Advice for Rental Properties

[Danimal]

Also about renting out a duplex: You are the land lord, you pick the tenants so they will know who you are. Pick them wisely and there will be no issues. You can go with a property manager, but until you have several rental properties it will be a waste of money. They charge 10 - 15% of the monthly rent and the services they offer can vary. When you have several properties it is a must to have a management company because they maintain the legal means to evict tenants and pursue them for non payment. You could do this too, but it is a nightmare of paperwork and heartache. Don't worry about having a tenant next door, if anything they will be more behaved than they otherwise would.

[Aloha_Shooter]

One of the nice things about having a formal property manager even if you only have 1 or 2 rentals is that someone else deals with irate renters (if something happens), gets the calls in the middle-of-the-night when the toilet starts leaking, etc. The anonymity afforded by going through a property manager can be well worth the 10% fee.

[rockhound]

I am and have been a manger and investment property seller for the better part of my life. If i wasn't managing them I was selling them if i wasn't selling them i was remodeling and building them.

a couple of things i like have been mentioned,

location location location,,, the better location will attract a better quality of tenant and save you on repairs, itwill be easier to sell for reasonable market value in the end.
buying a low cost rental in a crappy neighborhood will attract that type of tenant,

the investment dollars and LTV ratios don't really mean anything to you if you really plan to pay it off before turning into a rental. you will have no debt service and will cash flow immediately anyway.
if you are using it as your primary residence when you move in you can purchase the home with FHA or other govt backed loan, you initial investment can be done with a lower downpayment. If you plan to use it as your primary residence, what you do down the road is not their concern.

remember that you will lose your capital gains tax shelter after renting for three years, so if you do have a large capital gain (market comes back strong) you will be subject to taxes unless you move back in

stay away from renting any type of common owner situation (condos or townhomes) where an HOA is in charge of common area maintenance. even if you own it free and clear the HOA fees and any potential large repair could cost you everything you have gained. The Village at Breck is a good example. They upgraded the building season before last. The assessment was over $55,000 per unit.

foreclosures are tempting, but most needs heavy repairs so be prepared.

[rockhound]

one other thought,

it is not necessarily the best idea to have paid the home off yourselves before turning the home into a rental. yes you will cash flow, but you are all in with your investment then. some of the idea of owning a rental property is that you get some one else to buy you a house

if you have $150,000 of your own money in the property then you will need to recover $150,000 in rent before you break even.

just some round numbers, if you buy a $100,000 home on FHA with $3500 down and live in it for three years and turn in into a rental. round number you have an $800 per month mortgage, your investment would be consider your living expenses for the three years, something you have spent anyway.
if you rent the home at $1000 you would cash flow almost immediately, the $200 per month in additional over the mortgage and $200 a month that is being paid down on your loan with money that came from someone else. in the end you have an asset worth $150,000 that cost you nothing

in your scenario, you paid for your own asset, you have not gained anything, but cash flow, the idea is to gain an asset that does not cost you anything to own.

let the renter buy you your rental

[Wulf202]

+185,000 for rockhound

[Irving]

I'm impressed and pleased with how many people on here personally have experience with investing in real-estate.

[encorehunter]

Rentals can be great, but they can also be a nightmare. The tenants seem to have all the rules on their side. I finally got a good tenant after owning the rental for six years. He is a contractor, and he fixes all of the problems that occur. I give him a discount on rent when he gives me the receipts. If and when you get more rentals, I would suggest finding some one who is a handyman to rent one of your properties. He can take the calls to fix things night and day for a break on rent.
Does anyone know anything further about rolling a retirement into a down payment for a house tax free? I have been considering this, but the only way I knew was to pull the money out and take the BIG tax hit. If there is a way, it would save me around $40K in taxes to purchase the ranch I want.

[ChunkyMonkey]

I don't know what kind of retirement you have, but IRA only allows up to $10k in non taxable down payment toward your primary residence. If you have self directed IRA, you can purchase the property as investment as simple as a money manager would purchase bond/stock as portfolio. The issue is you can only contribute unto $49k a year as a company or $5k as individual. In short to purchase a commercial building worth few hundred thou will require a seasoned account.

Isn't someone on the board a CPA or fund manager? I'd be interested in other options too.