

+1. Vacancies and non-payment evictions are my biggest concern with my rental. I haven't found the maintenance costs to be too much yet.

Choosing the right tenant is very important. The difference between my current tenant who is normal and the prior tenant who was crazy is like night and day.

[Anonymous]

Anonymous wrote:You are not going to make much rental income on a place you purchased recently and started renting. Yes, you will be paying down principal, but it won’t help your cash flow much until rents increase well above the price you paid for the house. Have you looked at what your expenses will be vs the likely rent you would get? You’ll see what I’m mean. It’s a long game, not an immediate cash generator.

Long-time landlord here. That's a good point. One of my rental properties is 15 years old at this point. When I started, I made just enough cashflow-wise to cover my costs and a little bit of maintenance. Now, since rents have gone up, but my mortgage is fixed, I actually make some money every month. (Yes, property taxes and condo fees go up, but not as much as rents).

[Anonymous]

yes, and be sure you buy a condo because many of those appreciate significantly over time And if you believe that I have a bridge to sell you. Seriously, to make this work you have to look at TH and SFH and in the right areas.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I own a townhome that is rented out. We don't make any money on that property. It pays the mortgage but costs us a lot in repairs or in between tenants. We're going to have to replace the carpets & roof within the next few years. I constantly debate whether to sell the home and put the money from the sale in a mutual fund or a CD just so that it will actually make us money. We've been riding it out for the past 5 years hoping the housing market will go back up but it's been pretty stagnant where we live. I just don't see it appreciating enough to where we come out ahead. Maybe after the mortgage is paid off but that's in about 15 more years. And I can't help but to wonder if that money is just better off elsewhere.

We are in exact same boat. Debating if we should sell it in spring and use equity money for something else.

Same for us except we've had the same awesome tenants the past 6 years. But if/when they leave, the house needs new carpet and we are just waiting for the call that roof is shot.