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I have 2 residential properties that i rent out. I've had one Condo for about 6 years now and then added a townhouse to the mix early this year. As opposed to investments like Stocks, Mutual Funds, Bonds, etc rental investments is a hands on investing approach. With many of the other investment types you have the ability to move your money around quickly. If you make a poor devision in one fund or stock you can dump it and switch to another one in the same company or switch both companies and portfolios. With rental investments, if you make a poor decision in location you can not easily remove yourself from the investment. this is a buyer's market and it will not be able to easily sell a property that is not performing or won't rent out at all. In the not so recent past of the huge sellers market you could easily get yourself out of a poor real estate ivestment because there were many other civilians as well as investors willing to take a chance on the property. With rental properties the individual investor has the ability to make or break a deal just as much as the investment itself. For example, if you don't properly screen potential tenants and choose the wrong tenant you can end up in an eviction. A great deal of money can be lost because of an eviction. Depending on local laws it can take a very long time to remove a tenant from a property and when you do finally get them out, you could end up with a trashed house. many a landlord has lost a good deal of cash because collecting from tenants is not an easily achieved task. With the investment itself, there are many rules to follow, but one rule is key. The money is made when the property is bought. Buying a property at market value then turning around and renting it is a sure fire way to keep a tight profit margin. Keeping a tight margin can cause you to lose your shirt should anything major happen. This could be something like the pre-mentioned eviction, a major repair like a roof or HVAC system, or simply the carrying costs associated with having the property while it is not yet rented. Remember, you have to keep paying for it even if you aren't making any money on it. I've actually begun a blog where I've started detailing some of my lessons learned, etc. I welcome you to stop by and check it out. weblogfor ...

by Patrick

1 year ago

Asker's Rating: 

There is risk with everything, my friend and my brother both rented out houses and had so many problems with tenants not paying rent. One even tried to sue my brother because she claimed that noise from nearby construction was preventing her from enjoying peace and quiet in the home. Then she decided to reduce the rent she was paying cause of the noise. He ended up having to evict her and had to get the sheriff to evict her cause she stayed past the eviction date.

by Kainoa- 1 year ago

Yes, I have an investment property. It's a brownstone small office bldg, not a residential rental. The first key is buying the property(residential or commercial) for the right price. We're currently in a buyers market. Residential housing is way down(depending on where you live) so that could be good. You would have to price the house just like you would if you were buying it to live in it(i.e. nice neighborhood, good schools, closeness to specific necessities such as stores). Don't forget to check zoning and local ordinances regarding renting residentially.Commercial properties are not affected as much by these considerations. Basically, you value the building based upon the income it can generate. If you are going residential, is there a demand for a place to live? Are you in a college town? Is the home close to businesses ,a city or business complex where people would prefer to rent rather than buy. Is there competition from apartment rentals. As for commercial, competition from other similar properties is your primary concern. Are other places nicer with more amenities? Check the area, is there a lot of office space available? What are similar properties renting for? This is key to commercial because it will dictate what you can charge which is how you determine your profit. Speaking of profit, remember that with a property you have a fixed asset. Historically, real estate has appreciated at about 4% annually, so you need to include this figure in your profit analysis. Also remember that there is a capital gains tax when you sell(this rate can change so it's difficult to predict,, but assume it will be somewhere between 15-25%. They are the issues from a finacial standpoint. Being a landlord can be a real pain in the butt. You can choose to deal with tenants directly or hire a management company to do it. The management company will make your life easier, but they also take a percentage of monthly rent and eat into your profits. If you do it yourself make sure to screen potential clients for creditworthiness. Invariably, you will have tenants who are late or who just don't pay. Expect court time and costs to try to recoup what is owed. Even then, there's no guarantee of executing on the judgment. Bottom line: It can work out well, just make sure you do your homework

by Keggler- 1 year ago

Learn how to day trade. If you learn programs to do it well, and can invest time and money it will be worth it. You need to be quite intelligent to do it correctly. Real Estate is a tough business. Tougher than you can imagine. Cash flow is difficult to achieve especially when the rents can't be increased to much at this time because of the overall economy. You will always have someone not paying or paying late. Just when you think you have the perfect renter they move b/c they usually buy a house and are not your typical renter. Unless you invest in big time rich complexes it is difficult getting good people and good renters. It seems that bad people and bad renters go hand in hand. Most renters want to live independently wealthy and sap off the system. They don't get a job, sit home all day learning the laws so they can screw their LL, and end up not paying and ruining your apartment. I am not talking about being a slum lord either. There are also those who pay, but they are trashy and often cause you so much of a headache for no reason that you want to evict them anyway. When it comes down to eviction, the court often sides with the tenant and gives them extensions, etc. It takes a while to kick someone out and then they leave their trash and damage for you to clean up. If they owe money and don't have it, don't plan on getting a cent back. It is not even worth wasting the time to take them to court. If you stay on top of the eviction when the tenant doesn't pay, it is possible to get your money, but don't plan on having a second job b/c you have to make a lot of trips to the court. There are truly a lot of problems even if you try to be the best LL in the world. The clients are just not worth it. Perhaps it would be a good idea to buy one or two places to rent out. There is great equity in it all, but when the tenants are not paying or running late, it really doesn't matter when you have to pay the mortgage. I would look at other investments like gas stations or parking garages. (PS- not to say that bad people can be stereotyped as not having money as there are rich and poor bad people, but it seems high end complexes would give you better luck b/c the rents are higher....there will also be a host of different problems buying complexes)

by VOLLEYBALLY- 1 year ago