All Forum Posts by: Rich E.

If you are comfortable you have built in enough reserves for vacancies, maintenance, capital expenses (sounds like most of the major items are new) then it does not sound crazy to me. 

Gardi-  I think the real question is do you have enough cash to cover the vacancies and the "sh!t happens" if you have a bad run right out of the gate? 

Also, you mentioned you have a property manager.  If cash is tight, I would try to take on those responsibilities and keep the 8-10% from coming off the top to give you some cushion.

Good Luck,

Rich

My $.02.....I am running a business.   Would the utility company let her skip paying?  Would a bank forgive loan payments?  My guess is they both have bigger pockets than most landlord but they are run like a business and would require payment.

Many others have said, what if it was your mom or sister.  If it was, I would help them, they are my family. She should be looking to her family, friends and charities to help her, not a business owner.

Look, I personally feel bad for anyone in that situation but I seperate my personal feelings from the business.  I would not be mean, I would just follow my normal business prosses for dealing with late payments.

I am Indiana but rent is due on the first and they have a 5 day grace period.  On the 6th, I give them a 10 day "pay or quit" and after the 10 days, file for eviction.  DO NOT DELAY this process regardless of the story!   Every time I have, I have got burned.  Once people living paycheck to paycheck are behind, they can never catch up.  The process takes several days so if they would happen to come up with the money, you can stop.  Odds are though you will be repeating the next month.

Agree with many others, huge red flag.  proceed carefully.

My last few deals have came off the MLS but they are getting harder to find in my area (near Cincinnati). I seem to have better luck in the winter when there is less competetion. I take off the last two weeks of the year and look at houses that have been on the market for a long time and make a lot of offers. This landed me two deals this year but I am not having any luck this spring with all the competition from home buyers.

Yes, I do this quite frequently.  It is uncomfortable but part of the business.  As

@James DeRoest said, jus have it in writing.

@John Underwood 

25% is the going rate for vacation rental at least in that area.  It does cover some other things like credit card fees, etc.

@Jay Ritchie We are close to break even on expenses and we do get to use the property (but there is always work to do when I am there).  I think the opportunity cost of the capital tied up bugs me the most.   Wish there was a place where you could make a little money on your investment plus get to use it.

I have had a vacation rental in Dauphin Island Alabama for a few years now.  We love to load up our large dogs and take them there with us on vacation (not easy renting a place that will accept 90+ LBS dogs).   The house rents fairly frequently at local market rates but does not even cover the basic expenses let alone a mortage payment/opportunity cost of capital (it is paid for).  When you are near the beach you need hurricane and flood insurance which are not cheap.  Additionally,  we are hundreds of miles away so it would be difficult to manage it myself so there goes another 25% in mangement fees. 

Does anybody know of an area, near a beach, where this is actually profitable?  

I get 10%+ cap rate for the rentals I own in Indiana. If I sold the vacation rental and bought property there, we could take some sweet vacations on profits (not sure what the dogs would do though:-) ).