Landlord pros and cons?

[Pancho 44694]

I live out of state and still own my home in Houston. My realtor takes care of any issues that come up, and if anything needs to be fixed, my tenant (great guy) reaches out and I make a few calls to get it taken care of. Since I don’t live in Texas, this can be a bit of an inconvenience; however, my house is so new that most of the issues thus far have been very minor. 

I will say, finding tenants (I think this current tenant is going to move out because he’s being relocated for work) is a hassle. A friend who I went to UT with owns multiple houses in Houston and New Braunfels and says I should use her rental agency but they do charge more than she really likes when it comes to finding a tenant. 

I feel it’s easier to be the landlord if I still lived in Texas and selling seems like an easy route, but I also don’t want to give up my house too soon as it’s a great investment and in a great location. 

 

Pros and cons of being a landlord?

 

[52-80 19147]

Pros: somebody else pays your mortgage

Cons: unexpected issues

i manage my property across barional borders. kinda lucky my 2nd applicant is my current tenant and he’s been cordial and communicative and every on the business end is really good. bad news is ive had occasional property issues, and all the fixes have been on the upper-end of things. im too far to effectively cost-manage it (ie fix it myself or propose alternatives), and i dont want to jeopardize the relationship by fighting with him on the issues. 

[KYHorn 17011]

You may get more responses in the mortgage and real estate thread. We've had many discussions about this there and everyone is great about offering thoughtful and detailed advice. https://www.surlyhorns.com/board/topic/186-all-encompassing-mortgage-and-real-estate-thread/?do=getNewComment 

 

Just off the top of my head, it seems like money can solve a number of your concerns (tenants and day to day management), but it comes down to opportunity costs. What return are you getting on the property? (Rent + increase in property value - PITI, repairs, management fees) vs what can you get from the money of you were to sell the property, both in terms of utility and return (how would you spend or invest it?). If you're in a great market that should continue increasing in value and for which rent demand will remain strong (and therefore quality renters easier to obtain), and you're sitting on an historically low interest rate, that's probably hard to pass up and difficult to beat in terms of growth. But the rental income you receive may get significantly reduced by management fees and repairs to the point that alternative investments or ways of enjoying the capital you have in the house are more appealing. 

As a side note, I don't know what you've tried for finding renters, but I've had success using Zillow to find renters. They have everything you need built-in, including the obvious marketing infrastructure, but also background checks, references, and even a payment system if you wish. I considered using an agency my realtor recommended but Zillow made it all pretty easy. Meeting and communicating with prospective tenants is obviously going to come with some degree of inconvenience that you can shop out to a rental agency, but again it's all part of the opportunity cost and utility considerations that are unique to your situation.

Edited December 30, 2023 by KYHorn

[Guest]

I've toyed with trying it, but only with stuff where I can drive to the house so I can take care of most issues myself. Two things stop me:

1. The numbers just don't seem there for the hassle, at least in the Austin market. Seems you only make money on appreciation on the house, not the actual rental income. Taxes are insane and with 7% mortgage rates, the note is inflated significantly versus a few years ago. Not that you can't make money, but it's just not an investment that I get excited about owning.

2. I never had to change a water heater on a share of VOO.

[KYHorn 17011]

31 minutes ago, FirstTimeCaller said:

I've toyed with trying it, but only with stuff where I can drive to the house so I can take care of most issues myself. Two things stop me:

1. The numbers just don't seem there for the hassle, at least in the Austin market. Seems you only make money on appreciation on the house, not the actual rental income. Taxes are insane and with 7% mortgage rates, the note is inflated significantly versus a few years ago. Not that you can't make money, but it's just not an investment that I get excited about owning.

2. I never had to change a water heater on a share of VOO.

1. I agree as it relates to acquiring a new property, but he already owns it and presumably has it either paid off or has an incredibly low rate locked in. If you're treading water on the rent and your only hope for return is on the property value itself, then it's almost certainly not worth it. 

2. Which brings me to the opportunity cost you're referring to here. I get a nearly guaranteed (current renters are excellent and have 1.5 years left on the lease) return of about 10% on the equity I have in my rental house for at least 1.5 years with good prospects for additional years of return. That's accounting for repairs, taxes, insurance, interest payments, etc just from rent and not even considering increases in property value. While on average the market will get me about 8% annual return, it's not as likely to hit that mark this year as I am likely to receive rent from my current tenant. I feel the likelihood of decreasing property value is minimal and it's likely to increase modestly over the next few years. Now of course a good portion of that return in both rent and property value is illiquid and locked up in the equity of the house, but some of it isn't, so in that regard it's a more of an individualized matter of cash flow vs net worth. For me, the return I'm getting is well worth the occasional hassle, but there is wide variability in the specific circumstances around the property and the needs of the landlord.

[Pancho 44694]

Yeah, my rate is 2.8%

[LCHorn 2612]

3 hours ago, Pancho said:

Yeah, my rate is 2.8%

I’ve probably written on this more extensively on the other thread but we use Zillow to find tenants.  That said, it’s going to be hard if you’re out state.  
 

If it were me I’d probably ask my agent or maybe @UTPhil2006 for a Houston referral (if you didn’t use an agent previously) for someone who would be willing to show the house upon request for a fixed amount.  If you have a good tenant they may be willing to do that for you but it won’t maximize your chances of finding a good tenant (tenants renting SFR want to meet the owner).  Another fee arrangement might be to have them handle showings for half a months rent (that’s always seemed steep to me and might be a reason to try to negotiate the compensation based on lease length-if they sign a 24 month or longer lease that half month in rent doesn’t feel so onerous).  On the bright side, most agents right now are currently starving to death so you might be able to pay them in beer and Best Buy coupons.  
 

Also, I said this on the other thread but spend whatever it takes to get great photos.  Probably 40%-50% of the Zillow listings have cell phone photos and it’s just not the same.  
 

Another thought-our property in Houston (Memorial) hasn’t appreciated anywhere close to what our Austin properties have-I know that interest rate is terrific and I’d feel similarly disinclined to let it go, but I think another question you need to be asking yourself is to try to forecast the likely rate of appreciation (I like to use the Texas A&M real estate center data).  Make it a math problem.

[UT_OB1 2217]

My RE and property manager charges me 1/2 month rent to place a tenant, $75/ a month to manage. It’s worked and not a bad price. Most months I a pay him $75 to do nothing, but it’s worth it for the 1-3 times so comes up. Not to mention he does enough properties that he’s got several carpenters / plumbers and a gc that he keeps busy and I can get a good rate from them on repairs/Reno on other things I do

[Guest]

7 hours ago, UT_OB1 said:

My RE and property manager charges me 1/2 month rent to place a tenant, $75/ a month to manage. It’s worked and not a bad price. Most months I a pay him $75 to do nothing, but it’s worth it for the 1-3 times so comes up. Not to mention he does enough properties that he’s got several carpenters / plumbers and a gc that he keeps busy and I can get a good rate from them on repairs/Reno on other things I do

All of this.

I have family in Denver who is multiple generations in the real estate field, and critical mass for their property management is a freaking huge advantage when it comes to maintenance and repair. The pricing you describe seems like a very fair/ equitable setup too- not sure if that is easily attainable for Pancho or not, but seems ideal.

[UTPhil2006 3804]

9 hours ago, UT_OB1 said:

My RE and property manager charges me 1/2 month rent to place a tenant, $75/ a month to manage. It’s worked and not a bad price. Most months I a pay him $75 to do nothing, but it’s worth it for the 1-3 times so comes up. Not to mention he does enough properties that he’s got several carpenters / plumbers and a gc that he keeps busy and I can get a good rate from them on repairs/Reno on other things I do

This is a pretty solid deal, and I can assist or also point you in the right direction. If it’s just one property it should be pretty easy for someone to help maintain and keep rented for you 

[Snake Diggity 4619]

Rent houses can be an excellent way to generate wealth.  If you’re flush with cash, under 50, and can buy in a market where the rent will cover the note (increasingly difficult), they’re amazing supplements to standard 401k and cash savings.  But if you don’t have cash to cover renter turnover, repairs, etc., or if you’re close to retirement age, or if you are in a market where rents are lower relative to mortgages, they’re a terrible idea.  But for me, someone who bought 4 homes in good markets when I was between the age of 27 and 33 and when rates were near zero, they have been the best investments I’ve made, even if they come with an occasional headache that stocks or other investments dont have.

To the OP’s question, I much prefer to use a management company than manage myself.  Not only do they reduce the headache of finding and dealing with renters, they also have a long list of contractors they already deal with.  Paying for expertise is worth it.  They also put another layer between the owner and the renter which can be very valuable.  The key is finding a management company who will keep your place rented with renters who pay their rent and don’t destroy your property.  Renter turnover will kill your cash flow.  So will renters who don’t pay.

Edited December 31, 2023 by Snake Diggity

[Gil Bang 25907]

Some Prop Managers are better than others.  One thing I'd insist on is a semi-annual (or even quarterly) inspection, with photos.  A lot of tenants would rather have a faucet drip than have somebody in the house to fix it, and that's a mild example. 

[52-80 19147]

My BIL went to take back his SFH today.  Tenant went multiple months without paying.  He had to spend a few $k in fees for the eviction, and estimates the damages at a further $10k out of pocket.

When my mom leased out a house in the same area, her tenant kept calling her over every time they.... clogged the toilet.  The dirtbags didnt care to resolve something literally that shitty themselves.

These were houses in middle-class neighborhoods (DFW suburb), not slums.  Ugh...

[Chult86 335]

The company I run in Florida handles a little under 500 properties with long-term tenants/leases, and about 300 short-term rentals for vacation stays. As mentioned above, finding/qualifying the right Property Management Company can mean the all the difference in the world. At a minimum, MINIMUM, your management company should be providing detailed inspections with photos and comments.

• What type of home is it?
• Is it in a highly desirable tourist area?
• Is it furnished or empty?
• Do you ever use the home yourself for vacations/travel?
• What sort of cash flow do you need to have coming in to manage your expenses? A lot of owners make the mistake of thinking their home is worth $X/month, when the market is dictating that it's worth $Y/month. 
• Is there a Homeowner's Association? If so, what sort of rental regulations/restrictions do they have?
• What city/county is it in? Often times, differing municipalities will have overlapping restrictions on what you can do. I could trim 20% of our staff if it wasn't for HOAs around here...
• What timeline do you see yourself owning the home?
• What work is needed to get the property ready for a rental? Paint, flooring, appliances, etc
• What sort of vendors/tradesmen do you work with personally in the area? Is the management company willing to use your vendor first before their own maintenance team or other vendors?
• What is your ultimate end-game goal for the home?

Remind yourself that whatever management company you choose you are ultimately asking them to manage (depending on personal circumstances) probably your single biggest asset outside of your primary residence. You should be looking for someone that you feel you can trust with managing what is more or less a large, illiquid investment.

 

If you have other questions, I'd be happy to answer.

[Chult86 335]

One last thing... make sure it's set up so that you never have to speak to the renter, ever. If the tenant/guest gets your info somehow, they will never call the management company again and will just call you... no matter what time of day it is.

[CBT 1282]

On 1/3/2024 at 11:15 AM, 52-80 said:

My BIL went to take back his SFH today.  Tenant went multiple months without paying.  He had to spend a few $k in fees for the eviction, and estimates the damages at a further $10k out of pocket.

When my mom leased out a house in the same area, her tenant kept calling her over every time they.... clogged the toilet.  The dirtbags didnt care to resolve something literally that shitty themselves.

These were houses in middle-class neighborhoods (DFW suburb), not slums.  Ugh...

where was this? In Texas, it should only cost you $150ish to do an eviction at the JP then another $150ish to file a writ if needed.

 

[CBT 1282]

On 12/31/2023 at 12:36 AM, UT_OB1 said:

My RE and property manager charges me 1/2 month rent to place a tenant, $75/ a month to manage. It’s worked and not a bad price. Most months I a pay him $75 to do nothing, but it’s worth it for the 1-3 times so comes up. Not to mention he does enough properties that he’s got several carpenters / plumbers and a gc that he keeps busy and I can get a good rate from them on repairs/Reno on other things I do

That's an amazing deal. How big of a company are they? What does that home rent for? What parts of Texas do they operate in. I pay first month's rent and 10% on most of my stuff.

[Incredulity 11650]

On 1/3/2024 at 9:15 AM, 52-80 said:

The dirtbags didnt care to resolve something literally that shitty themselves.

Helped a buddy clean 4 pick up truck beds of trash(literal daily household trash) that the tenants decided was more convenient to stuff in the attic rather than take to the curb.  Thats right rotting kitchen scraps in the attic.  what a fucking disaster.

[UT_OB1 2217]

48 minutes ago, CBT said:

That's an amazing deal. How big of a company are they? What does that home rent for? What parts of Texas do they operate in. I pay first month's rent and 10% on most of my stuff.

Houston area that includes Galveston, woodlands, Brazoria. I think he’s got about 150-200. The 4 he does for me rent for about $1400-1500. 

[52-80 19147]

3 hours ago, CBT said:

where was this? In Texas, it should only cost you $150ish to do an eviction at the JP then another $150ish to file a writ if needed.

 

Texas. Not sure if it made a different but my sis was living out of state, maybe the fee was for convenience.
 

Although they leased out multiple properties in TX and it wasnt their first rodeo (and unfortunately not first deadbeat)

[52-80 19147]

3 hours ago, Incredulity said:

Helped a buddy clean 4 pick up truck beds of trash(literal daily household trash) that the tenants decided was more convenient to stuff in the attic rather than take to the curb.  Thats right rotting kitchen scraps in the attic.  what a fucking disaster.

Sometimes I think of how deplorable the worst* person I know of is, then hear stories like these, and it puts everything into stark perspective. 
 

(*can be replaced with any other human quality/attribute)

[UT_OB1 2217]

Hard to see, but when we bought our first house (duplex) part of the reason we got it at a good price is the owner didn’t want to deal w the upstairs tenants. 2 bedrooms with husband and wife that physically fault a lot, 2 very young children, 4 dogs, snakes, rabbits, cats, and a sugar glider. Dogs didn’t go outside to use the bathroom. Literal shit on the floor. 
 

When we finally got them out there was an explosion of roaches. The walls looked like they were moving. Roaches falling on you as you walked through. Pretty sure we broke several international treaties with the amount of poison that was used to get rid of them. 

Every wall / ceiling / surface in the house looked like this  

 

Edited January 5 by UT_OB1

[Incredulity 11650]

10 hours ago, UT_OB1 said:

4 dogs, snakes, rabbits, cats, and a sugar glider.  Dogs didn’t go outside to use the bathroom. Literal shit on the floor. 
 

Jesus Fucking Christ.

 

I hate people.  fuck.

[UTPhil2006 3804]

I wanna poison my phone screen after seeing that picture 

[Incredulity 11650]

so to sum it up

Pros: Build wealth, ability to use leverage, tax advantages

Cons: People

[Helobious 9456]

Cool horror story bro: my moms friend rented out a house she owned in far North San Antonio (very wealthy area) to someone. That person then sublet it to someone else who turned the house into a meth lab. They hooked up a camera system outside and everything. Neighbors called the police to report lots of suspicious activity eventually. Subletters fled, homeowner came by with cops but were unable to gain entry because cops noticed that there were booby traps set up around the entry points. When they eventually got inside it was clear the house was completely destroyed. Everything just trashed.

[UTPhil2006 3804]

I can’t tell if we’re helping @Pancho find a landlord or if he sold for 80 cents on the dollar out of fear 

[UTGrad98 2271]

As someone who may be leasing their home 18-30 months from now, this thread is nightmare fuel. Whoever I choose as our property management company better have thought of all of this shit. I guess installing video cameras throughout the house is illegal? Right? Or is that something we put in our contract and the tenants would have to agree to. Or maybe add in a PA system and anytime i don't like what they are doing I'll just get on and remind them to act like normal fucking human beings.  Is that ok to do? As long as it's in the contract ?

[Incredulity 11650]

The truth of the matter is

1.) you need to be able to completely emotionally detach from the property 

2.) pay a good PM company to vet a quality tenant 

3.) be ready to be disappointed in the abuse the property will take( if you’ve 1 and 2’d you will be fine.

 

 

[UTPhil2006 3804]

To bring a little bit of positivity to the thread, a quality tenant (which there are a lot of) are worth their weight in gold. We have a guy in one of our properties we’re about to sell has been there 3 years, rarely a peep out of him, pays early, minimal upkeep issues. Sometimes there are people that are just content renting. 

[Guest]

We rented when we first got married.  First apartment was 2nd story and about 6 months after we moved in the tenents below us were evicted.  It was (evidently) like the roach infestation and garbage/trash pictured above.  Two different clean up crew folks had their gear on, and still came out to the curb puking.  We had to fumigate our apartment too because those bitches were everywhere.

To UTPhil's point about good tenents, when we lived in Amarillo the first time, our landlords lived 4 houses down from us, but after they saw how we treated the place, each January they would give us a $50 giftcard for a restaurant for renewing with them.  We are still friends with them even though we moved away in 2004. When we moved to Houston area, the first 1.5 years we rented, and our landlord lived in CA.  My wife wanted to re-do to cabinets and update the painting in the living room and a couple of the bedrooms.  She drew up exactly what she wanted to do and the landlord said send me receipts and back all of that out of the rent.

Just saying there ARE some actual decent tenents out there, too.

Edited January 6 by slorch

[UT_OB1 2217]

Yeah the good tenants exist, and honestly i feel like there are more in the fine to good range than not. But those tenants don’t stick in your head so much 5 years later or make for good stories and pictures to post on a message board  

[Js1 85270]

1 hour ago, UTPhil2006 said:

To bring a little bit of positivity to the thread, a quality tenant (which there are a lot of) are worth their weight in gold. We have a guy in one of our properties we’re about to sell has been there 3 years, rarely a peep out of him, pays early, minimal upkeep issues. Sometimes there are people that are just content renting. 

I am that guy. I’m fine renting. Rarely have an issue of my own making (cheap construction issues aside). Can go 6 months without even talking to my landlord.

My last house had 3 issues in 2 years: an electrical outlet that needed replacing, a small termite colony, and a leak under the shower that was a construction issue and not a tenant issue because it predated me by 6 years, I was just the unlucky person living in the house when it finally happened

[Snake Diggity 4619]

I’ve had way more good tenants than bad.  Several stayed for multiple years, always paid on time, and didn’t destroy my house.  I’ve only had 2 really bad ones.  The first was just a guy who didn’t pay and wouldn’t leave; he eventually left before LEO got involved and by that point I  was happy to write off the thousands of dollars in back rent.  I was just glad he didn’t destroy the place on his way out.  The 2nd bad renter was a lady who signed all the papers then let some bums (I think they were like her nephews or family friends or some shit) move in.  They had cats without litter boxes and had a fridge full of food that they didn’t empty when their power got shut off.  Pretty sure drugs were involved.  For some reason they ripped all the cabinets off the walls in the kitchen before the finally left.  So thousands in back rent gone, thousands more in repairs.  Cool.

Tiers of renters:

Great: pays in advance, stays for years, is proactive about reporting maintenance issues, but doesn’t demand anything and is super patient with contractors/management.

Good: pays on time, stays thru their lease, does not ignore maintenance issues, does not pester landlord/management with complaints.

Average: mostly pays on time, usually stays thru their lease, ignores some maintenance issues, kind of bitch about complaining.

Bad: usually pays late, probably ends up breaking their lease, ignores maintenance issues, always complaining

Horrible: doesn’t pay, breaks their lease, actively destroys your shit.

 

My rentals in my “good” locations (North and South Austin) get almost entirely good renters with an occasional great or average.  A property I had in a bad part of a smaller town got almost entirely bad or horrible renters.

[Snake Diggity 4619]

I have failed to mention the primary reason I use a management company: I simply do not have the heart to directly throw somebody out in the street.  A few times over the years I have asked my property managers to cut a tenant a break after learning of hard times and it has blown up in my face every single time.  One tenant had paid on time for years and had actually never missed rent ever, but I found out she’d run into some hardship, so I proactively gave her a month’s free rent as an act of kindness.  She never paid me another dime from that moment on, and I had plenty of proof that she had the money.  It was heartbreaking.  Using property managers removes me from those situations and keeps me ignorant of any suffering my investment might be causing.  Similar to how I can own Lockheed Martin stock and not really feel a huge amount of guilt about innocent children getting bombed around the world vs how I’d feel if I worked actually assembling the bombs.

[EastHorn 281]

Stumbled on this.  Looking to rent a house in Denver starting in summer.  For those landlords in Denver send me some good property management companies.  Other than an internet degenerate I am responsible. 

[Larry T. Spider 1746]

This is actually something that I have been looking into and would love opinions from the experienced landlords on here. I’m in Austin and it looks pretty hard to cash flow here unless you buy the house outright, which is expensive and hard to scale unless you are already rich.

I’ve been talking to a realtor in a midwestern city with more affordable homes and it’s not a shithole/dying city. He was an investor long before he became a realtor, owns 20+ properties, has good connections with management companies, and has several out of state investors he works with. He would tour the homes, video, make an offer, then I would go up there during the option period to view in person. If it’s going well, I could eventually to more than 1 at a time.

From my own research, it looks possible to invest with the 1% rule there and houses that don’t need much/any work are 100k-130k. They get rented fast and have a chance of ok appreciation. Nothing like what the Austin market has seen, obviously.

Thoughts on being an out of state landlord using a property management company? 

[Incredulity 11650]

3 hours ago, Larry T. Spider said:

Thoughts on being an out of state landlord using a property management company? 

It’s possible.

However, I would keep in mind there are smart people with money everywhere.  So there probably isn’t some magic real estate honey hole in Akron, OH that everyone else has missed.

[LCHorn 2612]

3 hours ago, Larry T. Spider said:

Thoughts on being an out of state landlord using a property management company? 

Personally, I’d only be comfortable doing this if I was comparing options in multiple cities.  
 

Getting into the property investment market and selecting a city purely on the basis that the cost to entry is modest isn’t prudent.  
 

I’m a mortgage lender and have financed lots of investors in Austin and we’d oftentimes talk about comparing Austin versus San Antonio, Houston, Dallas, etc.  I think any of those have merit depending on your risk tolerance and what kind of money you have available.  That said, you’re looking for data that helps quantify the markets-a title company or realtor in each could pull sales data for you and you could make projections based on historical appreciation (ignore 2020-2023, too exceptional).  Texas cities, even with our ridiculous state government, have a strong record of appreciation and population growth and I’d want to use that as a baseline in comparison to whatever market you might be considering.  
 

[Pancho 44694]

On 1/6/2024 at 7:57 AM, UTPhil2006 said:

I can’t tell if we’re helping @Pancho find a landlord or if he sold for 80 cents on the dollar out of fear 

I’m going to keep it. My realtor told me she’d hunt me down and shoot me if I put it up for sale now. 

My renter signed for another 6 months and says everything is fine (save for the microwave) so I’m fine for now.

[Larry T. Spider 1746]

2 hours ago, LCHorn said:

Personally, I’d only be comfortable doing this if I was comparing options in multiple cities.  
 

Getting into the property investment market and selecting a city purely on the basis that the cost to entry is modest isn’t prudent.  
 

I’m a mortgage lender and have financed lots of investors in Austin and we’d oftentimes talk about comparing Austin versus San Antonio, Houston, Dallas, etc.  I think any of those have merit depending on your risk tolerance and what kind of money you have available.  That said, you’re looking for data that helps quantify the markets-a title company or realtor in each could pull sales data for you and you could make projections based on historical appreciation (ignore 2020-2023, too exceptional).  Texas cities, even with our ridiculous state government, have a strong record of appreciation and population growth and I’d want to use that as a baseline in comparison to whatever market you might be considering.  
 

Appreciate the perspective, especially from a lender’s viewpoint. Just want to clarify that a low cost of entry isn’t my main criteria. I’m more looking at the 1% rule, meaning that you can get 1% of the purchase price per month in rent. Pretty easy way to tell if you can cash flow assuming 25% down.

I do feel that I could get better appreciation in the major Texas markets. However, only putting 25% down would leave me in the hole each month. As a quick example, if somebody purchased my home using the same metrics, they would have to put about 150k down and would have about a $3,600 monthly payment with no repairs. It would rent for about $2,300. I know there are better areas in Texas for rentals than my current neighborhood, but I’m not finding much of anything that meets the 1% rule.

[Dbeasy 15041]

I rented out a house in Houston while living in Austin. I was able to do it because I have a real estate license and know enough about property management to be competent. It worked fine because I had a great tenant, a doctor, who was very cleanliness oriented. With that said, we got a lot of repair requests because he couldn’t turn a screwdriver. 

One comment on hiring cheap property managers.  Watch out. A lot of them will get kickbacks from repair people that work on your house, meaning you might be overpaying for repairs. 

And regarding paying only 1/2 months rent to an agent, that is hardly worth their time, so you will need to either find one to do it because they will eventually get to sell or buy something with you, or rely on a very junior agent who probably doesn’t know what they are doing. If I help a friend here in Austin on a rental, it’s usually one months rent, unless it’s a luxury property with a very high rent.

[LCHorn 2612]

46 minutes ago, Larry T. Spider said:

I do feel that I could get better appreciation in the major Texas markets. However, only putting 25% down would leave me in the hole each month. As a quick example, if somebody purchased my home using the same metrics, they would have to put about 150k down and would have about a $3,600 monthly payment with no repairs. It would rent for about $2,300. I know there are better areas in Texas for rentals than my current neighborhood, but I’m not finding much of anything that meets the 1% rule.

That’s fine, I was just suggesting a methodology-if the city under consideration is in the Midwest then look at some peer cities.  My point was that this is the due diligence you need to make rather than rely on what appears to be fairly greased rails to use this particular agent in a city for which he has experience.  He might not know (or care to know), that there’s 15% more rent available for the same property in a similar city three states away.  Or it might be a great opportunity for you-either way, prove it with math.   

 

25 minutes ago, Dbeasy said:

And regarding paying only 1/2 months rent to an agent, that is hardly worth their time, so you will need to either find one to do it because they will eventually get to sell or buy something with you, or rely on a very junior agent who probably doesn’t know what they are doing. If I help a friend here in Austin on a rental, it’s usually one months rent, unless it’s a luxury property with a very high rent.

Let’s not exaggerate the expertise it takes to show a house-it’s frequently a junior agent doing it in place of the listing agent just for the opportunity to meet potentially agent-less buyers.  On the tenant side it’s mostly a network builder and/or usually green agents or the wildly unsuccessful.  What you’re really paying for is just to list on MLS.  
 

We’ve done it both ways and had a lot more success finding good tenants on Zillow, anyway, and it’s SO much cheaper.

[UT_OB1 2217]

1 hour ago, Dbeasy said:

And regarding paying only 1/2 months rent to an agent, that is hardly worth their time, so you will need to either find one to do it because they will eventually get to sell or buy something with you, or rely on a very junior agent who probably doesn’t know what they are doing. If I help a friend here in Austin on a rental, it’s usually one months rent, unless it’s a luxury property with a very high rent.

A i mentioned in my post, the guy is also my RE agent. Sold our first personal home, bought our second personal home, had brought me a couple deals for rentals, and he’s the first person I contacted when I wanted to list a lot recently. His rentals mostly pays his employees, and they are essentially advertising / networking / relationship building for buying and selling hom

[The Royal We 3067]

On 1/6/2024 at 1:57 PM, Snake Diggity said:

I have failed to mention the primary reason I use a management company: I simply do not have the heart to directly throw somebody out in the street.  A few times over the years I have asked my property managers to cut a tenant a break after learning of hard times and it has blown up in my face every single time.  One tenant had paid on time for years and had actually never missed rent ever, but I found out she’d run into some hardship, so I proactively gave her a month’s free rent as an act of kindness.  She never paid me another dime from that moment on, and I had plenty of proof that she had the money.  It was heartbreaking.  Using property managers removes me from those situations and keeps me ignorant of any suffering my investment might be causing.  Similar to how I can own Lockheed Martin stock and not really feel a huge amount of guilt about innocent children getting bombed around the world vs how I’d feel if I worked actually assembling the bombs.

I've owned rent houses in Fort Worth in the past and now own two in East Texas and one in Dallas. The bolded has bit me in the ass more than once. As much as it sucks to operate this way, I've never cut someone slack on the rent and not had it fuck me in the long run. It seems like once tenants know that they can slide on payments they will abuse you to the maximum amount allowed.

I had a tenant in Fort Worth pleading with me around Christmas to give him more time on his rent and I did. Dude moved out at the end of January and punched holes in the living room walls on his way out after not paying for 2 months. No good deed goes unpunished.

My business partner does this for a living full time so we get to use their access to Rentredi.com for managing applications, rent payments, maintenance requests, etc. This makes life so much easier and cuts down on a lot of the administrative BS that goes along with being a landlord.

The main thing I have found is that heavily screening applicants is key. It's worth it to do a deep dive on their background/credit/past landlords, etc. before renting to a tenant. Every single time we've overlooked something nasty in their application in order to get someone into a property it has bit us in the ass. We had a guy last year that had a good job but fucked up credit so he got his mom to co-sign the lease with him. He lasted 6 months before getting himself arrested for driving drunk and getting into an accident while driving on the wrong side of the road. His mom ghosted us and we ended up eating the loss because it was going to be too expensive to try to collect.

[PvilleStang 2875]

Wife and I manage 3 units ourselves.  She's the numbers guru and deals with getting the tenants and setting rents.  I will tell you, buying right now in Austin for a rental is a huge PITA.  You can get 5% on T-Bills, or make 3-4% ROI on renting a unit you purchase OUTRIGHT.  If you mortgage it, you're lucky to break even right now in the market.

That said, we've had better luck not using a management company, rather doing it mom-and-pop style.  We use Zillow to post our rentals, which will propagate out to several other sites without having to post to MLS, and do our due diligence on the applicants (background checks through 3rd party websites, a little google stalking, etc.)  I'm very hands-on with the maintenance, and tend to solve most issues without calling in pros to fix (HVAC, plumbing, most basic maintenance issues, etc.)  $75 / month doesn't seem like much, but that's nearly a grand a year going to another company.  My time and mileage can be deducted from taxes, making it worth it in the end.

On the tenant side, we've been mostly lucky.  Had two bad tenants in the past.  One was a single mom who trashed the house on the way out.  Her son punched at least 10 holes in the walls of the house, was smoking weed on the roof in the back and disposing of his joints in the gutters before his mom could see.  He even managed to spray paint our private property that was stored on site which pissed me off to no end.  The other one has had some financial issues but really works to get the rent paid, but had to move out early.  She's left the unit pretty trashed so far (although she's not 100% out), and is likely going to cost us during the turn-around.

My biggest recommendation going forward is to plan for 1-2 months a year for the property to sit vacant (move-out, turn-around, new tenant). If you can afford the 2 months out of commission, and can do a lot of the maintenance yourself, it's a good investment.  And always plan for the county to screw you hard every year on tax increases, because you have no homestead to cover your ass.  I'm hoping the years of 20% valuation increases are a thing of the past, but we bought our last property and were making well over the 1% rule, but with rents stagnant and property values still climbing, we're at a 2/3% rent to home value currently.

[CBT 1282]

My business partner does this for a living full time so we get to use their access to Rentredi.com for managing applications, rent payments, maintenance requests, etc. This makes life so much easier and cuts down on a lot of the administrative BS that goes along with being a landlord.

Can you talk about your experience with Rentredi a little more? I’ve been looking at getting something else to use, but I’m not sure it’s worth the cost. We basically use spreadsheets and quickbooks for all tracking now.

[UT_OB1 2217]

@PvilleStang how do you deduct your time from your taxes, or was that a figure of speech?

[Horn Dogg 3870]

I own 23 rental properties in Texas and live out of state.  I’ve been at this for about 15 years.  I have a professional management company that charges 8% of the rent, 50% of a month to place a tenant.  I feel like they pay for themselves in increased rent alone (over what I would get not having the marketing tools they have).  The comments above about cheaper repairs are spot on.  They also have in-house services that can handle things like evictions, dead tenants, etc for you.  On top of that, they do your cash flow accounting work for you.  Management fees are deductible business expenses.   I wouldn’t dream of trying to manage these properties myself anymore as I work full-time, have kids and waste a lot of time bitching about Texas football on Surly.  

[PvilleStang 2875]

11 hours ago, UT_OB1 said:

@PvilleStang how do you deduct your time from your taxes, or was that a figure of speech?

CPAs are worth the money!

3 hours ago, Horn Dogg said:

I own 23 rental properties in Texas and live out of state.  I’ve been at this for about 15 years.  I have a professional management company that charges 8% of the rent, 50% of a month to place a tenant.  I feel like they pay for themselves in increased rent alone (over what I would get not having the marketing tools they have).  The comments above about cheaper repairs are spot on.  They also have in-house services that can handle things like evictions, dead tenants, etc for you.  On top of that, they do your cash flow accounting work for you.  Management fees are deductible business expenses.   I wouldn’t dream of trying to manage these properties myself anymore as I work full-time, have kids and waste a lot of time bitching about Texas football on Surly.  

Luckily, my wife works in MFH so she knows how to set rents and get it occupied.  The fees really do eat into the funds, so we feel very lucky that we can do this stuff on my own.  Again, I'm pretty anal with who I let mess with my properties, I don't like contractors coming onsite and doing a quick fix that costs more money than me doing it the right way.