Rentals: livng the dream or a big nightmare

20 Replies

I own one rental property now, with plans to add more in the future.  So far it's been a little bumpy, but I'm learning.  I'd like to hear from those of you that own a bunch of rentals (my definition of a bunch would be over 10).  Are you glad you got into the rental business?  Wish you hadn't?  Were you able to quit your day job?  At what point did the scales tip from being able to manage them yourself to needing to hire people to help?

Let's hear the good, the bad, and the ugly...

Renters, feel free to chime in with stories of terrible landlords.

Well I don't own 10 properties but I will give you my story. I bought my first rental in late March of this year. Immediately after closing, a tenant said she was moving out. She moved out and continued to use the unit as her personal storage area for the next 2 months or so.  Eventually we got rid of her. The tenant that stayed paid late, very late. Like 16 or 17th of the month late. The rental is in a low income area so I expected the turnover, just not that soon. I spent around $2000 fixing up the unit and other associated problems around the duplex (i.e. insurance company wanted rails on the stairs and front porch). I raised the rents of both units. One guy still pays late but now he pays 6 or 7. The newer tenant has paid on time since he's been there. At first I thought this was the biggest mistake I could have made since the property is in Memphis and I'm in Maryland. I credit the eventual smooth transition to my property manager, Derrick Craig, for being my eyes and ears on the ground. I've always wanted to do real estate and thankful I finally managed to get my foot in the door. Although I learned some valuable lessons very early on, I know have a better grasp on inheriting tenants and what to do when I first take ownership of any rental. The lessons cost be some greenbacks but I will make those back :-). First hand knowledge can't be bought and is invaluable.

we started buying sort of by accident. We could do nothing else but live off the rentals now, but have other interests(we help manage a motorcycle and ATV business). My wife and I self manage almost 60 units. I am not the best landlord(too lenient) but I love buying and owning rentals. 

In about 5 years, all rentals will be paid off. Then it will get real easy.  We would hire out more, maybe someone to collect the rent and pay the bills while we are on vacation and mission trips(which will be monthly).

The nice part of owning rentals is free time. 

Hey Rob,

We're buy and holders like you. My wife and I have now set up and run 9 properties for ourselves and 2 for my parents. I've managed a portfolio of over 50 properties. I list my credentials so that you'll believe me when I say that while the process gets easier, the tenant needs never change, and you never get more time. We brought property management in at property number three and have never looked back. It has been a game changer to have someone else manage repairs and tenant issues. It has also allowed me and my wife to focus on acquisitions, managing our rehab teams, consulting with tax, legal, and insurance advisors, and most importantly, getting out of the house to spend some of that cash flow once in a while! 

To answer all of your questions:

We are so very glad we got into the rental business.

I was able to quit an absolutely miserable day job, and now I own a furniture making company, Barndog Mill LLC. The extra cash flow from rentals made this dream possible.

I suggest getting property management after property number one. I plan to always keep one to manage ourselves, so we don't lose touch with what tenants want in a property.

As SFR section 8 and mobile home landlords, the stories are too numerous to convey. Our first ever tenant ended up in an eviction, and we quit for one year until we pulled ourselves back up by the bootstraps.

Hope this helps and brings a little encouragement. Keep solving problems for people, and you'll keep making money. You are putting a roof over someone's head and filling a valuable need in society. For that, there will always be a need.

Best,

Mike

We had rentals in 3 cities, Atlanta, Phoenix and Memphis. Atlanta homes continually got trashed, like over and over again.
Phoenix we got ripped off and lied to by property managers, like over and over again.
Memphis on the other hand we own well over 10 doors and help owners manage several hundred doors.

Once we learned to avoid anything renting for less that $725 a month we have had a pretty amazing run, nearly 4 years in now.

My take on landlording in the USA is that anything less than 10 doors is not worth doing. YOur cash flows are too unpredictable and when you only have a couple of doors you are always seeing problems.

Once you get to 10 plus you start to treat it more like a business and stop worrying about smaller issues and the cashflow starts to even out a bit more.

I started doing my own then eventually moved on to doing PM for others.

Some days it feels like the easiest job in the world. Other days it feels like the toughest job in the world.

Don't get discouraged by the bad days. It really is a lucrative industry.  I agree with @Dean Letfus in that you wanna scale. Owning only a few rentals makes the juice not worth the squeeze.

Originally posted by @Rob Kulp :

I own one rental property now, with plans to add more in the future.  So far it's been a little bumpy, but I'm learning.  I'd like to hear from those of you that own a bunch of rentals (my definition of a bunch would be over 10).  Are you glad you got into the rental business?  Wish you hadn't?  Were you able to quit your day job?  At what point did the scales tip from being able to manage them yourself to needing to hire people to help?


I currently own 12 rental properties.

1. Yes, I'm glad I got into the rental business.  I love being a landlord.  I love about 95% of the business.  There's always a 5% not to love but I deal with it.

2. Yes I was able to quit my day job and that was the #1 reason why I started investing.

3. So far my scales haven't tipped.  I self-manage all my rentals.

I agree with Dean,  the more you have, the easier it gets. Economies of scale.

Originally posted by @Rob Kulp :

I own one rental property now, with plans to add more in the future.  So far it's been a little bumpy, but I'm learning.  I'd like to hear from those of you that own a bunch of rentals (my definition of a bunch would be over 10).  Are you glad you got into the rental business?  Wish you hadn't?  Were you able to quit your day job?  At what point did the scales tip from being able to manage them yourself to needing to hire people to help?

Let's hear the good, the bad, and the ugly...

Renters, feel free to chime in with stories of terrible landlords.

Are you glad you got into the rental business? 

Absolutely!

Wish you hadn't? 

Wish I had started buying much sooner. I bought my first property at 27. I am 31 now and I wish I had started buying when I was in college.

Were you able to quit your day job?

I bought my first property in Aug 2010 and quit my day job in March 2011

At what point did the scales tip from being able to manage them yourself to needing to hire people to help? 

I stopped managing after 15 units or so. Initially, I hired someone to manage the properties, but this year I moved everything over to a PM company and couldn't be happier. It has freed up my time and helped me focus on growing my business.

Frankly, there will always be days when things won't go so well. You will have a few vacancies pile up, but that's part of the business and if you treat it like one, you will do fine. 

One of my largest clients, owns 740 units, told me unless I am planning on getting to 15 units, don't bother.  He felt that the benefits of owning and self managing did not out weight the negatives until you get to this tipping point.

Thanks for the encouragement and advice, everyone!  @Dawn Anastasi and @Sharad M. , you two were able to make the move so quickly and leave your day jobs.  What was the strategy you used?  Buy a fixer, remodel, refi, and repeat?  

@Dean Letfus and @Arlan Potter I'm glad to hear it actually gets easier with the more houses you own (over 10, that is)

Thanks for the story @Shawn Dandridge . You know you love it when you get your butt kicked right out of the gate but it doesn't stop you from moving forward.  That's kinda what happened to me on my first flip.

I used several strategies to buy real estate:

1) Partnerships

2) Mortgages

3) Peer to Peer Lending

4) Credit Partnership

5) Cash out refinance

6) Saving my own money

I personally prefer to buy in all cash, but am not opposed to using leverage if it gets me where I need to be (but the deal has to be right).

@Rob Kulp  

I own majority of my properties free and clear and I started with saving my own cash and investing. My wife and I live on lower of the two incomes and save the higher income and invest that and that has worked well for us.

I did do some cash out refinancing in the beginning and reinvested all of that towards more rental properties and just kept using the rental income towards buying more.

I wholesale properties and also do flips with other investors in partnerships and use the profit from those flips towards more rental properties.

You know, there is no one right answer. It all depends on what you are looking for. If you have one rental, you can make $300 a month for the rest of your life. If you have 2 rentals, you make $600 a month for the rest of your life. Maybe you just want it to be a supplemental income that will help you in retirement. And that is fine.

Once you start investing though, it is easy to start wanting to make more money so you buy more properties. My goal when I started was just 4 properties. I figured when I got them paid off in full I'd make $500 per property so I'd be making $2000 a month to help me in my retirement years.

Since them I have bought a lot more properties and now do it full time. And as you know, there are pro's and con's with everything in life, whether it is a day job or investing in real estate.

I love the free time of an investor. You can get up at 10 am and read your book over coffee. Work out in the middle of the day. Make home made meals every night.

Then you get a tenant threatening to sue you and you can't sleep for nights on end. There is a lot of stress when you have a lot of rentals.

So should you have a few rentals, or enough properties to retire on. Well, that depends on you.

When I tell people how many rentals I have they tell me I must be crazy.  I run into many people who have had 1-3 rentals and absolutely hated it.  It was tough starting out but you'll learn a lot of lessons along the way and things will get easier.  I'm up around 50 rentals right now so I'm used to everything that can go wrong.  I have multiple people to call for every situation.  

Having more units spreads the risk more evenly and makes things less stressful.  If I have a tenant that doesn't pay rent then it's only a 2% hit.  If I have to replace a roof I can do it out of that month's cash flow.

Having more units also leads to a lot more issues and stressful situations.  If you have one rental and you average 1 major issue a year such as an eviction, a tenant that skips out, a trashed unit at move out, or a major repair.  With 50 rentals you would expect 1 of those every week.  

I have 28 units and a healthy appetite for growth!

I'm not full-time technically but the cash flow from the rentals gave me the confidence to quit my day job as a factory drone and start a painting business. The painting business is going great and I have the flexibility to be able to better manage and grow my rental business.

I just wish I had started sooner! I bought my 1st 4 units Feb 2007 to January 2008 and then took a break until August 2011. From August 2011 to October 2013 I added 24 units. Had I done that a few years sooner I would've just quit my factory job to straight up run my rental business.

I currently own 3 SFR rentals and currently working on 2 more by the end of this year. In regards to self managing or hiring it out, IMO this should be an upfront personal decision before it becomes a "need to hire" out decision. For me, I knew I had no desire to be an active landlord dealing with tenants from the get go (I would rather manage one person, the PM). As a result, I buy with property management built in. The good thing is if I change my mind or I am forced to, at least I now that I will be compensated for my time :) I am glad my wife convinced me to get in the biz. I understand physical REI more than I will ever understand paper type assets (stocks, bonds, etc). I hate that I was not educated enough to fully capitalize on the down turn. In regards to leaving my job, because my day job pays me pretty well leaving is not in the immediate future; however, my plan is to use my day job to get rid of my day job (if that makes sense, lol).

We currently own and manage 15 units... SFR and small plexes. We didn't quit our day jobs and don't intend to. We are buy and hold investors, cash flowing well. We love our professional jobs and we love our real estate investment venture. It is not always easy and finding the right work-life balance is key. It works if you have supportive family, efficient systems in place and really understand the business... learn what you need to learn as quick as you can. Find a mentor. You don't have to go it alone and you can avoid costly mistakes if you listen to the sage advice of experienced investors. BP is great for this! Listen to the podcasts. Also, having sufficient reserves is extremely important. We figure when we get to 20 units it will be time to hire out most of the management duties.

As of right now I own 10 units, 15 mobile homes, and over 75 storage units of varying sizes.  Ill tell you, and I think many will agree, when everything is going smoothly, its feel great and financially so worth it.  However, when you get a perfect storm of things going wrong (and it will), that's when you'll decide if this is for you or not.  Because, we as landlords have to put up with A LOT, and if you are not committed, as if this is a hobby not a business, you will not last. 

Yes, quitting my job was great, but I also started other business unrelated to real estate to help with that.  I think @James Wise  

said its not worth it until you have 15 units, I think that is very true, you really need to have consistent checks coming in every month to comfortably quit your job. 

Yeah it is great being a landlord at times, I just want hundreds of checks every month , never looking for a huge pay out all at once.  Best of luck.

Originally posted by @Justin Escajeda :

  However, when you get a perfect storm of things going wrong (and it will), that's when you'll decide if this is for you or not.  Because, we as landlords have to put up with A LOT, and if you are not committed, as if this is a hobby not a business, you will not last. 


Exactly! And the more properties you have, the more often things will come up. Not always a perfect storm, but something. Our perfect storm was this year, our 8th year as landlords, and we self-manage. My husband has a full time job and I own my photography business, as well as managing the rentals. I know where all the money goes (in and out), and it's manageable at this point. I'm also a control freak and love details, which helps.

Our friends only hear about the bad stuff, which makes for good storytelling, but it also has them wondering why we do this. I don't think many of them consider that the tenants are paying all the mortgages and we get cash flow. They hear "eviction" "late rent" and "property damage" and think we're gluttons for punishment. 

Wait a minute, I need to re-think this real estate thing ;)

I'm really glad to hear that renting is going so well for so many of you.  I'm sure there are plenty of tough times ahead but I'm really excited to get more rental units!  

@Marcia Maynard , you're right, I'd like to find a mentor to help me along the way.  This site has already helped me meet some really knowledgeable and experienced people.

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here