Author Topic: Minimum Length of Time to Own Rental Property?  (Read 3701 times)

Mustache MW

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Minimum Length of Time to Own Rental Property?
« on: March 29, 2015, 10:27:11 PM »
Hi!

I'm interested in becoming a landlord and have just started digging in to learning about the process.

I can't seem to find a good rule of thumb for how long you should expect to own a property. I'm looking for something similar to the "you should plan on living in a house for at least five years or you should continue renting" type of guideline.

I'm interested in investing, but I only plan on living in my current area for about 5-7 years. This seems like an awkward amount of time to me, right in between short and long term, so I'm not sure whether to wait until I move to a more permanent location or dive in sooner.

What would you say is your minimum timeframe? Or, how would you calculate it?

Thanks!

Drifterrider

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Re: Minimum Length of Time to Own Rental Property?
« Reply #1 on: March 30, 2015, 07:07:06 AM »
Would you consider the same questions if you were starting a business?  Because, you are :)

My father bought his first property in 1956.  My mother still owns it.  My father bought it and immediately rented it for the first 12 years (he was military and knew he was still subject to frequent moves).  If you are in a good rental market and you can find good agents (for if you want to move) and the property has good prospects for continued long term tenants, I wouldn't think there is a minimum time.

YMMV

NumberCruncher

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Re: Minimum Length of Time to Own Rental Property?
« Reply #2 on: March 30, 2015, 07:35:54 AM »
It depends! In some cases, it may never make sense to buy, and in others it may never make sense to rent.
 
http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=0

Play around with this calculator based on what's in your area, etc. One thing that changes the answer quite a bit is investment return rate. The default is 4%, but you'd see much more if you put money you'd otherwise have as a downpayment into the stock market (more like 7% without inflation, inflation being another input).

waltworks

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Re: Minimum Length of Time to Own Rental Property?
« Reply #3 on: March 30, 2015, 02:53:52 PM »
Costs to buy, and to sell, are high. So if you want to purchase a rental, the BEST way to do it is to NEVER plan to sell (barring crazy high appreciation), or at least only plan to sell and 1031 exchange to another rental. Even in that scenario, though, costs to buy/sell will kill you if you do it too often.

Moving elsewhere doesn't mean you can't own and invest in property where you live now. You will just need to include management costs in your calculations (which you should even if self-managing, really).

-W

GrayGhost

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Re: Minimum Length of Time to Own Rental Property?
« Reply #4 on: March 31, 2015, 07:33:20 PM »
Some people do buy-and-sell models of rental investing, and that can make a lot of money, even though you only hang on to a property for a few years, if that.

What I think you need to keep in mind is that real estate is very much a part-time gig, and you should absolutely structure your investments so that, at will, you can outsource 95% of the work that goes into advertising them, renovating them, collecting rent, etc.

Overall, I'd say, be prepared and willing to rent out a property indefinitely. But if the opportunity presents itself and if there is sufficient upside, and you can sell for a sufficient profit, go for it.

arebelspy

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Re: Minimum Length of Time to Own Rental Property?
« Reply #5 on: March 31, 2015, 08:20:33 PM »
Hi!

I'm interested in becoming a landlord and have just started digging in to learning about the process.

I can't seem to find a good rule of thumb for how long you should expect to own a property. I'm looking for something similar to the "you should plan on living in a house for at least five years or you should continue renting" type of guideline.

I'm interested in investing, but I only plan on living in my current area for about 5-7 years. This seems like an awkward amount of time to me, right in between short and long term, so I'm not sure whether to wait until I move to a more permanent location or dive in sooner.

What would you say is your minimum timeframe? Or, how would you calculate it?

Thanks!

Agree with all of the above, and want to ask: What does you moving in 5-7 years have to do with you owning rentals there?
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

Mustache MW

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Re: Minimum Length of Time to Own Rental Property?
« Reply #6 on: April 01, 2015, 09:13:40 AM »
Thanks for your thoughts! You've all made some really good and thought provoking points.

My "problem" is that I'm still on the younger side and not exactly sure where I'll move next.

However, when I do move, I plan on moving out of state.  My thinking before reading your replies was that it would probably be best to keep rentals reasonably close-by geographically. But I suppose to Walt and drifterrider's points, ensuring it's a good investment even if paying management fees to a good agent, would make distance less of an issue.

Would you say it's best to buy locally where you know the market but long-term it's not as big of a concern I'd you have good management lined up?

arebelspy

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Re: Minimum Length of Time to Own Rental Property?
« Reply #7 on: April 01, 2015, 09:34:46 AM »
Would you say it's best to buy locally where you know the market but long-term it's not as big of a concern I'd you have good management lined up?

I would say that's true whether locally or not.

Build management into the numbers, even if you will manage it yourself, because someday you might not (or might not want to).  It ought to pencil out as a good investment with that expense in there, even if you end up paying that expense to yourself to save on it.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

clarkfan1979

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Re: Minimum Length of Time to Own Rental Property?
« Reply #8 on: April 02, 2015, 05:25:12 AM »
Thanks for your thoughts! You've all made some really good and thought provoking points.

My "problem" is that I'm still on the younger side and not exactly sure where I'll move next.

However, when I do move, I plan on moving out of state.  My thinking before reading your replies was that it would probably be best to keep rentals reasonably close-by geographically. But I suppose to Walt and drifterrider's points, ensuring it's a good investment even if paying management fees to a good agent, would make distance less of an issue.

Would you say it's best to buy locally where you know the market but long-term it's not as big of a concern I'd you have good management lined up?

Buy in neighborhoods that you know and understand. It's less important to actually live there.