If you started again, what would you do differently?

[IowaStache]

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[KBecks2]

Interesting question.  My husband has talked with people who have rental properties and he says none of them would do it again.  I imagine they are not really into land lording.  One has a lot of properties and feels that he can't sell due to taxes.  I am not sure what to think of it. 

[usmarine1975]

Owning Rentals is a job.  It requires time, and money.  It can also pay you quite well.  My grandfathers sole source of income until he died.  And then selling the properties gave my grandmother money to live on until she passed away with money left over to pass down to children.

What would I do differently.  I would have more cash reserves.  Do more research up front.  Interestingly I am a 3rd generation landlord.  You would think I would know it all.  I do not.  You make money when you BUY not when you sell.  If you pay too much you will not make money at least not in the short to mid term range.

I have 6 properties with 7 units.  I live in one of the properties and essentially live Mortgage free.  Rents collected pay my mortgage.

I would not have refinanced like I did.  Early on I refinanced to get more money out of the properties.  If I had refinanced to cut down on my terms I would have a few almost paid off now.  They will all be paid off before I turn 55 which will be a great retirement for me.

[richschmidt]

Thanks for the replies so far.  I think that I'm more interested in flipping...possibly 1-2 a year.  Work keeps me pretty busy and I think I'd rather plan for a short period of busier time improving a house when i know I'll have some downtime at work as opposed to the constant "on call" nature of owning rentals.  I know you can go the property management route, but of course that decreases your profit margins.

The "constantly on call" thing is true, I suppose... but I rarely feel it.  We have 4 houses with 5 rental units (3 sfh and 2 1br apts on the top floor of our house). They're all in our neighborhood, which makes it easier. Rarely do I have to do anything for our tenants, besides mow the grass, and that's just because I wrote the leases that way. A couple of them would probably mow their own grass if I knocked $50/mo off the rent.  Sure, there's an occasional repair, but that just means putting my eyes on it and then calling someone to take care of it.

I think it depends on the houses you buy and the tenants you work with. Our current tenants are all really easy-going and like living in our houses. Two of them just renewed for another year.

What would I do differently? Hmm... I'm not sure if I would change anything at all...

[escolegrove]

We own 4 rentals and I manage my parents 4.  We are on track to buy 2 more in the next 10 months. I work full time and self-manage. We got started turning our personal property into rentals when my husband was transferred. We buy higher end rentals. I put an hour or so into my properties a month unless a tenant is moving out. They often stay for multiple years improving the houses at their own expense.

My biggest mistake was not starting as soon as we got out of school. We would have had 3 more properties. I would never flip unless it was only with my husbands labor. I find dealing with contractors soooo much more stressful than with tenants.

I started a website/blog all about self managing and turning rentals into retirement baskets. If all keeps going according to plan, we should be able to retire at 42 and 44 (15 years ) on our cashflow and my husbands military pension.

[Blindsquirrel]

Do you rent/flip/both?- We hold 15 SFRS and we flip 1-2 or so a year
What is your portfolio size/how many homes do you flip a year?- gross 130K in rents, all paid off save 1.
How did you start?- I moved for a job, my neighbor at the time rented his house, he said don't sell! rent it to me, I did and he stayed 12 years and bought the house for me. When he moved out I sold it as not into remote land lording.
If you could do it all over, what would you do differently?- I would not buy a house because the financing was great-hence the one we owe on, not much 65k it may be worth that, probably not. Hey with 0% of my own money in it, my yield is infinite! :(
I would never own student housing, we charged like sin and if we mad much money it sure as hell was not worth it. College students are vermin.
I would use less leverage, we went way in at times and had some rough months due to high payments. We swung to far in the opposite direction in paying almost all of the off from a yield standpoint, from a sleep at night and FI stand point we are good.

[BlueHouse]

I'm an accidental landlord, so I don't have much to offer, but I'll throw this in:
1. Don't buy the kind of house YOU like.  You may get emotional and YOU are not your target market.
2. I wouldn't buy another condo with condo fee.  Fee simple or small neighborhood HOA (under $150) is okay, but my condo fee kills my cash flow and I have ZERO control over it. 
3.  I would go for cheaper rentals that a family may like rather than more expensive ones for one person. 

[Nords]

If you could do it all over, what would you do differently?

I'd have an exit strategy.

You know, something like "At age 60 I'm hiring a property manager" or "At age 70 I'm selling it all, paying the taxes, and buying a REIT".

Something better than "probate" or "... but someday our daughter might want to have that school district for our grandchildren!"

Until one of those four things happens, I have no compelling reason to sell.  But I don't really have an exit strategy, either.

[usmarine1975]

Not sure how it will all work but our attorney was talking to us about putting our properties in a trust eventually.  May or may not pass more tax friendly then traditional. Just a thought Nord's again I don't have all the details as we are not ready to do it.

[sequoia]

...

My biggest mistake was not starting as soon as we got out of school. We would have had 3 more properties. I would never flip unless it was only with my husbands labor. I find dealing with contractors soooo much more stressful than with tenants.

...

Same here. I would have 2-3 more properties had I started several years earlier. Just never thought about having rental properties.

[MNBen]

2. I wouldn't buy another condo with condo fee.  Fee simple or small neighborhood HOA (under $150) is okay, but my condo fee kills my cash flow and I have ZERO control over it. 

Just a reminder to all who own within a HOA or Condo Association....  Board members are elected by owners and board meetings are to be open all owners.  All association financials are available for viewing by owners. You DO have control, but it's up to you to decide if you want to exercise it.

My recommendation if within an association is to get involved in one way or another.   For me personally, I have three rentals, two I bought in foreclosure within one complex and the another in another complex which was my first home.  I am a board member of both associations.  It does add a little work at times, but it also helps me to have a lot more control over responsible use of monies and also better understand the long-term financial situation.

But I can also say, as a Board Member, I can't believe how little people care about the association actions.  I've been on one board for 12 years, and we have nearly 100 homes.  In 12 annual meetings, I'd estimate maybe 10-15 different people have EVER come to an annual meeting.

[zinethstache]

...

My biggest mistake was not starting as soon as we got out of school. We would have had 3 more properties. I would never flip unless it was only with my husbands labor. I find dealing with contractors soooo much more stressful than with tenants.

...

Same here. I would have 2-3 more properties had I started several years earlier. Just never thought about having rental properties.

+1 - what the heck took me so long to finally take the plunge? /sigh

we have 3 multi's. 90k/yr gross rents. In our area the math works out far better for dup/triplex than SFH. 9 doors total, one is a shop, and an extra un-rented garage makes 9 1/2 doors.

Landlording does get easier with time and we are only 3 years into this journey, we've bought one property per year. We have a large savings, have financed all three with great terms. No interest in paying them off early, however we may pay off our home if we decide to stay here long term (its been 13 years already so the likely answer is yes, we stay).

no flips yet... that is next on our list to build up more capital. If numbers no longer make sense to buy locally, we will throw the profits at our mortgage. Can't quite get DH to consider long distance properties yet as he is hands on, but I am working on that:)

[mooreprop]

If I had it to do differently, I would not buy the lower end houses no matter how cheap they are.  We owned "slum" houses and thought that if we fixed them up nice, then we would get decent tenants.  Even with good tenants, the margins are too slim to allow for proper maintenance.  It is far better to buy a few nicer homes where professional tenants would like to live than lots of cheaper ones where your tenants are struggling to pay their bills.  The number of hours you spend are much less too.  The other thing I would do differently is to get 10 year mortgages on any house I am planning on keeping long-term.  If you cannot cashflow with this, then save a bigger downpayment and borrow less money.  You pay mostly interest on 20 year loans for the first 10 years. 

I would do some things the same.  I would buy quickly and aggressively when the houses are cheap.  This seems to happen about every 15 years after a bubble.  I would hold them as rentals again until the next bubble, then sell them.  You know it's time to sell when you can no longer get good tenants, because they all buy their own homes since the financing is so easy.  I guess that is called having an exit plan.  If you love the house, you may even be able to buy it again after the crash! I bought one house at sheriff's sale for $2000, sold it for $50,000 seven years later and could have purchased it again another 5 years later for $10,000. 

[usmarine1975]

Location location location.

[BlueHouse]

2. I wouldn't buy another condo with condo fee.  Fee simple or small neighborhood HOA (under $150) is okay, but my condo fee kills my cash flow and I have ZERO control over it. 

Just a reminder to all who own within a HOA or Condo Association....  Board members are elected by owners and board meetings are to be open all owners.  All association financials are available for viewing by owners. You DO have control, but it's up to you to decide if you want to exercise it.

Many condo associations (mine included) do not allow non-resident owners to hold a position on the board. There are usually one or two strong personalities on the board who get changes passed because few people care enough to vote and because they socialize the ideas with other voting members. By renting out my property, I no longer have the privilege of using the common areas to socialize the ideas so I would have to make it a full time job to stay up to date with the club room politics.  I realize there are ways to effect change, but by laws have been set up to curtail influence of non-residents.  I'm merely stating that the hurdles are so great that it's not worth it to me to do it again and if I were starting over I wouldn't have done the same.   

[johnhenry]

If you could do it all over, what would you do differently?

I'd have an exit strategy.

You know, something like "At age 60 I'm hiring a property manager" or "At age 70 I'm selling it all, paying the taxes, and buying a REIT".

Something better than "probate" or "... but someday our daughter might want to have that school district for our grandchildren!"

Until one of those four things happens, I have no compelling reason to sell.  But I don't really have an exit strategy, either.

+1  For thinking about exit strategies and knowing your options.  I wouldn't say it's necessary to have an exit strategy set in stone, but rather to be aware of the pros and cons of different exit strategies and in which situations you might employ them.  After much deliberation and careful planning, we jumped into residential real estate in a big way.  We don't have a specific exit strategy, but the many options available to use as an exit strategy is one reason that residential real estate investing (especially in SFHs) is so appealing.

- if things get bad enough, sell (or rent) our house and move into one of the rental units
  - (this is more of an option to avoid having to use an exit strategy)
- sell units all at once to an investor or one by one to occupants/investors
- continue to self-manage for maximum return or hire manager for minimal involvement
    - or any combination like sef-managing low turnover units with long term tenants and hiring out mgt of other units
- 1031 Exchange!! into just about any other kind of business investment, not just SFHs (or exact same asset type)
  - for deferment of depreciation recapture and capital gains

- While I would recommend a strategy more complex than "probate"... passing real estate assets to the next generation, where they inherit them on a stepped-up basis, should not be discounted if one of your goals is pass some wealth to the next generation.

[arebelspy]

1. Do you rent/flip/both?
2. What is your portfolio size/how many homes do you flip a year?
3. How did you start?
4. If you could do it all over, what would you do differently?

(Numbers added for ease of answering.)

1. Both.  Mostly rentals, but some flips.  I never do work on the flips, just partner with someone and fund them.
2. About a dozen rentals, some notes, some flips.  Only a few.
3. Buying the first one.
4. I'll have to think on this one.  There's a lot of things I could have done better, but a lot of it just required learning from mistakes, and/or hindsight that wasn't available at the time.

[SunshineGirl]

At present, I own two properties with eight units. Bought about 15 years ago.

What I did right: Bought properties with fantastic cash flows right from the get-go. One property, we paid $55K cash and it flows $1100/month. The other, we put 3% down on a $130K five-plex property, lived "free" for a year in the sense that our tenants paid the mortgage, which allowed us to buy a cheap SFR.

Another thing we did right (for us) - Refinanced the $130K property into a 15-year mortgage, which still provides us with good cash flow and will be paid off in two years, just in time for state college tuition for our oldest child.

What I wish I'd done differently - We sold the SFR when it would have been a good cash-glowing rental. I wish I'd kept that and bought 1-2 more SFRs before we stopped buying, because we'd be nearing having them cover all our expenses rather than about half our expenses.

I wish we'd hired a property manager a lot sooner than we did. We likely would have bought more property if we hadn't had to put time into the rentals.

I won't go so far as to say that buying income properties is a young person's sport, but if you do it right when you're young, the incentive to buy more when you're older (I'm mid-40s) is way less, at least for me, which is why I wish I'd bought more when I was in my 20s and early 30s.

Another thing we did that worked for us is we never took equity out because our goal was to have our properties paid off in time for our kids' college educations. (Hopefully, they'll get scholarships and we can party with the money instead...!)

I find I'm less willing to take a leap and buy another income property right now because at this point, all we have to do is NOT make any mistakes and we're set in terms of our financial goals. So I guess to sum it up - we got great deals when we were young, we held onto good properties (with one exception), and we had a reason for financing the way we did and not taking out equity.

[Mr Mark]

I'm trying to educate myself on real estate and thought a "If I knew then" thread would be helpful.  To start discussion:

Do you rent/flip/both?
What is your portfolio size/how many homes do you flip a year?
How did you start?
If you could do it all over, what would you do differently?

hell. Capt. Hindsight is THE Best way to do real estate and deals.

Id have not sold my place on the beach in Auckland for one.

Id have leveraged to hell and bought properties in the 90s... sold in the 2005s... bought again in foreclosure in 2009.

Spent a lot less in my youth on total useless crap and instead invested it somewhere my subsequent ex-wife wouldnt have gotten any, anyway. ;-)

[arebelspy]

I hear "I wish I hadn't sold property X" WAY more from experienced investors than I hear "I should have dumped this property a long time ago."  One book I was reading the author was saying he hasn't sold any in 20 years or so, but he still wished that he had kept every property he'd ever bought.

I try to remember that when I get the urge to sell to redeploy equity elsewhere.

[Mr Mark]

I hear "I wish I hadn't sold property X" WAY more from experienced investors than I hear "I should have dumped this property a long time ago."  One book I was reading the author was saying he hasn't sold any in 20 years or so, but he still wished that he had kept every property he'd ever bought.

I try to remember that when I get the urge to sell to redeploy equity elsewhere.

+1

if it's cashflowing, take out equity til it squeeks, but if you can, never sell....

[enpower]

I'd buy on a higher cash yield.

[Mr Mark]

I hear "I wish I hadn't sold property X" WAY more from experienced investors than I hear "I should have dumped this property a long time ago."  One book I was reading the author was saying he hasn't sold any in 20 years or so, but he still wished that he had kept every property he'd ever bought.

I try to remember that when I get the urge to sell to redeploy equity elsewhere.

+1

if it's cashflowing, take out equity til it squeeks, but if you can, never sell....