Posted over 7 years ago

Attributes I stay away from when buying rentals

I look at a lot of properties, and over the last 2.5 years I've been investing in rentals in the Milwaukee area, I've come up with a few key attributes that I stay away from.

Fireplaces

I just have a desire to not have tenants start fires in houses that I own.

Only 1 Bedroom

My lowest bedroom single-family homes are 2 bedrooms. Those type of SFH are nice because you can rent to a single mom with a kid, or to an older couple without kids. I can't see getting good rent and finding a decent property with 1 bedroom.

Boilers (versus furnaces)

When I was growing up we had a boiler and radiators for heat. I hated it. It always seemed cold to me. That's the emotional side. On the practical side, boilers are more expensive to replace than furnaces, and are more expensive to deal with because of their parts and finding technicians to work on them. With a furnace you can connect an A/C unit which is a nice feature for a property.

Oil Tanks

I stay far, far away from oil tanks. If a property has an oil tank in the basement, I don't even look at it.

Bad Foundation Problems

If a property has a minor foundation problem, I would consider it (I did buy one like this before). If it has major issues, then I'll skip it.

Too Much Rehab

I've taken on properties with a lot of rehab. I don't like it because as a rental, you want to get people in and renting the property quickly. So this was a learning experience.

Can anyone else think of attributes they personally stay away from? And why?


Comments (17)

  1. The last property I bought had an addition. It was poorly done and unpermitted, so I got a concession from the seller (bank). I had to undo the whole thing (demolish addition, install sliding door and siding that was removed, etc) but in the end it worked out great. Oh, and I only got it because the highest bidder backed out when he found out the addition was illegal :)


  2. h20 problems


  3. Knob and Tube wiring and old plumbing may also be added to this list Potential high expense. Bars on windows/doors potentially. And termite inspected of course. :)


  4. I'm also hesitant with homes that are equipped with septic systems.


  5. I stay away from the following: Flat roofs, main roads, heating systems that are other than forced air, homes built before 1940, and bad additions. I could just say additions, as most seem to be poorly done.


  6. I understand Amy's desire to avoid flat roofs ... we actually put a roof over a six-unit H-block as it was going to be cheaper over the long haul. However, flat roofs are a reality for larger buildings and they do have some advantages ... they are wonderful places to mount solar panels (solar thermal for DHW or photovoltaic) or to rent out for cellular antennae mounting. We looked at a house a couple of years ago that had a ice rink in the back yard (apparently there was an old tennis court there for summer use) ... I lump those in with pools and we took a pass.


  7. Robert, that brings up a good point. Once I saw a house where someone did some DIY really, really badly. I would not take on that house because I'd pretty much have to "undo" a lot of things that the person did in order to do them right. And if they did things incorrect that I can see, what can't I see (behind walls) might they have done badly as well?


  8. Some of the worst are attempted carport and garage conversions to living space. I can't recall ever seeing one that I thought was well done and a good idea. They almost always create a disproportionate amount of living area to other homes (comps) in the neighborhood. All while taking away an amenity that many people want, covered parking. Extensive DIY remodels or additions. Especially when there's part of the home with crawlspace and part on a slab (concrete foundation). If the part with a crawl space needs leveling, how do you level it when its attached to the part on the slab? Bad floorplans. Sometimes it's just not worth it to start moving walls to correct a poorly laid out floor plan. Flood areas. I don't expect to ever live in one, because we get serious "flash floods" in Louisiana. I never want to worry about the water rising when I hear it raining at night. Likewise, I wouldn't want to hear one of our rainstorms and start wondering if my tenant's stuff was about to start floating. I'm glad you created this topic Dawn. It's good food for thought for new investors to be aware of!


  9. Great topic Dawn!


  10. Interesting topic! Here is my take, I prefer 3 bedrooms 2 bath because of a variety of reasons i.e; resale value, low turnover, high demand, etc. Foundation issues are usually scary. They could turn into a huge problem. Stay away from them. I prefer house with a garage as well as they are in high demand in my farm area. I also prefer single story over other styles because of low maintenance and repair cost. Hope it helps.


  11. Those are some good additions -- I would not buy a property as a rental with a swimming pool. Also would not buy one in front of a bus stop, as you would tend to see a lot of litter in front of the home.


  12. Swimming pools, bus stops, conveinience stores, neighbors with bad collections of anything or big dogs.


  13. Another reason to prefer furnaces is because there is less damage in a freeze-up if they break down. If your tenant forgets to fill the oil tank or moves out without telling you, you will just have your domestic water pipes to worry about, not hot water baseboards or radiators or the entire boiler freezing up and the resulting flood! However, people around here like boilers because it gives a more even heat. We also have no choice as far as oil tanks, since many areas do not have natural gas and propane is very expensive. I am finding that I prefer rentals in areas that have natural gas available. I'm currently converting two buildings from oil. Another thing I like to avoid are flat roofs and buildings without enough parking. I like my 1 bedroom apartments - fewer people means less drama. However, I can see it would be a setback for a house.


  14. Thanks for the insightful article. I was able to have an old oil tank with some oil in it removed by being drained and cut up to be carried up a narrow basement stairway for $500.


  15. As a rule, we stay away from oil and fireplaces as well, though one of the buildings we are evaluating now has an oil fired boiler - conversion to a high-efficiency gas unit will be baked into our numbers if an offer is made. I'm not threatened by a lot of rehab if the acquisition price is right - though I appreciate the "let's get it making money now" approach. If we were investing primarily in SFRs, then we might well stick to the same modus operandi. We've performed several deep energy efficiency retrofits now and are becoming fairly proficient and estimating the rehab on properties we evaluate. Where we are mostly looking at 4+ unit properties, we often have the option of renovating one unit at a time. Shaun: I like my 1bdrm places to come in six packs ... its a good balance of building envelope to rentable space. We looked at a 10 row house property last year comprised of 1 & 2-bdrm houses, but took a pass ... in hind sight, we could have pushed a little harder on price.


  16. I generally feel the same way that you do about 1BR places. However I know some people that have them and in the areas they are working in they say they are some of the easiest places to fill, have some of the longest average tenancies and cash flow well since rent/sqft is higher than bigger places and you get them a lot cheaper since there is little demand.


  17. I, personally, just bought a house with an oil tank. I had the oil burning furnace replaced with a gas furnace. This meant I had to get the gas company out to run a gas line to the property because it didn't exist and install a meter. Then I had to get the oil drum removed. I had gotten a $2,000 reduction in purchase price because even if I kept the oil burning furnace (which was over 30 years old and a monstrosity), I needed to make expensive repairs to the chimney. Instead I stuck the $2,000 into a new furnace. I'd do it again. I've bought rental properties that need virtually no work and my most recent one that needed a lot of work. Definitely easier to buy those that need little work but they tend to sell faster and for a higher price than if I buy a cheaper place and do some work. I have not ventured into a property that needs structural repairs. Good article!