Longtime Landlords: All it's cracked up to be?

[Paul C.]

I've only been buying and renting SFRs for just under 2 years, but so far the experience has been pretty good. I've been able to acquire several properties with an average unlevered yield of 8%. That's based on the 50% rule and corroborated by my estimate of expenses.

I have to wonder, though, if I'm missing something. The math would say that if I want 120,000 of rental income, I just have to scale what I've done to 1.5mm worth of properties.

1. Is it really that straightforward (not going to say easy, but straightforward)?

2. What happens in 10, 20 or 30+ years? Do they really just keep pumping out stable cash flows that grow with inflation or do you end up with a bunch of decrepit houses that no one wants to rent?

3. What are the long-term risks I may not be thinking about? e.g. a Detroit type scenario?

4. If you've been doing this for 10+ years and have grown your portfolio of properties to 10 or more, did everything pretty much gone as expected from a big picture point of view? What were the biggest surprises if any?

Thanks!

[Account Closed]

Every post is "right on". I am a retired landlord. My husband and I did own properties in Detroit for 30 years and the outlining areas. We owned 40 properties and it was EXCITING. It was a CHALLENGE. But you know what? We were so busy and happy doing what we were doing that we didn't anticipate growing older, therefore the best advice I can give you is to make sure you have an EXIT PLAN! Especially for the day that YOU cannot physically do all the work yourself. Even though we had various handymen to help us with the work, we still did the physical labor ourselves for awhile, until the old bones were causing us to eat Tylenol like candy, then we turned over most of the labor and repairs to our handymen, but the more dangerous Detroit became, the more our handymen stopped working for us, because their vans were stolen and their toles taken, and even one of our men, lost his life. And soon we found ourselves having no handyman want to come to Detroit and work with a ten foot pole and we were alone. Trying to take care of 40 rental units and everything else that is involved in being a landlord including handling my own court cases, was overwhelming, and in 2009 we finally sold our homes and took a great loss.

When I first began being a Landlord I didn't have a clue how to get tenants to pay their rent. I was frustrated every moment of the day, to the point that I wanted a Divorce! I wanted out! But my husband's favorite words to me were, "Yea, sure, just pick up your baseball glove and go home to mommie and daddy. You're not a loser! You don't quit! You're a winner! " And I knew he was right. I wasn't a quitter! Being a Landlord is and was and still is, to this day, what defines me and is who I am and always will be.

So...being a person who has always been a business woman from the day I was born, yep I was born with a pencil behind my ear, and a calculator in my hand, I decided that I had looked at this entire adventure completely wrong. Instead of looking at landlording as a business, I viewed it as just a person who bought houses and rented them out, just like every newbie feels when they first get into this business! And, that, my BP friends is where we go wrong!

That day, I developed a business plan and I put it into action. I no longer fought with tenants over rent verbally or ever, I never got frustrated because I let my Lease Agreement and the law work for me. And I had a plan. I had rules and regulations in the tenants lease agreement which is a legal document I studied the landlord/tenant laws and the City Ordinances of where my properties were located. And I began setting up my home office like it should have been setup, with the right equipment to help me be a winner.

Everything I did I put it in writing and I mean everything. Every conversation I had with a tenantand I followed up that conversation in writing and sent it to the tenants confirming our conversation of that day.

I purchased Vonage Phone and all voice message were recorded and a record stored to my online account. The day, the minute, the hour, how long the conversation went, etc. And it kept a record of my phone calls to them! Vonage became my very best friend along with Stamps.com. Stamps.com recorded every letter I sent, the date, the time, and how I sent it. Two very powerful tools that helped me from going to court over every little thing. It proved my cases in court and I never lost a case ever in my landlording career and I handled them all myself for 13 years.

Once I viewed landlording as a business, it began to run like a well oiled machine. My tenants were happy because they found stability with me, and my tenants stayed with us long term, some for 20 years.

Do I miss it, yea I do, but I'm still involved in other ways now.

I hope I have given you incentive to stay the course, just be careful where you invest. Develop a plan, and have an exit plan. Take care of your tenants. Make them happy, and you and your family will be happy.

Always make sure that you have profit of at least $100.00 per rental unit when all expenses are paid. Not every house will have repairs done to it every month so you will have big profits most of the time if you run this as business and do things right.

One other tip. Try to buy as many houses as you can and keep buying. Having one house or two or three won't cut it. You have tenants who won't pay their rent. You will have vacancies. You will have repairs that you didn't anticipate, like furnaces, new roofs, water heaters, things that go wrong. The more houses you own, the more those houses keep you running and going and able to pay those repairs without stress on you and that's what makes you happy. Having enough Equity in your investment, in your rental homes, helps maintain that investments and it just doesn't get any bettere than that!

Good luck to you

Nancy Neville