Becoming a Landlord, was it worth it?
Virginia Beach, VA · Member since 2017 · 7 posts · 2 votes
Becoming a Landlord, was it worth it?
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Investor · Post Falls, ID · Member since 2016 · 606 posts · 699 votes
8yYes, we have been very pleased with our investment. We moved from a high cost area to a lower cost area to retire. When we sold our paid for house, we were able to use that money to purchase a 6 unit apartment. We are healthy, active retirees and do our own management, maintenance and landscaping. We hire out the bathroom remodels and replacing rotted subfloors. For the first two years, we used the profits to fund building improvements and build up a contingency fund.
We are now able to take $3000 a month out of our LLC. Since we have low fixed costs, we do not stress if we have a vacancy, since we have plenty of cash flow. We do not put up with bad tenant behavior because we are not afraid of vacancies. We have not had to take much out of our 401Ks -- we are covering our day to day living expenses on Social Security and money from the apartments. We spend about 4 hours a week at the property.
As we get older and frailer we will have to hire more out, but for now it is very manageable. My plan is to have my daughter inherit the apartment building (on a stepped up basis) when we die. We are fortunate to have decided to settle in an area with rising property values and rising rents.
I am a retired RN and my husband is a retired mental health counselor. Our former jobs both focused on working with people, and setting limits. This has served us well as landlords. Life experience also has it rewards -- my husband and I were timid landlords when we were in our 20s and rented out a house we could not sell. With experience comes self confidence,less willingness to put up with tenant shenanigans, and an overall lower level of landlording stress.
30 Replies
- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes8yLarry Johnson My suggestion would be to invest in mortgage notes. Depending on your appetite for risk you can invest in non performing or performing. You do not have to deal with tenants, toilets or termites and can get double digit returns. I am in real estate for my full time job and started with rentals then moved to notes to avoid the Sunday Morning calls that the sink is clogged etc
7e investments53 Reviews - Virginia Beach, VA · Member since 2017 · 7 posts · 2 votes8y
Smells fishy to me, Chris Seveney. https://papersourceonline.com/dirty-little-secret-non-performing-notes/
- Claremont, NH · Member since 2017 · 14 posts · 5 votes8yIt was for me, I'm 41. you Just have to manage it well. Don't buy a maintanence nightmare and hold out for good tenants.
- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes8yLarry Johnson There will always be haters which I hope more people read those types of articles and stay away from notes as it is less competition. On the performing side If I told you that you can buy a note that the borrowers on $30k on, are paying $300 a month and the house is worth $75k - oh and you can buy it for $24,000 that reduces risk. On non performing there are many sellers and websites you can buy non performing notes and they are overpriced or not worth anything but there are also deals you can get direct from banks, credit unions and some hedge funds that are direct. On non performing a typical deal will be acquiring a $50,000 asset that is upside down (owe more) and paying $25,000 for it. From their we can either get the borrower repaying or if we have to foreclose on the property. Then you can rent it, Rehab and sell it or sell it as is. There are inherent risks involved but if you do the proper due diligence and use professionals (legal team and licensed services) you can mitigate a good amount of risk.7e investments53 Reviews
- Investor / Broker · Brooklyn, NY · Member since 2016 · 665 posts · 1k+ votes8y
I started my REI in 1997 at the age of 31.
If I had to start out now at age 52, I would certainly NOT buy:
1) A maintenance nightmare - Buy something easy to maintain, but make sure you do all your due diligence at the time of inspection. There will always be surprises when you finally buy, but try to minimize the cost of those surprises as much as possible. This might require some extra time or money spent to do that. I typically have my GC go through the property after the Inspection Report. So I agree with Micaiah here.
2) A difficult property to Manage - Even if you are using a PM, which I don't do. I self manage basically so I can make sure the management will always be top notch. However, because my properties are in very desirable areas where it's easy for me to get quality tenants, I am MOST likely to get a exceptionally good tenant and not have to be put through the ringer with a horrible tenant scenario.
3) An Area which can depreciate in Price - There are some cities, neighborhoods or even blocks in a neighborhood that can be very bad to own over the years. I have seen a relative buy on an iffy block where the crime kept on getting worse. 5 years after he bought the building, the gang activities included a shooting just a few feet from his door and one of the gang members was shot and killed. Needless to say, he cannot get rid of the property because it just won't appreciate in value after it fell in price due to the area becoming a war zone. To ensure this doesn't happen, I normally must have a lot of knowledge of the area and typically can predict how crime will be doing in the future. All my properties were bought in areas where the areas were already good and then it moved up in safety as the general economy moved up. If my relative tried to retire now, he couldn't but I certainly can.
I think these are 3 of the most important things I can think about as to what NOT to buy. I also believe that Financial Planners advise older people who are about to retire to invest in much safer higher quality versus higher risk higher return investments.
Just my opinion, however!
- Rental Property Investor · Concord, NC · Member since 2016 · 1k+ posts · 3k+ votes8y
I'm 59 and retired last year after 35 years in corporate America. I was very fortunate to have a well paying job but looking back, I'm sad I spent my best years in an office. I started buying SFHs in 2007 and currently have 14 rented. I self manage, it's hard work but I love every minute of it. What started as a hobby allowed me to retire early and cash flow life. I've found there is nothing like the freedom and enjoyment of runing you own lifestyle business. It's not for everyone but getting into buy/rehab/hold/rent was one of the best decisions I ever made.
- Rental Property Investor · Red Bank, NJ · Member since 2017 · 1k+ posts · 1k+ votes8y
I love every minute of it.
I am working at a loss as I reposition my buildings. 2018 will be my year of gains. But I will still have my prior years losses to offset my income.(And now thanks to tax reform my carried loss is worth more)
I could not have done this with out my W2, so I think for retirement you are looking at a turnkey and I don’t see the returns that make it worthwhile.
Also- if you are looking at SFH, be aware that the coming year could see a shift in SFH due to the new bill.
Good luck- one of the best things I have done is investing in multi-families and I love being a landlord.
- Investor · Post Falls, ID · Member since 2016 · 606 posts · 699 votes8y
Yes, we have been very pleased with our investment. We moved from a high cost area to a lower cost area to retire. When we sold our paid for house, we were able to use that money to purchase a 6 unit apartment. We are healthy, active retirees and do our own management, maintenance and landscaping. We hire out the bathroom remodels and replacing rotted subfloors. For the first two years, we used the profits to fund building improvements and build up a contingency fund.
We are now able to take $3000 a month out of our LLC. Since we have low fixed costs, we do not stress if we have a vacancy, since we have plenty of cash flow. We do not put up with bad tenant behavior because we are not afraid of vacancies. We have not had to take much out of our 401Ks -- we are covering our day to day living expenses on Social Security and money from the apartments. We spend about 4 hours a week at the property.
As we get older and frailer we will have to hire more out, but for now it is very manageable. My plan is to have my daughter inherit the apartment building (on a stepped up basis) when we die. We are fortunate to have decided to settle in an area with rising property values and rising rents.
I am a retired RN and my husband is a retired mental health counselor. Our former jobs both focused on working with people, and setting limits. This has served us well as landlords. Life experience also has it rewards -- my husband and I were timid landlords when we were in our 20s and rented out a house we could not sell. With experience comes self confidence,less willingness to put up with tenant shenanigans, and an overall lower level of landlording stress.
- Virginia Beach, VA · Member since 2017 · 7 posts · 2 votes8y
Originally posted by @Chris Seveney:
Larry Johnson
There will always be haters which I hope more people read those types of articles and stay away from notes as it is less competition.On the performing side If I told you that you can buy a note that the borrowers on $30k on, are paying $300 a month and the house is worth $75k - oh and you can buy it for $24,000 that reduces risk.
On non performing there are many sellers and websites you can buy non performing notes and they are overpriced or not worth anything but there are also deals you can get direct from banks, credit unions and some hedge funds that are direct. On non performing a typical deal will be acquiring a $50,000 asset that is upside down (owe more) and paying $25,000 for it. From their we can either get the borrower repaying or if we have to foreclose on the property. Then you can rent it, Rehab and sell it or sell it as is.
There are inherent risks involved but if you do the proper due diligence and use professionals (legal team and licensed services) you can mitigate a good amount of risk.
Move on, Chris. You lost.
- Virginia Beach, VA · Member since 2017 · 7 posts · 2 votes8y
Originally posted by @Llewelyn A.:
I started my REI in 1997 at the age of 31.
If I had to start out now at age 52, I would certainly NOT buy:
......
Just my opinion, however!
Llewelyn,
Thanks for the advise. Just wanted to ask if you could further explain your reason for saying that you wouldn't start buying at age 52. Did it take too long to see a profit, or something else?
- Virginia Beach, VA · Member since 2017 · 7 posts · 2 votes8y
Thanks for all the replies. Didn't know how to say "thanks" individually, so I voted for y'alls post.
- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes8yNot sure what I lost at - I was trying to show there are alternative investment strategies in real estate that are much more passive than being a landlord and notes is one of them. There is also crowdfunding, hard money lending, tax lien and tax deed investing in which all of them you do not have to deal with tenants. Each has risks and rewards to them which you can find detailed information on bigger pockets in the different forums.7e investments53 Reviews
- Claremont, NH · Member since 2017 · 14 posts · 5 votes8yMy investment has been profitable. I haven't always enjoyed it or managed it well but being older helps in the wisdom department. you can do an easy yearly projection if you know how to create a spreadsheet. I could send you the one I use if you like.
- Investor / Broker · Brooklyn, NY · Member since 2016 · 665 posts · 1k+ votes8y
Originally posted by @Larry Johnson:
Originally posted by @Llewelyn A.:
I started my REI in 1997 at the age of 31.
If I had to start out now at age 52, I would certainly NOT buy:
......
Just my opinion, however!
Llewelyn,
Thanks for the advise. Just wanted to ask if you could further explain your reason for saying that you wouldn't start buying at age 52. Did it take too long to see a profit, or something else?
Hi Larry. Just wanted to clear up a confusion. "If I had to start out now at age 52, I would certainly NOT buy: 1) ......"
I WOULD buy at age 52. Just not buy the three things I mentioned.
In fact, I would buy even in retirement. However, the older I get, the more I want higher quality tenants, less risk for vacancies, and less risk for maintenance.
I prefer to own a very easy to manage Investment Property in an appreciating area than to put my money into a Treasury Bond paying very little returns.
- Augusta, GA · Member since 2014 · 1k+ posts · 1k+ votes8y
We started "late" in life (I was 55 years old). Wish I had started earlier (well, my knees and back wish so). We have 16 SFH and that's enough; my partner Bill wished I had stopped at 10.
Using a small HELOC I was able to pay cash for each of these so no mortgages. Sometimes a headache but all are certainly manageable. We continue to manage all of them and I just turned 66 this month.
Gail
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Chris Seveney I was going to suggest notes as well... but it looks like the OP does not understand them and is like many other invesetors that don't understand how banks work.
and only understands the basic buy a rental put a tenant in it and love it..
both work and can work... most of my clients that buy notes tire of being landlords for X amount of years and just want to clip coupons.
@Terrell Garren as Terrell said if you love it great but it is work.. and many folks love this stuff they love going over and tinkering on their houses .. keeps them busy and engaged... Others like me the last thing I want to do is talk to a tenant or work on a house LOL..
were as notes done right is clipping coupons.. I would say at least 90% of our clients sell off their rentals as they get into their 60s and invest in notes.. at that point they are far more educated in how it goes on both sides of the equation.
but at the end of the day its what you understand and are comfortable. with.
But as you mention there are alternatives REITS being one.. if accredited going in with some top shelf syndicators will get you a 6 to 8% coupon.... and most rentals at the end of the day won't do any better. Notes done right will do better and will have that command and control folks like.
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
I want to clarify myself personally I ONLY deal in performing notes.. I am not keen on NPN personally .
read the article you mentioned, Don who wrote it is a frequent poster on BP and one that I highly regard. And I agree with his thesis.
but there are people that do well with bad debt.. so we just cant say bad debt cant be reworked.. but its a Job..
I don't like to work notes..
I like to put them in service and collect payments and never worry about them. or have to deal with the trustor or mortgagor other than to send in a payoff demand statement and sign a reconveyance or satisfaction.
@Llewelyn A. if your going to buy rentals though I would follow Lew's advice to the letter.. buy top end and not bottom end.. nothing is worse in this life then dealing with tenant drama in my mind.
I owned over 500 C class and low B class.... the greatest day of my life was when I sold that portfolio and put that chapter of my investing life to bed... at my age and I am over 60 the last thing I want to deal with is others drama and their financial problems.. which is what low end tenants are all about 90% of the time.
- 8yIan IppolitoBusiness MemberInvestor · Tampa, FL · Member since 2015 · 1k+ posts · 1k+ votes
@Larry Johnson, Flipping homes can return more than being a landlord. However, it is also more risky because if the market turns on you, then you take a loss. And since most people use leverage, this makes the losses worse. Also, construction and rehab costs are going up around the country, so this makes it more challenging to stick within budget. It's also getting more and more challenging to get the labor required to do rehabs in many areas of the country. Again this drives up costs more than expected.
It's also a lot more labor-intensive because you have to be constantly looking for, acquiring and flipping houses in order to keep it going. And then you have to know when to stop, and not get sucked into a downturn. Many people couldn't stop rolling the dice in the last downturn, and got killed (some of them losing everything).
A landlord on a long-term hold (which is what you seem to be describing) yields less, but is also a lot safer. Since you're not going to try to flip and sell it in a couple of months, you don't really care if the value of the house goes down, as long as the rental income stays steady. So this insulates you from price drops during real estate recessions.
Also, you do have the same construction/rehab problems as flipping houses at the beginning. But this gets a lot easier after your initial rehab has been finished and you simply have to do proper maintenance. So you're much less unlikely to accidentally blow your budget due to rising labor costs etc. (Assuming you have set aside proper reserves, of course).
So the biggest risk is that you're not able to meet your mortgage payments, and lose the house because rents went down too much in a downturn, or you had too much turnover due to tenants losing their jobs etc. If you stick to solid properties in good neighborhoods, the risk of this is a lot lower than questionable properties in sketchy neighborhoods.
Being a landlord is a lot less work than flipping, if you've screened your tenants properly and you have picked your properties well. Also, many people will simply outsource that part of it with the property management company, so if you're looking for even less work, that is also an option.
The Real Estate Crowdfunding Review - 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Ian Ippolito very good post on the state of rehabbing as it exists today..
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes8y
Originally posted by @Larry Johnson:
Hello, I'm nearing retirement age and I'm considering buying a rental property. Am I insane! Was it worth it to you financially? Did you lose money your first year? I've heard horror stories and success stories. Do most people lose money like first-time flippers, or do most become successful? Is becoming a landlord more risky than flipping homes? Thanks much.
I love this business.
- Is it hard? Yes.
- Is it awesome? Yes.
I've seen it all. Drug overdoses, Theft, Murder, Lawsuits, Property Damage, even had a tenant try to burn down my personal house.....The wins outweigh the losses though. Real Estate has drastically increased my net worth & quality of life. Wouldn't trade my time in this business for anything.
- Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes8y
I agree with @Ian Ippolito. Of tou take tour time and learn from BP (and elsewhere) you can do well in buying rentals. Also, I personally wouldn't want to buy rentals in a market where there isn't good cash flow from rentals. And keep in mind, if managing is more work than you want you can hire a property manager.
- Investor · Kansas City, MO · Member since 2017 · 791 posts · 1k+ votes8y
You don't have to be a landlord to invest in rentals. Just make sure you find and invest in an area where there is a great property manager. I've been a landlord and did not like it at all. I retired in 7 years of investing, and I spend about 1 hour a week between answering some questions for the PM, transposing statements from the PM into quickbooks, and some year end accounting.
- Investor · Port St. Lucie, FL · Member since 2017 · 56 posts · 22 votes8y
The bottom line is being a landlord is hard work and the profit is all earned. The myth of easy money after becoming a landlord is a fraud.
- Phoenix, AZ · Member since 2017 · 8 posts · 1 vote8y@Patrick M I’m a newbie looking to get started in the next couple months, what bill are you referring to with SFH’s? I also live in AZ if that makes a difference!
- Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes8y
He's referring to the new tax reform bill that has become law.
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