Author Topic: How much work (stress) is rental property ownership?  (Read 3820 times)

Polixenes

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How much work (stress) is rental property ownership?
« on: May 24, 2016, 06:52:10 PM »
We are FIRE and looking into the possibility of investment in property. Right now we are invested in a mix of stock/bonds/funds and looking at buying something for about 10% of our invested net worth. My wife is the keenest of the two of us on this project. I look at it as a harmless side-investment or perhaps even a hobby.

I'm ok with the financial aspects, but my concern is the amount of work/stress involved in rental ownership. Assuming we hire an agent who is responsible for *everything* so as to make this a passive undertaking (how far is that possible?) it sounds good.

My wife does not handle any kind of stress well. The slightest little thing eats at her and causes her frustration. To my mind, there is a huge potential for stress in property ownership.

Can I realistically expect hiring an agent to manage all aspects of the property and the rental-process will create a harmonic worry-free endeavor?

Eurotexan

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Re: How much work (stress) is rental property ownership?
« Reply #1 on: May 25, 2016, 04:15:37 AM »
I am a landlord of two rental properties and I cannot tell you it's stress free. In fact, I am thinking about selling them not as I am tired of the early morning calls and chasing contractors. I think there are key points: a condo or apartment is going to be a lot less stressful than a single family house. Buy newer and well made. I do not have a property manager but that is definitely the way to go. The stress for me comes  not  so much from the money aspect but the repairs/ maintenance. For example on the morning of Thanksgiving last year I had a call from each tenant - one house had a leaky roof and the other a leaky toilet. Did not make for a fun day.

However, financially these rentals bring my FIRE date forward about 5 years so they are definitely worth it from that perspective. Just make sure you have a good property manager who can handle the day to day annoyances for you.

Good luck!

Drifterrider

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Re: How much work (stress) is rental property ownership?
« Reply #2 on: May 25, 2016, 04:49:03 AM »
I am a landlord and I don't stress over it at all.  I have a good property management company.
I renovated my house so everything except the HVAC is new.  Got an e-mail in March (from the PM).  Heat won't come on.  Told PM what company I deal with and all was taken care of.

I would say your level of stress (or lack thereof) depends on the condition of your rental unit, the quality of your PM company (if you use one) and what services you are willing to provide the tenant.

My brother had a tenant who called him because of a stopped up toilet.  He asked the tenant if it was stopped up when he (tenant) moved in.  The answer was "NO".   Brother said, then you stopped it up.  You want me to call the plumber or you want to call the plumber (at your expense) or you want to unstop it yourself?

No further calls.   

Polixenes

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Re: How much work (stress) is rental property ownership?
« Reply #3 on: May 25, 2016, 09:31:03 AM »
Thanks guys, sounds like we can do this without major headaches then with the right preparation. We will spend some time shopping for a quality manager and then narrow our purchase scope to a newer building. Appreciate your comments!

zephyr911

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Re: How much work (stress) is rental property ownership?
« Reply #4 on: May 25, 2016, 09:36:43 AM »
Second the PM comments. If it's not profitable after that 10% cut, it's not a good rental to begin with. Build that cost into all your analysis from the beginning, even if you plan to self-manage, and you will pick better properties as a result.

Us2bCool

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Re: How much work (stress) is rental property ownership?
« Reply #5 on: May 25, 2016, 01:05:47 PM »
I own two properties and am looking to keep buying more. When I got my first property, I got a lot of advice about whether or not to use a property manager. Now, I wouldn't ever invest in  house without one! A good PM will not only take care of repairs and save you a ton of time screening tenants, they will also make sure your rent is collected and remind you to raise the rent when it's time. In short, they help you run your rental like a business and not like a charity.

My first property had a small (~$50) negative cash flow for the first two years. Ten years later I'm charging twice the rent and the rest is gravy.

zephyr911

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Re: How much work (stress) is rental property ownership?
« Reply #6 on: May 25, 2016, 01:17:52 PM »
Good PMs will even help you refine your selection criteria to make sure you're buying good properties. Mine has permanent staff in most of the trades too, which really keeps maintenance costs down. We're doing some fairly major overhauls of three properties right now for under $20K.
Any and all future acquisitions, like the one we just completed, will have PM agreements signed the same day as closing.

Bobberth

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Re: How much work (stress) is rental property ownership?
« Reply #7 on: May 25, 2016, 01:54:51 PM »
I would caution you about this if your wife can't handle stress very well. How will she react if you have a normal vacancy from a turnover and you have to pay expenses out of pocket? What if it's an extended vacancy? What if you get a bad tenant or a bad manager? Lots of potential stress as you're taking on someone else's drama-even if you have a manager it ultimately comes back to you.

That said, I love having my rental properties. I manage them myself and really, the management part isn't very much. I can't imagine paying 10% of rents for someone else to do the management. Leasing up takes a bit of time and could be worth paying somebody you trust for, but the regular monthly management is very little. Other than taking checks to the bank, most of the management issues I get are the usual calls this time of year and in the fall that the AC or furnace isn't working. Which I immediately turn around and text my HVAC guy to take care of.

daverobev

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Re: How much work (stress) is rental property ownership?
« Reply #8 on: May 25, 2016, 07:17:13 PM »
Given your first line - "We are FIRE" - I would say do NOT do it.

Why? The downside is that the house can *cost you money* - worse than going to zero. If you get some bad luck, it can take years before it begins turning a profit, all the while being difficult to sell at a price that allows you to escape.

You say "a hobby" - that's fine, til you get sink holes or some stupid thing that the insurance won't cover.

Will it happen to you? Maybe, maybe not. You could buy, and double your money in 5-10 years, or have a great tenant that stays put for 15, never calling you etc etc. But the converse is possible - a string of bad tenants that break things, leave early, etc.

Don't get me wrong, I am a landlord, and it can be good - find the right property and the right manager and you *should* be just dandy.

But if you are *already* FIRE - why take the risk? The worst a diversified ETF can do is go to zero, and the chances of that are pretty much the same - zero.

(UNLESS you want to become a land baron, in which case the risk is spread out over many properties, hopefully at least somewhat regionally diversified - in which case you'll be fine - but then why not just buy a REIT?)

salmp01

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Re: How much work (stress) is rental property ownership?
« Reply #9 on: May 30, 2016, 01:13:11 PM »
I own several properties and I have leaned how to reduce my stress over the past few years.  If your wife gets stressed easily then buy a REIT instead.  When you first become a landlord there will most definitely be times when the stress levels are high.   
« Last Edit: May 31, 2016, 10:47:39 AM by salmp01 »

Kroaler

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Re: How much work (stress) is rental property ownership?
« Reply #10 on: June 02, 2016, 10:36:56 AM »
@ Daverobev

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daverobev

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Re: How much work (stress) is rental property ownership?
« Reply #11 on: June 02, 2016, 02:11:53 PM »
@ Daverobev

"To "follow" a thread hit the notify button at the end of the page!


I never knew that I could follow a thread without posting something in it, thank you for this information. lol  You will save me many useless post...

Yeah I put that in after the thousandth 'following!' post I saw, thought it was probably more likely to do good than my referral spam :P

hucktard

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Re: How much work (stress) is rental property ownership?
« Reply #12 on: June 03, 2016, 10:06:04 AM »
Real estate is awesome. There is the potential to make a ton of money. However, you have to REALLY want to be in real estate to do well at it. I read books for almost a decade before buying my first rental (wish I would have started earlier...) It doesn't sound like either one of you are REALLY into real estate. Personally I like the challenge and the "game" of rental properties. I do everything myself including most maintenance, and I still only spend a couple hours a week most weeks. However, there are some times when it can be pretty stressful for a week or two. I had one really bad tenant that caused a few weeks of high stress and hours of work. Overall, for me, it is totally worth it because I will be able to retire way earlier than just investing in index funds. But its just not for everyone, and you need to decide if it is for you.

zoltani

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Re: How much work (stress) is rental property ownership?
« Reply #13 on: June 03, 2016, 10:22:30 AM »
I have out of state rentals and use a PM. Stress is very low, and seeing those rents hit the bank account each month is very nice!

protossZerg

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Re: How much work (stress) is rental property ownership?
« Reply #14 on: June 04, 2016, 03:43:30 PM »
My wife does not handle any kind of stress well. The slightest little thing eats at her and causes her frustration. To my mind, there is a huge potential for stress in property ownership.

Can I realistically expect hiring an agent to manage all aspects of the property and the rental-process will create a harmonic worry-free endeavor?

My wife does not always handle stress well, in fact she grew up very very poor, so when we spend any money it stresses her out. :)  We now own several SFHs in 2 different markets.  One market we have a PM and the other we have relatives.  Love our current PM (we have been through a few) and he takes a lot of the stress out of the equation.

4 things help us minimize stress of land lording . 

First, we only buy properties that attract the kind of tenant: highly rated schools, low crime area, etc. 

Second, we only buy properties in areas with low occupancy rates, makes the right return, etc.....we are very picky and take our time to buy.  Be patient.

Third, we are involved in screening.  Even though we have a PM, we make the final decision on tenants.

Finally, we have a good PM, they can do the blocking and tackling, sounds like your wife needs that.