if you want real estate exposure, just put some REITs in the portfolio. let the reits managers handle the tenants. definitely not worth the headache to do this on your own.
Just a different perspective but we have done OK with our two investment properties. The first is a house we bought in suburban Atlanta with the proceeds from selling one in the Orlando area that was 60% less sq.ft. back in 2005. We were figuring that Orlando had much more downside AND we were trying to defer the capital gains so had to buy within some short time (I recall 6 months). We have never had a problem with tenants and they have payed on time 95% of the time. THe second one is a short sale condo purchase in Orlando that we picked up in 2008 which was a little premature as REOs are now selling for 20% less than we owe but we are not in a rush so not TOO bothered. The tenant is great, a grad student with a family that pays 4 months at a time when she gets her stipend. Hate to see her go, especially after the posts on here (and no headaches at all as she didn't even tell me that the air was broken for 6 weeks last summer and we are in Florida, think sweltering swamp.) IMHO, you are more likely to get "bad" tenants if you are a slumlord (which, i would say Section 8 qualifies as such) but then, it is much more difficult to have a monthly positive cashflow if you are buying a $250k house to rent out, at least here in Central Florida. On the other hand, there are relatively safe condos (regarding HOA special assessments) that you can get into for $35k and rent out for $650-$700, which would more than cover the monthly $250 HOA and $70 prop.tax. SUre, you have to consider the cost of the place but in 10 years, that is recouped or say it is unoccupied 20% of the time, you are still looking at 13 years and then the market MAY have turned into a seller's market, especially because historically, real estate locations that have boomed tend to do so again. Either way, as in the equities market, there is some risk. As with any trade, I am prepared for the worst case scenario, in this case, no renters and major repairs. However, I think the odds are in my favor to get in down here now IF i get one of the steals but I also think there will be heaps of sdeals for at least the next year if not two, so patience pays. Good luck to all
i had units in lower-income (working-class) areas and some units in middle-class areas. the working-class ones had the lamest tenants and the most deadbeats. i used to feel sorry for poor people but not anymore. i saw firsthand how they're responsible for their shitty lives.
consistent employment background is a good indicator of a tenant's likelihood to pay on time. if someone had 6 jobs in a year, do not rent to them. those people WILL be late on rent or skip out on the lease, almost guaranteed. if they're not responsible enough to keep a steady job, they're not responsible enough to manage money or pay bills. the deadbeat warning sirens should immediately go off when you encounter a tenant like that
I'm a landlord, there was once a golden time to own rentals not anymore, given I 'm in the Detroit area so my opinon is of my own experinces, section 8 tentants can and wil be tossed out of the section 8 program for excess damage, however generally they are people some exceptions elderly, some in school, etc, that can't take care of themselves, again there are exceptions, I saw the covered call post it does make sense, however it my not be right for everyone, things to keep in mind, whats ur goal? how long? looking to build equity? looking for a project?, don't laugh it happens looking for income only and don't care , options are the way to do u have the time to deal with it, showings, fix its etc, do u have the appitude to deal with "those people" wink wink? Are u handy? what will painters/plumbers etc run u? rentals can drain you mentally, and $ do u have the balls to toss someone out who lost their job??? or has a medical condition? How do you handle excuses? I been involed for 15 years in the rental biz once owned 4 buildings, you will hear it all and see it all, every possiable excuse u can imagine and then some. I was also a finacial advisor, be careful on ur choice? weigh ur options
Excellent points. Taxes are also more complicated if you have a rental property. If you draw income from it, you are subject to tax.
What's complicated about paying taxes on income? [/QUOTE] You have to learn the tax law, you have to account for all of your income, which may have come from multiple tenants (including the receipt and return of security deposits, pet fees, etc...). You have to account for all of your expenses, which may or may not be deductible. You have to gather the forms for your property tax, mortgage interest, HOA fees, special HOA assessments, and all other expenses including mileage, cell phone use, repair and improvement costs, etc... Also the value of the rental property needs to be depreciated over time (just the structure, not the land). All of the above costs may have been variable throughout the year, and you can only include expenses made during the tax year. This could mean, for instance, that you need to include the 2nd half of your 2009 property taxes and the first half of your 2010 property taxes, depending on when you actually cut the check. If you have a loss, it may or may not be deductible depending on your total income for the year. You may or may not need to carry over any losses into one or more future years if you don't qualify for the deduction in a particular year. It also may have AMT implications and the tax deductability may be affected by what state you live in as well as what state the property is located in. My accountant charges approximately $300 to complete the federal and state rental property tax forms and worksheets. This year I did them myself for 2 rental properties and it took me about 4 hours to prepare everything. If you have not done it before and aren't familiar with it, I would estimate it could take twice as long or even more. If you have not been diligent with tracking expenses throughout the year, it could be even worse. You're right, though. Once you're experienced with it and have done it at least once, it's not that complicated. However, it still takes time and it's always a pain in the ass.