What makes a slumlord
IL · Member since 2010 · 46 posts · 1 vote
Ok for the landlords out there question.
I did math on a bunch of properties and saw in my area the only way to make positive cash flow on a property is that it starts around 6+units which is like 800k starting, and the only other way is slumlord in crappy neighborhoods and who says you will get any rent money from these guys?
What am i missing?
Please define "crappy neighborhood".
My rentals are working class, mid to lower income housing. I provide a clean house at a fair price. They cashflow well. I have had my share of good tenants and bad. i am not a slumlord. I reinvest some money into maintenance on my units. I have them cleaned between tenants.
I have friends that have high end rentals. They have their share of good tenants and bad.
To me, a slumlord is a person that takes the cashflow and never does any maintenance on his property and runs them into the dirt. Then he wants to sell them at top dollar and is outraged as to why he isn't successful. Just my opinion.
it just doesn't make sense to me, a slumlord buys a property for 100k has to chase people around to get rent money always evicting someone, just to maybe clear about 3k a year on that 1 property. I mean i make more than 3k a year with just the dividends on my stocks. Seems a Slumlord is a Lose, Lose situation. What am I missing here?
Crap, my town isn't "densely overcrowded" so I don't quality as a slumlord anymore. Nuts....
But then again, neither is Springfield, Missouri (unless you're at Silver Dollar City in June) so Bill has never met a real slumlord either.
Here's the lowdown with low income housing. It's a starting point for investors who want cashflow.
It takes very little money to acquire and get low income housing cashflowing. The flip side is you won't have much equity in 1 house and your exit strategies will be limited. You're basically looking at renting it or selling it to another landlord who will not pay full retail. It is more work to keep them working but really not that much more. I have a house I bought for 12k that a tenant is moving out of this month on the 3rd after 1 year of living there. The new tenant is moving in on the 13th. Is there more work with getting new tenants more often? Sure, but this 12k house gets me $550-575 a month. Stick that in your spreadsheet and smoke it. It doesn't take a lot of judiciously purchased 10-12k houses to eliminate the need for a full time job. I haven't had one for 3 years now.
That's pretty much what low income landlording is. That's why some people do it. Most people can figure out a way to put 100k together and can use it to get started.
Btw Mike - don't feel bad. My first investment was a $210,000 house in Chicago I got like $1,400 a month off of and thought I knew everything about cash flow because of that. It really is a Chicago thing to become accustomed to real estate that just flat out costs too much money.
Not at all. It's a collection of properties about and hour and a half from Chicago in Indiana.
Yeah i look at some really good cash-flow there just that its kind of far away if something happens to the property
What could happen to the property? And btw - it takes longer to drive from the north side of Chicago to the south side of Chicago than it does to drive from Chicago to Laporte, Indiana. What's important, the distance or the time it takes to get there?
Mike,
I am here in Ft Wayne and have similar experiences to Tim in terms of price to rent ratios. Even though I live here, I utilize a property manager. I still have issues but I have managed my own before and do not enjoy the property management aspect of owning rental property.
Before my wife and I starting buying rentals again 2 yrs ago, we interviewed property managers before we ever looked at a single home.
I will give you an example of why I utilize a property manager. In Jun, my property manger calls and tells me that someone has driven a car through one of our homes. She has already worked with the police prior to calling me. I send an e-mail to my insurance agent and get the process started. I have made a handful of phone calls and sent about the same number of e-mails to have this entire issues settled to include the 14K rehab. I chose to not drive by the home even though I am right here in town. I have pictures of the before and after. So even though I am in town, I did not need to be.
You may be wondering why someone would drive a car through a house. Turns out my tenant was dating former boyfriend of car driver. Still working the issue to have my deductible paid by the car insurance company and I am working with the prosecutors office to provide documentation.
I tell this long story to illustrate that with an appropriate team in place you can invest out of your local area.
I am sure that Tim could help you out where he is working and I would be happy to introduce you to any of my team members here in Ft Wayne.
Best of luck to you
Chris
As they both said, Indiana is the place to invest if you live in Chicago. $150,000 can you 4 or more $800+ rentals in Indianapolis. I had an offer in on a property a while back that ended up selling for 14K, needed 10k in repairs, and will rent for $1200 a month.
Check all the "top real estate investment" city articles and you'll see Indy there somewhere.
Hell, I had a 6plex in a small town making $1900 a month that I picked up for $60k.. still beating myself up over selling that one.
a lot new york investors buy in southern jersey(camden, atlantic city)
One of my lower end rentals...a small 3-1 sfh, the tenants have been there 3+ years and have been late one month. They called that month and arranged for the late payment.
There are good and bad renters in all economic levels and social groups. It's up to the screening process to determine who is probably going to honor their obligations.
Yes, I'm back...well, Springfiled Mo doesn't really have a slum area like large cities, and I have been to them. Tim, you're not that familiar with Springfield then, there is an area known as "little Italy" (why Italy I have no idea) it's basically behind the Wil FIsher Beer Distributorship off the 13 By Pass, if you know where that is. Several buildings, I dare not call them homes. I was inside one, I think it was originally a garage and walled up. Newspaper stapled on one wall of the inside to the outside siding, that was the insulation..the floor was on the ground and uneven, one room was a dirt and brick floor! They had burned wood in a barrel to supplement heat. There were three lights in the house, one dangled down by the twisted wires to a light socket that years ago were used in closets. The bath had a concrete floor, no bathtub, but a metal shower stall. Three people lived there, I don't remember what the rent was...like 275to300.
There was a teenage girl (highschool) that would not come out of a room when I was there. We talked for a few minutes and asked where she was, they said she did not want to come out that she was too embarrassed to let anyone see her living there. I asked about her friends, she attended Parkview High, my old school, and she had never had anyone at the house. She called her mother in and wanted to go outside and asked if I would promise to look the other way while she walked out of the house. I did and she left the hosue. The kid was so embarrassed and upset crying that someone would see her living there and that the word would get back to other kids at school.
The parents; he was a truck driver that was in a car accident and lost a leg, no job. His wife was plain skinny and just ill looking, she had medical problems but have no idea what was wrong, whe had a stroke, but said she could work if she could find it. The cleaned houses and he had a push mower to mow yards. They did not have a car. They were on the waiting list for Section 8 and the list was only about a year at that time. Their church helped them alot and they were trying to find another place to move to, I was on the Board of Directors for Habitat for Humanity here at the time, that's what I was doing there.
I really can't describe in this forum the feelings I had and still have for the SLUMLORD. And yes, in my past I did everything I could to get that placed condemened, and it was. There are still other buildings in that neighborhood that are slum properties, IMO, but none that bad!!
As far as I'm concerned that property owner shouldn't even be breathing my air. I believe he has lost most, if not all, of his properties now.
If you would like to see some other dirt floor dumps, go around Eniad (sp?) OK, lots of indians living in the area with some pretty bad conditions in the county.
Tim, speaking of dirt floors, Carol Jones grew up in OK in a oneroom house with a dirt floor and went barefoot to school! Carol Jones built one of the largest real estate sales (#2 at one time) companies in the state and is nationally recognized as a leading business woman...and a good family friend for about 40 years..
You think slums are just for large cities? Not at all, and I never though you were a slumlord Tim.
Now you all know why I have such a dislike for real estate opportunists, they aren't investors!
It's not up to some bureaucrat to tell you what your lease should have been or what the laws should be. Choose an area with judges that have their heads on straight and get your day in court. I know from personal experience that Springfield, Missouri judges see right through these tenant games and apply the law as it is written well. What a bureaucrat threatens doesn't matter as long as you're following the law.
Tim
None of this really has anything to do with bad tenants, and there seems to be way more bad tenants than bad lardlords, I have been lucky in that I never really had a real bad tenant. No, it wasn't luck, it was good processing and management, what was I saying!
I mean does anyone work Full-Time and still do Land-lording? Its gotta be hard, all that pops in my mind are the problems: My Heat/Air don't work, My toilet wont flush, the basement is flooding, and the way life goes, they will call you 10minutes before you start work.
Mike K, if you have another life and rentals, you really need a handyman on call, someone who can get over there and take care of small emergencies. If you have to take off from a paying job every time you get a call, you probably won't have that job very long.
Mike,
I have a very demanding job that requires not just the 7 to 5 but I routinely handle phone calls, e-mails, and meetings on nights and weekends.
That is why I want a property manager. I do not have the time nor desire to property manage even if I did have the time. The key is to purchase in areas that cash flow with property management in place. I know that there is plenty of discussion of what areas are good for cash flow rentals. I know that Eddie Ziv lives in California and invests in Birmingham AL.
There are plenty of examples here on BP of investors going outside of their local area to find opportunities that work for them.
You will have to decide if you want to invest for cash flow, appreciation, or some combination thereof.
I would encourage you to keep asking questions and searching until you are convinced that you found something worthwhile.
I have helped several other families get started with rentals here in the area. They will normally ask me to go with them to look at houses. My response is always the same: Go walk through 100 houses and when you are ready to make an offer, I will go with you. You might have already guessed that by the time they have walked through 100 homes, they know what will make a good rental.
Good luck
Chris
Oh hey quick question, would anyone know any good website that tells you about the property and how much each unit rents for currently?
Thanks, mike