How easy is renting?

Question

I recently read "Landlords grow rich in their sleep". Is renting a unit as easy as purchasing a unit, hiring a management group, and collecting the cash flow?

Loc R. · Answer

I think all landlords should have some experience with managing a property. Think about it this way: a PM only gets paid if the unit is rented. Therefore, how hard do you think they're really screening a potential tenant? Or are they just looking for something with a heartbeat? At some point due to the economy of scale and with your time being more valuable elsewhere, PMs do become worthwhile (assuming you can find one worth their fee). However, I know of a few of old (rich) landlords who still manage their own properties. That probably had something to do with them becoming rich.

Ken Latchers · Answer

If a few MF properties, I would say buy them close by and manage them yourself. You need to learn all aspects of a property, and you cannot if some stranger is handling this.

Brian P. · Answer

In my early years the old pros used to say there are two licenses that are a license to steal, a probate attorney and a property manager. That is still true today sort of. I have made money by buying poorly managed buildings and putting them back on the road to success. The price a landlord pays for management is more then the percent taken for the service. I say learn the business yourself before you get a company to do it, many a bar has gone out of business because of a bad bartender.

Chris Masons · Answer

Look at it this way. If your not managing your property, you are managing your PM or should be. NOBODY is going to take care of your property better than you will. While managing a PM is in theory alot easier than managing a property and a bunch of tenants I prefer direct hands on approach just my style always has been. I guess when you get to a certain point maybe you should hand the reigns over to a PM but that point is different for everybody. IF your just gettign started I would try to self manage first year and get your feet wet and see if this business is really for you and learn the ropes as there really is ALOT to learn when it comes to being a landlord. You need to know how to deal with all types of people and at the same time be knowledgable about household problems - or at least come across like you know LOL regards, Chris

Andrew Jones · Answer

Even if you have a PM you still have to stay on top of them. Especially when you buy a distressed building that you need to stabilize which is where you will get your best deals.

Tod R. · Answer

I agree with Mike Hasemann. For your first few deals, you may give up your cash flow if you have a PM but you still get the other benefits of REI, especially tax deduction & equity buildup through mortgage paydown. If you decide to manage yourself, you will have a part time job for sure. You will also get a good education. Either way, it's just not that simple.

Mike H. · Answer

I'd be a little hesitant to go with a property management firm off the bat. That management fee in your first few years may be the difference in your profit or loss - especially if you factor in what they charge you for leasing the property. 8-10% of rent plus 1 month's rent for leasing the property. But keep in mind too some of the other ways you're making money. Even if you're breaking even on a house, you're still making money. 1) Appreciation - not much of that right now but traditionally houses double in price every 20 years. 2) Tax write off - you can write off up to 25k per year unless you're a real estate professional (i.e. full time job is real estate), but only if you actively manage your properties. Depreciation is a beautiful thing. 3) Mortgage paydown. Regardless of the appreciation or net cash flow. You know you're going to be paying down the mortgage. So, when you say you're going to get rich quick in your sleep, I'm sure that was more for effect. But I can say that I now have 16 properties (just closed on #16 on Monday) and the management of them is all surprisingly easy. Expect a couple of those to be late payers with sob stories on why they're ALWAYS late. And a few repair calls every month that I just call the handyman to take care of. The turnover is the only real headache as I'm still doing the make readies myself (paint and clean). I'm getting closer to handing that off too and then it will be like making money in my sleep. My advice is to jump in now while the getting is still good. You'll be kicking yourself big time in 5 years if you don't!

Neva Williamson · Answer

I would have to say absolutely not. I owned a multi-unit for a few years and it seemed like smooth sailing. Then boom I had to do two evictions in one year. This was in NYC, where you are required to go to court to complete evictions. That year seemed like complete hell. I made it through but it was tough and I really had to answer "Why am I a landlord again?" about a thousand times. So I say when things are going good, yes being a landlord is easy as pie but it can and will get rough. I definitely don't say this to deter you. I am still a buy and hold girl and I probably always will be. The benefits to me outnumber the headaches.

Account Closed · Answer

Landlords may be on call 7 days/week. I currently self manage all of my rentals and for the most part they are on autopilot. I do spend time collecting the rents, do get calls about domestic problems, do get calls about repair issues and host of other things that come up. I know for sure that landlords can make good money over time simply because I have. It is not a get rich quick scheme, but it can be a get rich slowly investment. Like any investment you have to buy right. You should know what you are getting into before investing. You should keep in mind that real estate is not as liquid. You also want to make sure that you have reserves.

Ryan M. · Answer

Landlording is a 7 day/week hands on job. People forget the risk, like a basement getting flooded and then getting sued by the tenants for their possessions all while there is no income coming in. I managed to lose 13k on ONE property in a year, this included Excavating around the property to install drain tile, all of which we did in house with a skid and a excavator.