How worthwhile is owning investment property as a landlord?

Check out this book on the legal responsibilities of landlords. It’s pretty straightforward, and may give you an idea of the headaches you face and whether those are worth it for you.

I owed three nice rent houses and it’s a “pain in the ass!” True story. Tenant called around 10pm and said his bathtub was stopped up. Drove up there, about 15 miles, walked into the bathroom and removed the hair around the drain and it was unstopped.

Could give you so many stories on this…but, bottomline, sold them and happy that I did. It’s a good writeoff, but you better be a very patient person to deal with the “stuff!”

How about if you own it and have someone else manage it. Problems arise you blame them, fire them, hire someone new. Doesn’t work this way?

@Ltryptophan unless you have lots of property, would be expensive to do it that way!

@Ltryptophan

Regarding outsourced management – not necessarily. You may be able to outsource management to a company, which would hire the manager. There are ways that you can outsource employment issues to companies with the resources and experiences to handle that.

So, that seems easy.

@Ltryptophan

Well, that depends on the situation (whether one is available near you, whether you have enough property to warrant it, whether it’s affordable). Playing out the details of it could be much more… interesting.

how many properties do you think warrant it? Does it have more to do with how much value the properties are drawing than the quantity. For instance, if you have a penthouse in New York, but that’s all, still might deserve outsourcing the labor.

If I had 5 houses each drawing $600 a month in rent might be worthwhile…what about a double bringing 1500 per side…same money

There are too many variables to consider to give you an answer that will address the situations generally – I would say that, barring all other considerations, I would be more inclined to outsource management the more tenants. If this causes a decrease in profits, you can offset this with a rent increase on the properties that will be noticed less the more tenants you have if it is a set fee. If the fee is related to the number of buildings, than the fewer buildings the more efficient. If the fee is related to the number of tenants, then there’s really no way to offset it without applying it to each tenant directly.

cool

There are certainly easier ways to make money. I never had a mutual fund call me in the middle of the night because a toilet was backed up.

@GeorgeGee we discussed that, and came to the point that it might be worthwhile if that sort of thing were being managed by someone else. In which case it is like a mutual fund backed up by an asset. Real estate is a commodity unlike an investment, unless it is an investment in a commodity… Which would be a similar thing. Having lots of gold somewhere through a mutual fund, and its changing value is kinda like tenants and rents…

If you can make enough money at it, you can do as @iamthemob, but in general, being a landlord is a barely break even proposition, except for the large investment companies. As an individual owner, I would say it’s way too much trouble.

I’ve never done it, but looked into investment properties quite a bit.

There are two main ways to make money from a long term property, you can try to be “cash flow positive” and actually make money each month off or your rents. You have to remember you’re usually paying a mortgage, taxes, upkeep, advertising costs, and other smaller items before you even get into whether or not you want someone to manage the property for you. So it’s fairly difficult to make money just off the rents coming in. In my area, most of the places that can make money this way are multi-family homes. Usually 4-plexes or more units in a apartment complex or condo setup. It’s rare to see a duplex or single family home that will make money monthly. Of course more units usually means more initial investment and more work.

Most smaller investors (anyone who’s not developing a huge complex) seem to be happy with breaking even off of the year to year expenses and just make money off the appreciation of the property between when they buy and sell it. Most in fact seem to lose a little each year when you figure in large repairs like AC units, roofs, and any sort of renovations. So you’d look for up and coming areas or prime real estate that you can hold on to for a while.

The other side of the coin is “flipping”, which means you buy a run-down place, fix it up, and sell it for a profit. I think this is probably more viable in an up real estate market because there aren’t so many properties just waiting for a buyer. There are definitely people who make a lot of money at it though.

If you’re seriously looking at the whole thing, there are real estate companies that specialize in investment properties and rentals. You may also want to read a book as it will cover a lot of things you might not think of otherwise. I liked Buying and Managing Residential Real Estate.

As far as how to get started. I think the easiest way would be to buy a duplex, rent out half, and live in the other half. This is what I was considering doing. Your rent will be subsidized by the rent from the other half most of the time, you’re on site for repairs if they’re needed, and you can keep an eye on the place pretty easily. Meanwhile you’re gaining equity in the place. The downside is you live right next to your tenants, but if the thought of dealing with one tenant puts you off, having 20 down the road might not be your cup of tea.