Author Topic: When is the "right" time to have rental property?  (Read 2396 times)

b4u2

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When is the "right" time to have rental property?
« on: May 10, 2016, 08:03:14 AM »
I currently have one rental, not by choice but by necessity. It is finally making some money after being in the hole for a few years. I and possibly a friend are looking into getting more rentals. So as the subject asks what makes the "right" time to invest in more? Do my finances need to be perfect? How do other people make it? Isn't making money/income stream the point of rentals?

I am just asking the question at this point. There are some properties that have come up that I am interested in. I can give details on them if interested but for now I just want to hear what/how others have managed to become landlords and/or expanded.

Another Reader

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Re: When is the "right" time to have rental property?
« Reply #1 on: May 10, 2016, 08:06:09 AM »
The right time is when you have the liquidity and reserves to operate the properties and the numbers make sense.  Really make sense, not manipulated to meet your investment requirements.

zephyr911

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Re: When is the "right" time to have rental property?
« Reply #2 on: May 10, 2016, 01:21:11 PM »
The right time is when you have the liquidity and reserves to operate the properties and the numbers make sense.  Really make sense, not manipulated to meet your investment requirements.
+1
Most by-necessity rentals suck. The first thing to understand if you want to look for more is that you're probably looking at a whole different class of property than what you're already holding. You want something that will be profitable from day one with a reasonable (let's say 20%) invested and the rest financed. It's up to you if you want a lower LTV, but if you HAVE to have higher equity just to have cash flow, you're really just speculating on appreciation while using rent to ease the pain.

Quote
Do my finances need to be perfect? How do other people make it? Isn't making money/income stream the point of rentals?
Growing, and to an extent protecting, income and assets, that's what I'd say the point is. If you get into the business without savings, one nasty surprise could tank the whole thing for you. Roofs and HVAC systems aren't cheap.

clarkfan1979

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Re: When is the "right" time to have rental property?
« Reply #3 on: May 11, 2016, 09:25:16 PM »
The best time to have rental property is when vacancy is low. Vacancy is one of the biggest killers of cash flow. I would be willing to fall short of the 1% rule, if it's a desirable neighborhood with low vacancy.

b4u2

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Re: When is the "right" time to have rental property?
« Reply #4 on: May 12, 2016, 08:59:44 AM »
A triplex is up for sale that a friend of mine found. It's currently rented out but he wants to sell because he can't do any maintenance himself. It in a 500 year flood zone. It's been flooded once (2008) but has been renovated since then. It's already making money which is why I can't understand why he wants to sell it. I have a call in to my insurance agent to see what flood insurance costs. I've never had to worry about flood insurance so no clue what it costs.
Most everything was updated after the flood of 2008 including the roof if I understand the report. Electrical, appliances, major units all newer and up to the new flood codes the city/state imposed. We are still researching to see what the problem is. It's been on the market 280+ days.

Asking Price $139,500
Improvements maybe $2500
Closing costs and inspection $3,500
Property taxes $3,300 yr
Insurance $1,200?
Flood insurance ???
Current rent is $675 per unit *3=$2,025

money_bunny

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Re: When is the "right" time to have rental property?
« Reply #5 on: May 12, 2016, 06:07:35 PM »
What is the neighbourhood like? What are the tenants like? Is 675 market rent for similar units? Is anyone there HUD or Section 8?

Will you be managing it yourself? Can you step up and put someone out and evict someone or say no?
Do you have the time to do the upkeep and repairs?

In your city/county does a triplex and under fall under "Mom and Pop land-lording clause" where you don't have to follow all the Fair Housing Rules etc and get a state inspection card.

If it's in your neighbourhood will you have potential conflict of interest with your tenants if you also have to do business with them?

There is a lot written in these pages about some of the other costs and headaches.

fishnfool

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Re: When is the "right" time to have rental property?
« Reply #6 on: May 12, 2016, 08:36:55 PM »
 Be sure do turn over every stone on this property. Make some calls, get estimates on the flood insurance etc etc. Three units means 3x's the amount of possible issues.... 3 tenants, 3 kitchens full of appliances, 3 bathrooms where water can raise issues etc etc. Not saying this couldn't be a good opportunity but you don't want 3x's the headaches either.

 First red flag, why has this property been on the market that long in this current housing market???

 Second red flag, prior flood damage, hidden dry rot, mildew etc???

 Third red flag....you fill in this one???

In spite of all that the numbers look good. So that would peak my interest in it too, but due diligence is critical here!