Investing 102

[CarlC]

Todd, I too have become a landlord by renting my Dad's old home. It required a LOT more work and cash than yours but the financials were hard to ignore.

During remodeling several people per day come to the house wanting to buy or rent, and there was no sign, advertisement, etc. An on-line rental availability map showed that there were only two similar rental rental properties in a 1.5 mile radius, and outside of that the neighborhood gets really ugly. Hence, premium rental income and a selective tenant process is much easier to get.

If all goes well in 26 months all of the cash outlay will be paid off. Like cars my labor is "free", but for me it's the price of admission and sweat equity since nothing had been done in the house since it was new in 1953. If I had to pay someone to do it all it would have been hard to justify.

My friend and I are now looking at purchasing a commercial building as a combined rental and storage (for us) facility. We both want a place to go after we retire to keep ourselves busy, and our current home properties won't allow expansion. By leveraging the home rental there should be little out-of-pocket expense but a good long-term ROI if the commercial tenant rent can cover the bulk of the loan.

There are advantages and disadvantages in property rentals. Both revolve around the tenant. Get a good one and it's a good deal. Get a bad one and it's a real PITA, especially in California where the tenant has significantly more rights than the landlord. Texas is much more landlord-friendly. To lure in the tenants that I wanted a few more things were added to the property than planned, but they are upgrades that over time will pay for themselves. So far the tenants have been good.

If one can afford to purchase and fix a property for rental it's a great time to do it if the income can cover costs. I don't see home prices going a whole lot lower in most markets, people are always going to need rentals, and as home values rise from the ashes, the appreciation is a great nest egg. Just like stocks though, it has to be the right property, in the right area, with the right tenants, etc., so due diligence is needed to make sure it's not a money looser.