So much advice to not rent out places in my community

Realtor · Iron Mountain, MI · Member since 2019 · 18 posts · 4 votes

Hey!

I fully renovated an entire 3/1 home in a prime location (walking distance of everything), and will be renting it at an estimated $400 a month profit.

But, I have everyone - I mean EVERYONE in my community telling me to NOT rent and to flip it.

After capital gains, closings, etc, I would stand to gain far less than holding it...especially with an economic downturn coming.

My intent is a very rigid application process, including full background checks, references, and a $150 application few.

Knowing my goal is to build a portfolio of rentals for passive income, I'm seeking advice of my fellow BP'ers on if this level of resistance to renting is normal?

Thanks!

0 Reply

86 views

Most Popular Reply

Joe P.

Philadelphia, PA · Member since 2017 · 824 posts · 1k+ votes

Don't take criticism from someone you wouldn't take advice from.

Usually the people who have done the least, tend to talk the most (as someone who has only 1 current rental, and had a max of 2...I'm violating my own rule).

If you're unsure, focus on the logic and optics of this. Have you accounted for all possible expenses? Are you being realistic on the expenses and rental market? Does the condition of the property line up with your expenses? Does your expected rent/applicant pool line up with the real world, e.g. what you see on Craigslist, Zillow, Rentometer -- is everything in range?

If so, then proceed as planned. You can always rent first and then sell if its not working out long term.

My own father called me a slumlord when I purchased my recent duplex. Frankly if you can spend 1000 for a 2 bedroom, I don't think that makes it a slum at all, but that's just my opinion. Negativity and inexperience comes from like...80% of people...they are also the people with no assets, high debt, and plenty of gum circumference to flap on topics they know nothing of.

My only comment to you is your application fee is going to scare off a lot of people. I think its absurd, but it also depends on your rent. If the rent is $3000 a month, maybe its a good application fee. But I think anything over $50 is pushing it. You shouldn't be making money on applications and at $150, you definitely are. Another good thing would be to run your process and rationale of screening with another investor, because that does seem out of range to me.

3 Reply

See this reply in the discussion

12 Replies

Jump to latestLatest

Sort by

Tyler GibsonBusiness Member
Real Estate Agent · Orlando, FL · Member since 2017 · 1k+ posts · 2k+ votes
6y
@Lucas A Davidson I think it is normal for people to have a negative reaction to me telling them I have a rental. I find that people have either had a bad experience with having a rental or know someone who had a rental that went bad. These people either didn't have the right systems and tenant requirements in place or just got unlucky. If you know what you are doing and understand the risks, rental property investing can create long term wealth and financial freedom. I don't bother trying to convince people that it really isn't that hard.
[email protected]407-590-9858
GPG Team 598 Reviews
Website View Page
2 Reply
Jill F.
Investor · Akron, OH · Member since 2016 · 2k+ posts · 4k+ votes
6y
The interests of the neighbors are probably not the same as your interests. Make the decision based on what is best for you.

If the property is mortgaged, $400 would be really high for actual profit after mortgage & operating expenses. You'll want to be sure you have accurately accounted for all the actual expenses associated with renting the property.
1 Reply
Dawn P.
Rental Property Investor · Sumter, SC · Member since 2015 · 334 posts · 531 votes
6y
@Lucas A Davidson sounds like you have a plan and a great rental property - stick to your goals and ignore all the negative comments. When I bought my first rental, everyone from coworkers to in-laws had a rental-gone-wrong horror story they just had to share with me. A few told me I was dumb for not flipping, also, even though that was never my plan.
Stay the course and do what makes sense for YOU.
1 Reply
Joe P.
Philadelphia, PA · Member since 2017 · 824 posts · 1k+ votes
6y
Don't take criticism from someone you wouldn't take advice from.
Usually the people who have done the least, tend to talk the most (as someone who has only 1 current rental, and had a max of 2...I'm violating my own rule).
If you're unsure, focus on the logic and optics of this. Have you accounted for all possible expenses? Are you being realistic on the expenses and rental market? Does the condition of the property line up with your expenses? Does your expected rent/applicant pool line up with the real world, e.g. what you see on Craigslist, Zillow, Rentometer -- is everything in range?
If so, then proceed as planned. You can always rent first and then sell if its not working out long term.
My own father called me a slumlord when I purchased my recent duplex. Frankly if you can spend 1000 for a 2 bedroom, I don't think that makes it a slum at all, but that's just my opinion. Negativity and inexperience comes from like...80% of people...they are also the people with no assets, high debt, and plenty of gum circumference to flap on topics they know nothing of.
My only comment to you is your application fee is going to scare off a lot of people. I think its absurd, but it also depends on your rent. If the rent is $3000 a month, maybe its a good application fee. But I think anything over $50 is pushing it. You shouldn't be making money on applications and at $150, you definitely are. Another good thing would be to run your process and rationale of screening with another investor, because that does seem out of range to me.
3 Reply
Lynnette E.
Rental Property Investor · TN · Member since 2018 · 2k+ posts · 2k+ votes
6y
Rentals are not for everyone, and in some areas of the country they are very hard to manage. Neighbors often do not like to live by rentals because of the people coming and going, often each year.
But if rentals is your goal, then that is what you should do. Screening the tenants is part of the process, but eventually if you're in the game long enough you will get burned no matter how much you screen. Professional tenants are good at the game too. Have the resources in reserve for when you do need them.
BTW, I do think that the high application fee is going to work against you. Good tenants do not need to pay a fee that high to 'be considered'. Bad tenants will invest that outrageous fee as its all you are going to get from them. Be careful, but reasonable.
0 Reply
Damaso Bautista
Rental Property Investor · Hawthorne, CA · Member since 2018 · 655 posts · 900 votes
6y
@Lucas A Davidson
As long as you are a responsible landlord, I wouldn't put too much weight on what the neighborhood wants.
Congrats and good luck!
0 Reply
Marc Winter
Real Estate Broker · Northeast PA · Member since 2017 · 2k+ posts · 2k+ votes
6y
There are a few things to consider in this scenario. One would be how many rentals do the naysayers own?
1 Reply
Josh C.Pro Member
Property Manager · Indianapolis, IN · Member since 2010 · 1k+ posts · 1k+ votes
6y
You should sell it. No one will apply with a $150 application fee so you won’t make your $400.
0 Reply
Marian Smith
Real Estate Investor · Williamson County, TX · Member since 2011 · 1k+ posts · 961 votes
6y
@Lucas A Davidson did the naysayers give a reason? It Is conceIvable in some places all the people you’d want as tenants buy, leaving those with issues as renters. How are drugs, employment, crime in your area? And no one will pay a $150 application fee. It is hard to sell a property in a great location...do they come up often? You could sell to build up reserves and rent out the next rehab if you could easily buy a similarly located property.
0 Reply
Lucas A Davidson
OP
Realtor · Iron Mountain, MI · Member since 2019 · 18 posts · 4 votes
6y
Regarding the $150 application fee - my contractor owns quite a few rentals in our community and that's how he keeps poor renters away. We do not have quality renters in our area - there are a notorious amount of people who destroy rentals.
The application fee is what he suggested to help reduce the applications from poor tenants...he said you can always refund it, depending on case.
I enjoy the feedback, though, and will absolutely consider removing this requirement in the future.
0 Reply
Anthony Rosa
Rental Property Investor · New York City · Member since 2019 · 703 posts · 538 votes
6y
@Lucas A Davidson - I'll speculate and take another route. Maybe its not about you owning a property that you could either rent or sell. Could it be that the community prefers that the homes are owner occupied?
If the neighborhood is nice and primarily owner occupied, homeowners rather keep it that way because chances are that the home and the exterior grounds will be better maintained.
0 Reply
Noah Mccurley
Belfast, Northern Ireland · Member since 2018 · 128 posts · 56 votes
6y
@Lucas A Davidson
If your numbers are working and your property Is cash flowing well cor you and it is true to your goals. I would say forget about what they say. However, you could ask them why they think you should flip rather than hold and if they have previous experience in real estate.
0 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.