Real Estate Investors

Anyone here invest in rental real estate? The housing market has softened a little here in the Austin area and there are some good deals on foreclosures. There are several houses listed here in RR, just north of Austin, in the 110-140k type neighborhood which would probably make good rent houses. Several of the homes are priced 10-15k blow their tax value right around 100k (3br/2ba/1400-1600 sq ft).

I work as a police officer so I am constantly talking to folks from every walk of life. Every time I speak to someone who owns rental real estate, I get a different opinion on how they like it. Some like it, others claim that it is the worst thing they have ever done and can't wait to dump their so called "investment". I have to wonder how much of the variation in attitude can be attributed to many folks simply not realizing what they are getting into when they purchase that investment property, not purchasing at the right price, not being willing to have to deal with broken doors, locks, replacing carpet, repainting, etc...... I know that you have to be willing to do a lot of work youself and that it takes lots of elbow grease to make the investment really pay off. Otherwise you will get nickeled and dimed to death. I have no problem doing home improvement work, tile, carpentry work, etc....

I'm seriously considering buying a rent house as I realized a long time ago that you have to invest in appreciating assets if you want to become financially independent at some point. I'm tired of watching the world go by and not grabbing my piece of the pie. I have a a decent amount of free time on my hands and I want to get into something on the side apart from my full time job. I have 15 days off every month without burning any vacation/sick leave.

My question to ya'll is, how many folks here have invested in rental real estate? Would you recommend it to someone who is willing to put in the work? What is the biggest drawback and or risks that you face as a property owner? Any other suggestions, info., or alternate ways of building wealth that you would recommend over rental real estate?

 

thanks in advacne for any help

 

Thank you for your service to your community.

I don't own any rental properties but have considered it at times. What held me back was one thing. Renters rights. They seem to hold all the cards. Buying property that would give me a better chance would have required rental rates that approached mortgages. My thoughts were the profits just didn't justify my troubles.

 

The right tenant makes all the difference in the world.

 

We are currently in the market to get our first rental property. Hoping to acquire 1-2 this year and grow from there. I'll be having a rental company manage it. I have 4 kids and my wife and I both have demanding jobs, so that's the path for us and our sanity.

 

In a way it really is a gamble. My aunt has several real estate properties here in Texas.

Understand you are accepting some risk in buying a foreclosure. Remember the saying if it sounds to good to be true it probably is. The 2-3 or people I know who went cheap on foreclosures got burned in the long run. If the “experts/people heavy in the market” are not buying it yet there is a reason why.

I still personally think real estate market needs some more correction to get back to a reasonable level. The run up bubble attributed to COVID on cars and houses was crazy and it has to cool back off. Something that seems to have started in the last few months. If you buy today it could be a few years before it’s actually back positive in value.

Round Rock is one of the fastest growing areas in Texas so that really helps you.

To me the gamble comes in your renters. People always surprise me. You think a solid great person but turns out they don’t pay their bills.

My aunts sweet spot is younger professional couples age 25-35. They have solid careers, pay on time, and actually care about the property. If college kids she prefers all females. They are cleaner and less likely to trash the place. Males college age do not care and have trashed many of her properties far beyond what a security deposit will cover.

The people, your “income” is the gamble.

I was also told yearly income on most rent houses covers expenses and allows you to break even. You don’t truly make money until you sell the property years in the future.

For me the risk of bad renters, higher cost of entry, pain of doing maintenance even if I cover labor and high property taxes makes me out of the real estate game.

I would literally rather gamble on stock and options trading.

 

As my aunt said once you have a renter who is 90 days late and you are faced with court proceedings and an eviction… you really start to question why you did this in the first place.

Cash for keys is powerful in this situation but still sucks.

 

Also, final thought, some of the more successful people I know in real estate are making it on Air BNB and similar platforms. The house is empty most of the year except college football game weekends or other big events. Most of this hinges on being near a large university. They also spend a lot of money on professional cleaning ( required after renting out) and a lot of time scheduling and setting people up for a certain weekend.

 

Have never owned rental property but know some folks that do.
Just starting out, the lower priced houses certainly makes sense, also know what those will actually rent for in the market.

Seems just having one or two might be tough if there were major maintenance required. Always heard that you need 8-10 or more to help offset those major maintenance items. Then it's almost a full time job or you may need a manager to run things.

 

I throw all my money in index funds. Too much headache with RE, but I do understand the diversity that it gives you, which some like to have.

 

I own 2 rental properties.

The tenants make all the difference.

Zillow has a platform to do credit checks as well as criminal background checks. I do all the renting and maintenance by my self.

If you can get a good rent, pay a property Mgmt company and still make a few bucks while equity grows=win win.

I’m also a public servant but have 4 days off to take care of any problems. Of course the problems only happen when I’m on shift.

the first few years are scary before you have an acctount built up to pay for any big expenses.

I look at it like equity growing from someone else’s money and I’ll have passive income when I retire.

you can always make your lease as detailed as you want. Put a clause in there if they are 60 days late you will “assist” them moving out. Most renters don’t pay attention to the lease and just sign.

quick edit
Stay away from condos. The HOA will offset any profit

 

I have a buddy in the same profession in the DC area. He owns 4/5 rentals and been having them for several years. He started off by selling his sports car and working a ton of OT to save 100k. He bought his first house with cash in the Md area went through the house and spruced it with paint and flooring. The appliances were in decent shape, so he left them. He has a application form that he charges them a small fee, and he does the back ground check; call previous landlords, check their credit rating etc. He learned later on during his process that someone would good credit would try to rent the house and have other adults that aren’t on the contract living there with the rental. He won’t rent to anyone where he comes across any red flags or looking to house others not on the contract. He went online and gathered all the forms that pertained to his rentals and printed them off. He learned after his first year with the first property rental, he would buy an appliance for Xmas for the first rental instead of taking a couple hundred off of their rent to make them feel like they are getting something.

He purchased his second rental a couple of years later for around 100k with cash and went through it completely and refurbished the house, and he did the same with the others. He said the biggest thing he didn’t want to deal with anything on his off time and everything is new inside the house and looks modern to attract a certain type of renter. He makes them responsible to keep up the yard, and he holds them responsible for any mishaps because of the renter’s fault.He never had any issues with his tenants and they been their for years.

The good thing about his rental houses they are all paid off. He can pull equity or sell at anytime or have a good source of income and not depending on the job. He steered away from stocks and wanted more control of his money.


Another buddy has a few houses back in his home state out west. He has a ratio which he follows about depreciation, and he has a rule to make $500 off of each house after all the bills have been covered. He look for specific houses that allows him to achieve that.

 

I’ve answered tons of these over the years… renters rights suck… management company rec’s come from people without experience and who don’t make profit… I now own farms; corn & soy doesn’t steal your appliances, copper pipes, rip down your drywall etc etc…

If you cant eat 8-12mo’s mortgage payments, you can’t afford it. Think long and hard. Google covid rent abatement…..

 

As with most things, it isn't what it used to be. For a hobby, I'd say buy and sell big ticket tools and equipment using online resources like craigslist, marketplace, offer up, etc. If you need space to warehouse and conduct business transactions, rent a storage unit and meet the potential buyer or seller in the parking lot with the item(s). You can buy a used 3500-5000 watt power inverter from a pawn shop so you will have an onboard power source. You can make some cash without any big investment, no accounting, flexible, etc. It's not like someone isn't always looking for a ext. ladder, lawn mower, table saw, air compressor, etc. Buy right and keep a solid 10-20 items in inventory and listed and you'll keep pretty busy with it and make more money than a rent house.

 

I have been investing in RE for over 40 years, some winners and some losers. But have let the renters buy my properties and have been living off the income, bills always come up for repairs. What I have learned is the nicer the property usually the better the tenant. Also get professional property management and treat the property as a business and keep up with market rents through annual rent increases. If you are handy do repairs and save yourself $$$, however never let the tenants know you're the owner or they will take advantage of you. Just show up as the handyman and do your repairs. It's a long game and not a get rich quick game, unless you flip properties. Looking back on the properties I sold well those were mistakes; buy and hold and don't sell, the market is always up and down but up over the long term. Also don't wait for the market to go down, its always fair priced. Interest rates up property prices down; interest rates down prices up.

 

My parents have an appartment over their garage, and it has been occupied all but about 6 months in the last 30 years. Good renters make all the difference. My mom also had a small home in a lake community which she had pretty good luck with. Ironically her worst renter was her best friend who was supposed to buy the lake house when she moved in and got settled. Ended up falling on the lake, breaking a leg then her sobriety, and well the rest is history.

 

How long did he take to repair and sell the house?

 

Hope it was just a side hustle!

 

OP is a cop. I'd guess that a staggering % of resale tools are stolen. All good until it isn't.

 

There are many cases where people just have unfortunate things happen and they need money quick. Many of them turn towards their tools and equipment. That said, yes there is plenty of tool and equipment theft within our society. You don't have to buy from a private seller if you don't want to, someone else will buy it though if you don't. Obviously I wouldn't regularly buy new in the box power tools repetitively from a crack head. 99.9% of the individuals I bought from have been a 1 time transaction that provided a handsome ROI. Pretty easy to generate decent, flexible, yet steady income once it is set up and rolling. I'm sure local population is going to be the most important factor for those who would like to give it a go. Can't really lose IMO.

 

Always stay away from HOA’s. They suck!

That said unless you’re a cash buyer right now rates are up and prices are still up. Lots of single family properties are still being bought by corporations and LLC’s (cash buyers) supply is still low due to people who normally would be selling who are holding because the low interest rates they locked in. They don’t want to sell due to prices still being high and new interest rates being high so they are staying put. The let’s hold and see what happens folks. Others are keeping the home as a rental due to the low interest rate they locked in and buying another home to live in. This is keeping supply low and the market inflated. Best investment in real estate is muti family ie 4 plex or more, long term parks (trailer/RV), storage for RV/boats, storage units, or build a food truck space on industrial property which is cheap right now and all the rage. All these bring mutilple occupants which evens out the one or two that might not pay “space fees” not “rent” Contracts with storage are an easier quicker turn around to evict due to occupant laws vs tenant laws.

 

I'm 60 and have had rental properties most of my life. The right renters do make all the difference. If you are buying a property on price then more than likely that neighborhood is in decline and the overall property values will be too at some point. Remember what happened during the pandemic when they let people live in your rental and not pay! WTH!!! When I had the most success in rental it was years ago when people were more honest and trustworthy and respectful of your property. That my friend is gone! You are correct it is a lot of work but be prepared to be a contractor, a collection agent and a lawyer when you can't get the SOB out of your property. You have a lot to consider. I have one property left which is a service center with a great renter and when he is gone so is the property! Take your time before you jump on some "deal".

 

Imagine having a rental in a nice part of town and needing a tenant. You find a 65 year old guy that just lost his wife to cancer and can't bear to stay in the place they lived. He sells it for a big gain and pays you 6 months rent plus one month as a deposit. Moves in and all is well for a month, until you see the house on the 5 o'clock news with the caption - "neighbors shocked as local resident killed by girlfriend." OOOF, WTF!

Called the police and left my name/number as the owner. They would not let me have any access to the house until their investigation was over, 7 days later. The GF attacked him while he was sitting in his recliner, with a Big Bertha driver, yes the golf club, to the head. When he went to the floor she picked up the hammer next to his chair and finished the job. Left him there for 3 days, then confessed to the police. She had a key to the house but the police still kicked in the back door, for some reason. All kinds of biohazards in there, blood, spit, teeth, shit, etc. Took Servicemaster a week to clean up and get all the contaminated furniture out and wipe everything down.

Then began dealing with the guys daughter, his only heir. That took 6-7 months to finally get his stuff out. Then the house was "stigmatized" so not much luck renting or selling. Yeah that was fun, let me tell you. Luckily I sold it a year before the pandemic and didn't have to suffer through tenants having the legal right to not pay their rent. It would have really sucked making the mortgage payment with no rent coming in.

That is only one of many stories I could tell. So I would vote NO on the rental property.