Author Topic: Should I do a rental?  (Read 2067 times)

mustache110

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Should I do a rental?
« on: October 17, 2015, 06:20:45 AM »
Hello Real Estate mogul mustachians,

I have until recently only considered stocks and bonds in my investment portfolio as I value a hands off approach. However, I have met two new friends who are active in condo rentals in the Columbus, OH area, and they are encouraging me to do it, too. I have to admit, it is a lot of fun to look at rentals and open houses, and the cash flow would be nice. Plus, I realize how attractive today's interest rates still are, historically speaking.

As I've been doing research, it seems the real money is in the sweat equity and self-management of the unit(s). This is what my friends are doing. Given that I have an active 3 year old and a busy job, I have neither the time nor the desire to deal with tenants or repair/damage/upgrade issues. I would definitely be looking at a property manager, which would eat into my profits, obviously.

Should I listen to my inner voice and stick to stocks/bonds, or should I try this out instead? Any of you hands off investors, and are you still getting good returns? What would you do differently?







Setters-r-Better

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Re: Should I do a rental?
« Reply #1 on: October 17, 2015, 06:59:31 AM »
are you open to using leverage or would you buy properties in all cash? Many RE investors like the leverage aspect (somebody else paying down the interest and principal). I think that's the main advantage for people who choose to outsource everything.

Also, a lot of people do a hybrid approach. Don't hire a property manager, but still outsource everything like repairs, maintenance, lawn work (but can sometimes make tenants responsible for this)... Then you don't end up paying a property manager just to collect checks (best case scenario) and find ways to rip you off (worse case scenarios).

You can also do a hybrid approach to the management in hiring a property manager now, and then when you're comfortable with the process or when you have more time you can do the management later in your life.

Papa bear

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Re: Should I do a rental?
« Reply #2 on: October 17, 2015, 07:18:56 AM »
Real estate had been good to me and my family!  If you want to do it, I say go for it.  A number of friends and I are in the Columbus market.  PM me if you want to talk any specifics. 

There are deals anywhere.  Make sure you buy right. 



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rocket354

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Re: Should I do a rental?
« Reply #3 on: October 17, 2015, 01:23:17 PM »
I agree with the self-manage, outsource repair approach.

I hired a property manager once. It was more trouble managing the manager than just managing the property would be. And they take a big cut (7-10% of gross rents which, for a leveraged property, might be 40%+ of profits). They also won't care for the property or tenants like you would, and there's always the phantom repairs/charging extra for repairs/etc possibility.

But, ultimately, I think rental properties can be very lucrative. You can get better returns than the stock market with just a little research and a low-rate mortgage, and more reliable, too--the cash flow is there every month. The risk is in having a large chunk of capital tied up in one property.

If you care for the property, and buy in a nice enough area, you can attract quality tenants and have an almost-passive, highly-reliable income stream for as long as you like.

Bearded Man

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Re: Should I do a rental?
« Reply #4 on: October 17, 2015, 04:15:42 PM »
I would only do it if you intend to use leverage. Really, leverage is the MAJOR thing that gives an advantage to real estate in that you can increase your returns drastically. Otherwise, you'd be better off putting your money in in index or dividend fund.

I have a paid off rental and while it is profitable, I could just about get the same returns with no effort. I'm actually considering selling it and buying multiple leveraged properties.

clarkfan1979

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Re: Should I do a rental?
« Reply #5 on: October 18, 2015, 10:57:55 AM »
If you need some convincing to do it, then I wouldn't do it. I think you need additional motivation to be successful. If you have a change of heart and are really motivated, then do it.

DaveR

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Re: Should I do a rental?
« Reply #6 on: October 18, 2015, 11:18:59 AM »
If you need some convincing to do it, then I wouldn't do it. I think you need additional motivation to be successful. If you have a change of heart and are really motivated, then do it.

+1

And you mention a 3-yr-old, a busy job, and lack of desire to deal with things... there are better ways to spend your time & money than chasing real estate returns. As luck would have it, real estate will be around in 5 years or 10 years or when/if you have the motivation.

mustache110

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Re: Should I do a rental?
« Reply #7 on: October 18, 2015, 12:36:36 PM »
Thanks for the advice, guys. I would definitely be doing this with leverage if I go down this path. To me, it's a big advantage in investing over stocks.

I see the drawbacks in using a property manager, so I guess it's going to come down to whether I want the extra work or not. As a few of you said, the deals should always be there, so it might be a situation where I should just wait until I'm in a different phase of life and want to take this on.

undercover

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Re: Should I do a rental?
« Reply #8 on: October 18, 2015, 04:43:07 PM »
Finding deals in today's market is hard. You're almost guaranteed to have to buy something and fix it up unless you buy turnkey, which I overall wouldn't recommend as your first purchase. I agree with Dave: if you have no motivation then it's going to be hard to be successful (or at least harder).
« Last Edit: October 19, 2015, 07:42:40 AM by undercover »