I am considering buying a rental property. Talk me out of it.

[Anonymous]

I have saved up a good chunk of money, in addition to having a very healthy amount in my 401k and other savings.

I have started thinking about buying a rental property but I would like an honest analysis of the pros/cons from someone who is not trying to sell me a book/get rich quick scheme. There is so much conflicting information out there.

Should i consider buying a property? Or just put the money in more index funds?

Thanks in advance!

[Anonymous]

It is an extremely hands-on, frustrating investment. How much time & energy are you willing to invest beyond the money?

[Anonymous]

I own some rental properties and one major con is is large unexpected bills for things that break, or just wear out over time, surprise tax bills, vacancies, etc. So make sure you have a large cash reserve to spare.

Another is the time spent on it, even if you have professional management.

The big pro is the opportunity for returns far greater than index funds.

The Bigger Pockets website and podcast is a good way to start educating yourself.

[Anonymous]

Anonymous wrote:I own some rental properties and one major con is is large unexpected bills for things that break, or just wear out over time, surprise tax bills, vacancies, etc. So make sure you have a large cash reserve to spare.

Another is the time spent on it, even if you have professional management.

The big pro is the opportunity for returns far greater than index funds.

The Bigger Pockets website and podcast is a good way to start educating yourself.

I have been reading Bigger Pockets for quite awhile now, it partly seems too good to be true to me.

Have you been successful as an investor? How much time did your "learning curve" take? Do you have a manager or do you manage yourself? I am afraid of making a very costly mistake.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I own some rental properties and one major con is is large unexpected bills for things that break, or just wear out over time, surprise tax bills, vacancies, etc. So make sure you have a large cash reserve to spare.

Another is the time spent on it, even if you have professional management.

The big pro is the opportunity for returns far greater than index funds.

The Bigger Pockets website and podcast is a good way to start educating yourself.

I have been reading Bigger Pockets for quite awhile now, it partly seems too good to be true to me.

Have you been successful as an investor? How much time did your "learning curve" take? Do you have a manager or do you manage yourself? I am afraid of making a very costly mistake.

NP here. DH and I have two rental condos in Montgomery County. One is cash-flow positive, meaning we make money from every rent payment because it covers the mortgage + condo fees. One is not, we get enough to cover the mortgage + condo fees. Maintenance costs have been fairly minimal, as one was bought brand-new (as I bought to live in), and DH bought other for himself to live and basically gutted the entire thing. We have significant equity in the older property, some equity in the newer property.

We manage the units ourselves, but there's really not much to do. The tenants email us with questions from time to time, but rarely ever. We're fairly strict in our initial screening. This will really depend on where you buy - if you buy somewhere in NE or SE DC, you may want to have a management company and there's a chance you may have issues with tenants not paying the rent, etc.

Btw, condos aren't necessarily the best rental investments IMO. We just happened to end up with two because we were living in them. Single-family homes or townhouses are better. Where are you looking?

[Anonymous]

Anonymous wrote:

Anonymous wrote:I own some rental properties and one major con is is large unexpected bills for things that break, or just wear out over time, surprise tax bills, vacancies, etc. So make sure you have a large cash reserve to spare.

Another is the time spent on it, even if you have professional management.

The big pro is the opportunity for returns far greater than index funds.

The Bigger Pockets website and podcast is a good way to start educating yourself.

I have been reading Bigger Pockets for quite awhile now, it partly seems too good to be true to me.

Have you been successful as an investor? How much time did your "learning curve" take? Do you have a manager or do you manage yourself? I am afraid of making a very costly mistake.

And personally, if you're afraid of making a costly mistake, I would advise you to stick with index funds.

[Anonymous]

If you can get the rental cash flow positive, they basically pay for themselves (maybe not cash in your hand, but at least in equity). Yes, you will have to manage them, but money don't grow on trees!

[Anonymous]

Anonymous wrote:If you can get the rental cash flow positive, they basically pay for themselves (maybe not cash in your hand, but at least in equity). Yes, you will have to manage them, but money don't grow on trees!

18 years ago, I looked at the finances near where I live: rentals for small houses were about 1800K/mo, cost was 200K. I was sitting on 140K, and I bought 3 of them; 40K down, and about 400/mo positive cash flow each. I took the money, and saved it for rehab on the house. I had to put in a total of about 30K over 15 years, so I netted about 190K in cashflow. In the end, all of the houses needed major work -- 30 - 40 K. But they where in Vienna. Sold each of them to builders. After paying off the mortgages, I netted about 400K each (pre tax). So, my pre-tax gain over all was 1.4 million on a 200k outlay.

The key element was the cash flow. I had no idea land was going to be so valuable.

[Anonymous]

Anonymous wrote:

Anonymous wrote:If you can get the rental cash flow positive, they basically pay for themselves (maybe not cash in your hand, but at least in equity). Yes, you will have to manage them, but money don't grow on trees!

18 years ago, I looked at the finances near where I live: rentals for small houses were about 1800K/mo, cost was 200K. I was sitting on 140K, and I bought 3 of them; 40K down, and about 400/mo positive cash flow each. I took the money, and saved it for rehab on the house. I had to put in a total of about 30K over 15 years, so I netted about 190K in cashflow. In the end, all of the houses needed major work -- 30 - 40 K. But they where in Vienna. Sold each of them to builders. After paying off the mortgages, I netted about 400K each (pre tax). So, my pre-tax gain over all was 1.4 million on a 200k outlay.

The key element was the cash flow. I had no idea land was going to be so valuable.

Is the maintenance involved in renting out single family houses really onerous? Did you manage yourself? I am looking at smallish houses near where I live, in PG county.

[Anonymous]

Another question for landlords in this group: did you create LLCs for your property? Did you get a good lawyer or accountant to help you with the financials? Can you make some recommendations for the DC area?

[Anonymous]

Think about everything you do to maintain your own house plus whatever outside help you need like plumbers or whoever. Then picture renters who have minimal incentive to take care of things themselves, but maximal incentive to ask you to make everything perfect.
That is what it is like. Never again.

[Anonymous]

Think about everything you do to maintain your own house plus whatever outside help you need like plumbers or whoever. Then picture renters who have minimal incentive to take care of things themselves, but maximal incentive to ask you to make everything perfect.
That is what it is like. Never again.

[Anonymous]

If you decide to buy, make sure it's close to where you live. Not next door or on the same street but within 15-20 min drive. I've read Bigger Pockets too and I've also been a Landlord since 1989. Take what you read on there with a grain of salt.

[Anonymous]

PP with two condos here. We didn't create LLCs or get a lawyer or accountant, but probably should do the latter. Haven't had the issue above ^^ and have been landlords for eight years.

We did have one annoying tenant with two kids that complained more than the others and did a lot of damage to the walls, but one out of six or seven isn't bad. Plus we had her deposit to cover the damage that was beyond normal wear & tear.

[Anonymous]

Anonymous wrote:Think about everything you do to maintain your own house plus whatever outside help you need like plumbers or whoever. Then picture renters who have minimal incentive to take care of things themselves, but maximal incentive to ask you to make everything perfect.
That is what it is like. Never again.

I agree but it's pretty easy shut that crap down. Tenants will ask for a lot if you let them.