Newbie - Should I get my feet wet?

Question

I have toyed with the idea of getting into rental properties for four or five years now.  I have the chance to get started now.  I am very green, so any input or questions on the following scenario will be considered a learning opportunity for me.

Here is my situation.  I have a mortgage on a house that my wife and I purchased four years ago.  We have done a lot of rennovations with the intent to sell and turn a profit.  To beat a dead horse, the market is terrible for selling right now.  I could use this house as a rental.

So I have a mortgage and credit in this house currently.  I would consider renting to try to turn this into cash flow instead of cash drain.  My personal place of living is not a concern.

What should I be asking, researching, etc.  I am reading other posts on here and other forums and taking it in a like a sponge.  So please, ask questions, tell me why I shouldn't, poke holes in my idea.  I want to learn and not be an idiot.

Thanks and have a great day.

Account Closed · Answer

I'm assuming that you will be managing your own rental.  Several things to consider.

Tenant Screening - you want good tenants that pay the rent timely, so they need stable income that is sufficient to pay the rent.  You want to know they are reliable that paying their rent especially, but other bills are an indicator as well.

Good Rental Agreement - You may want to look at rental agreements used at good sized apartments nearby.  I would have an attorney review it with you and make any necessary changes.

Once you have a tenant it is important to hold them to the terms of the agreement.  I would take some time to read through the landlord forum as well for useful advice.

Being a landlord is not for everyone, but it can prove profitable.  Many will advocate using a property manager.  This tends to be  a personal decision something you may want to give further thought as well.

James Shuler II · Answer

Started a family business with my parents in 1999.  That business has expanded into two and has included, design, manufacturing, brick and mortar retail, ecommerce retail, outdoor recreational facilty.  We have pretty well settled into retail online, & brick and mortar, and running the outdoor recreational facility.

I have been heavily involved in the daily decision making and act very much as a general manager.  I manage a small staff, and manage many of the business's projects.  All that said, I don't want to come off to impressive - we are a very small company and have struggled in the current economy.

Timothy W. · Answer

What is your professional background?

James Shuler II · Answer

Most likely managing myself, though I have a lot to learn.  I am interested in looking into a property manager but I don't know much about that.

Thank you to all three that have posted.  The guidance in where to look it greatly appreciated. 
 
The credit is not an equity line yet but will be soon.  It is on cards right now (BAD I KNOW).

I have not looked into what local rentals are going for in a few months so I need to brush up on that.  Taking all the comments and making myself a to do list.

Mr. Lewczenko, you mentioned "are you ready to re-repair"  What should I expect???
I am very familiar with the current condition of the house and know that the central heating and air unit is nearing the end of its life so I expect that at some point but what would a tenant want re-repaired?

Mat Lewczenko · Answer

You mentioned that you bought your home four years ago, that was near the beginning of the "slide". You also mentioned that you have a mortgage and a credit on your home? Is that an Equity Line?

Do you know what the current rents are in your area for comparable homes, and will they cover your current payment, or come close?

Also, in the next 12 months are you ready to re-repair your imporvements after the tenants have moved out?

Not sure if a "renter" is your best bet, depending on the answers to a few of those questions, but you may consider an owner-financing strategy. Lease-Option/Contract for Deed, where your tenant has a more vested interest in the property and will treat it as their own, instead of a rental.

James Shuler II · Answer

I have a steady job.  
Haven't started portfolio yets, though I have been studying that end of things.  
I can afford the mortgage payments without the rental income.

Dale Osborn · Answer

In order to survive - you need to have multiple streams of income coming in. By renting the home out for positive cash flow - you will have a stream of income that will help out should something happen to your JOB. In order to create wealth - it is recommended to have at least 4-5 streams of income coming in. There are 3 types of income: 1. Earned from your JOB. 2. Portfolio - paper assets like stocks, bonds, & mutual funds. 3. Passive: Good tax benefits, and this is where your rental home falls. The first 2 are taxed higher so best source of income is from passive income. When your passive income is greater than your earned income - that is the time to consider walking away from the JOB and going full time investor! Been there since 1994 and is rather enjoyable.

Newbie - Should I get my feet wet?

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