Getting started with rental property

[Leorocky]

Hello, I’ve been reading here for a while and notice that several regular posters are landlords. I am interested in starting to plan and research purchasing a rental. I’m just wondering if anyone has any advice to help me get started.

I am interested in something less than $100k so that I can cover it with my income if neccesary – in other words I want to start small with something that wouldnt break me if things went to hell.

I am thinking a small house/duplex or apartment complex in an area like Dallas or Kansas City (have heard good things about both). The goal would be to use any cash flow to pay down the mortgage as fast as possible.

Any advice or comments would be greatly appreciated.

[(former)FormerSanDiegan]

I have no experience with out-of-town rentals.

We started by moving to a new (well, new to us) house and renting out our primary residence. In that case we had lived in the nighborhood for 4 years, knew the property condition inside and out and knew the rental market. We sold after a couple years to retain the tax-free capital gains (at that time it was not pro-rated as it is now) and invested the proceeds in another rental property.

By the time we pruchased the second rental property we were familiar with the tax consequenses and other factors in dealing with rental property. This takes some time to implement, but I think it is the best way to start out.

[(former)FormerSanDiegan]

I have no experience with out-of-town rentals.

We started by moving to a new (well, new to us) house and renting out our primary residence. In that case we had lived in the nighborhood for 4 years, knew the property condition inside and out and knew the rental market. We sold after a couple years to retain the tax-free capital gains (at that time it was not pro-rated as it is now) and invested the proceeds in another rental property.

By the time we pruchased the second rental property we were familiar with the tax consequenses and other factors in dealing with rental property. This takes some time to implement, but I think it is the best way to start out.

[(former)FormerSanDiegan]

I have no experience with out-of-town rentals.

We started by moving to a new (well, new to us) house and renting out our primary residence. In that case we had lived in the nighborhood for 4 years, knew the property condition inside and out and knew the rental market. We sold after a couple years to retain the tax-free capital gains (at that time it was not pro-rated as it is now) and invested the proceeds in another rental property.

By the time we pruchased the second rental property we were familiar with the tax consequenses and other factors in dealing with rental property. This takes some time to implement, but I think it is the best way to start out.

[(former)FormerSanDiegan]

I have no experience with out-of-town rentals.

We started by moving to a new (well, new to us) house and renting out our primary residence. In that case we had lived in the nighborhood for 4 years, knew the property condition inside and out and knew the rental market. We sold after a couple years to retain the tax-free capital gains (at that time it was not pro-rated as it is now) and invested the proceeds in another rental property.

By the time we pruchased the second rental property we were familiar with the tax consequenses and other factors in dealing with rental property. This takes some time to implement, but I think it is the best way to start out.

[(former)FormerSanDiegan]

I have no experience with out-of-town rentals.

We started by moving to a new (well, new to us) house and renting out our primary residence. In that case we had lived in the nighborhood for 4 years, knew the property condition inside and out and knew the rental market. We sold after a couple years to retain the tax-free capital gains (at that time it was not pro-rated as it is now) and invested the proceeds in another rental property.

By the time we pruchased the second rental property we were familiar with the tax consequenses and other factors in dealing with rental property. This takes some time to implement, but I think it is the best way to start out.

[ctr70]

Out of state rentals can be a challenge. I have one and it has gone OK b/c I really researched the neighborhood I bought in before I bought and made sure it would attract good tenants. I manage the property myself, but only b/c I was luck to find some really trustworthy handyman to call when stuff breaks. If you have to use a property manager, it can be a major hit to your cash flow.

If you are in San Diego I would look in Phoenix, Riverside County or Central Valley CA before going to a place like Kansas City or anywhere in the Midwest. Arizona and CA have taken a huge hit in price so they numbers on rentals are the best they have been in a decade. You have a much better shot at future equity growth in these areas than the Midwest. You could also look in the more working class neighborhoods of SD, but you would probably need a condo to break-even on cash flow.

The keys I’ve found with rental properties are:

1. Try to find something with a 1% rent to price ratio. Meaning if you buy something for $100k, you want to get $1,000 in rent

2. It MUST be in a neighborhood that attracts quality long term tenants. It will be a nightmare if you have constant turnover and/or sits vacant. You lose a lot of money when properties turn over tenants (vacancies, new paint, new carpet, etc..)

3. Try to find a newer built property or one that has been updated. Then you will have far less things to repair and replace. Houses have a ton of things that need to be fixed (AC units, furnances, roofs, appliances, landscaping, water heaters, garage door openers, flooring, etc…). If you have to replace a lot of these items the repair costs can eat up your cash flow.

[ctr70]

Out of state rentals can be a challenge. I have one and it has gone OK b/c I really researched the neighborhood I bought in before I bought and made sure it would attract good tenants. I manage the property myself, but only b/c I was luck to find some really trustworthy handyman to call when stuff breaks. If you have to use a property manager, it can be a major hit to your cash flow.

If you are in San Diego I would look in Phoenix, Riverside County or Central Valley CA before going to a place like Kansas City or anywhere in the Midwest. Arizona and CA have taken a huge hit in price so they numbers on rentals are the best they have been in a decade. You have a much better shot at future equity growth in these areas than the Midwest. You could also look in the more working class neighborhoods of SD, but you would probably need a condo to break-even on cash flow.

The keys I’ve found with rental properties are:

1. Try to find something with a 1% rent to price ratio. Meaning if you buy something for $100k, you want to get $1,000 in rent

2. It MUST be in a neighborhood that attracts quality long term tenants. It will be a nightmare if you have constant turnover and/or sits vacant. You lose a lot of money when properties turn over tenants (vacancies, new paint, new carpet, etc..)

3. Try to find a newer built property or one that has been updated. Then you will have far less things to repair and replace. Houses have a ton of things that need to be fixed (AC units, furnances, roofs, appliances, landscaping, water heaters, garage door openers, flooring, etc…). If you have to replace a lot of these items the repair costs can eat up your cash flow.

[ctr70]

Out of state rentals can be a challenge. I have one and it has gone OK b/c I really researched the neighborhood I bought in before I bought and made sure it would attract good tenants. I manage the property myself, but only b/c I was luck to find some really trustworthy handyman to call when stuff breaks. If you have to use a property manager, it can be a major hit to your cash flow.

If you are in San Diego I would look in Phoenix, Riverside County or Central Valley CA before going to a place like Kansas City or anywhere in the Midwest. Arizona and CA have taken a huge hit in price so they numbers on rentals are the best they have been in a decade. You have a much better shot at future equity growth in these areas than the Midwest. You could also look in the more working class neighborhoods of SD, but you would probably need a condo to break-even on cash flow.

The keys I’ve found with rental properties are:

1. Try to find something with a 1% rent to price ratio. Meaning if you buy something for $100k, you want to get $1,000 in rent

2. It MUST be in a neighborhood that attracts quality long term tenants. It will be a nightmare if you have constant turnover and/or sits vacant. You lose a lot of money when properties turn over tenants (vacancies, new paint, new carpet, etc..)

3. Try to find a newer built property or one that has been updated. Then you will have far less things to repair and replace. Houses have a ton of things that need to be fixed (AC units, furnances, roofs, appliances, landscaping, water heaters, garage door openers, flooring, etc…). If you have to replace a lot of these items the repair costs can eat up your cash flow.

[ctr70]

Out of state rentals can be a challenge. I have one and it has gone OK b/c I really researched the neighborhood I bought in before I bought and made sure it would attract good tenants. I manage the property myself, but only b/c I was luck to find some really trustworthy handyman to call when stuff breaks. If you have to use a property manager, it can be a major hit to your cash flow.

If you are in San Diego I would look in Phoenix, Riverside County or Central Valley CA before going to a place like Kansas City or anywhere in the Midwest. Arizona and CA have taken a huge hit in price so they numbers on rentals are the best they have been in a decade. You have a much better shot at future equity growth in these areas than the Midwest. You could also look in the more working class neighborhoods of SD, but you would probably need a condo to break-even on cash flow.

The keys I’ve found with rental properties are:

1. Try to find something with a 1% rent to price ratio. Meaning if you buy something for $100k, you want to get $1,000 in rent

2. It MUST be in a neighborhood that attracts quality long term tenants. It will be a nightmare if you have constant turnover and/or sits vacant. You lose a lot of money when properties turn over tenants (vacancies, new paint, new carpet, etc..)

3. Try to find a newer built property or one that has been updated. Then you will have far less things to repair and replace. Houses have a ton of things that need to be fixed (AC units, furnances, roofs, appliances, landscaping, water heaters, garage door openers, flooring, etc…). If you have to replace a lot of these items the repair costs can eat up your cash flow.

[ctr70]

Out of state rentals can be a challenge. I have one and it has gone OK b/c I really researched the neighborhood I bought in before I bought and made sure it would attract good tenants. I manage the property myself, but only b/c I was luck to find some really trustworthy handyman to call when stuff breaks. If you have to use a property manager, it can be a major hit to your cash flow.

If you are in San Diego I would look in Phoenix, Riverside County or Central Valley CA before going to a place like Kansas City or anywhere in the Midwest. Arizona and CA have taken a huge hit in price so they numbers on rentals are the best they have been in a decade. You have a much better shot at future equity growth in these areas than the Midwest. You could also look in the more working class neighborhoods of SD, but you would probably need a condo to break-even on cash flow.

The keys I’ve found with rental properties are:

1. Try to find something with a 1% rent to price ratio. Meaning if you buy something for $100k, you want to get $1,000 in rent

2. It MUST be in a neighborhood that attracts quality long term tenants. It will be a nightmare if you have constant turnover and/or sits vacant. You lose a lot of money when properties turn over tenants (vacancies, new paint, new carpet, etc..)

3. Try to find a newer built property or one that has been updated. Then you will have far less things to repair and replace. Houses have a ton of things that need to be fixed (AC units, furnances, roofs, appliances, landscaping, water heaters, garage door openers, flooring, etc…). If you have to replace a lot of these items the repair costs can eat up your cash flow.

[sdduuuude]

Make sure you include some risk assessment calculations that include “what if rents drop?”

[sdduuuude]

Make sure you include some risk assessment calculations that include “what if rents drop?”

[sdduuuude]

Make sure you include some risk assessment calculations that include “what if rents drop?”

[sdduuuude]

Make sure you include some risk assessment calculations that include “what if rents drop?”

[Author]

Posts