Oh, to be a landlord in OB

[barnaby33]

Real estate exceptionalism at its finest. Having spent a fair bit of time in OB, unless you are there to manage it, it is one hell of a risk. The types of people attracted to OB don’t provide the best applicant pool. Your friend is extremely lucky in timing.

Is anybody currently buying properties to rent, especially on the coast?
Josh

[spdrun]

Plenty of solid people in OB — are you sure you’re not thinking about PB?

[gzz]

UPDATE ON MY FIRST RENTAL PROPERTY

Over the summer I made nearly triple my interest+tax+ins in short term rentals.

Then in Oct and early Nov I got zero rentals despite dropping the price a lot.

I used this time to do a lot of renovations and improvements and have out of town family and friends stay, so it was not a total loss.

I had it listed at a somewhat high price for a long-term rental. I gave a lot of tours but had no takers over two months. Rather than cut the price, I just kept making the house better.

I rejected a few renters because they had multiple large dogs or otherwise gave me some bad vibes.

Finally last week I got a long-term tenant at my somewhat high asking price with one sweet and quiet medium sized dog. They’ve been very nice to deal with, I gave them their first week free in return for putting up with me finishing renovations that are in progress.

It is a relief to have it rented now, the short term rental was profitable but a giant hassle. More the constant “reservations desk” work with potential renters online and on the phone than dealing with the actual people in person. Customer service work dealing with semi-rich people (it was $320-400 a night plus tax) is no fun at all.

[svelte]

After helping my father with his rentals when we were college students, my wife and I decided we never wanted to own rental units. The crap my dad put up with was unbelievable. I actually ended up serving papers for him a few times. And the filth people left behind I wouldn’t have believed if I didn’t see it with my own eyes.

As it turns out now, if we had them I think relatives would have been wanting to rent if we owned one, then things would get even stickier if they fell behind on rent/maintaining the premises.

Reflecting on it all, I think I might have owned rentals if my wife wouldnt/couldnt work full time. Having her deal with the phone calls to rent and maintain the properties would be a way to have her earn money while being at home. As it is, she works full time like I do so neither of us want to deal with rental hassles.

[Coronita]

[quote=svelte]After helping my father with his rentals when we were college students, my wife and I decided we never wanted to own rental units. The crap my dad put up with was unbelievable. I actually ended up serving papers for him a few times. And the filth people left behind I wouldn’t have believed if I didn’t see it with my own eyes.

As it turns out now, if we had them I think relatives would have been wanting to rent if we owned one, then things would get even stickier if they fell behind on rent/maintaining the premises.

Reflecting on it all, I think I might have owned rentals if my wife wouldnt/couldnt work full time. Having her deal with the phone calls to rent and maintain the properties would be a way to have her earn money while being at home. As it is, she works full time like I do so neither of us want to deal with rental hassles.[/quote]

Rentals aren’t for everyone. And I use to think the same way. But after lengthy conversations with sdrealtor in the past, it really got me thinking on a few things, and I changed my mind a bit. I think what helped me out a lot is where the clientele is and the type of property, because with the right property, the “pain in the ass” factor drops off significantly.

There’s probably an inverse relationship between maximizing cash flow/rental returns versus “tenant pain in the ass factor”. And for me, it was trying to figure out where I felt comfortable playing in my own little world.

From what I’m experiencing, renting small condos in a good prime location with a lot of professionals helps out a lot to reduce the PITA factor. First for small condos, there’s not a lot of things that can go wrong. And renting to professionals, one typically doesn’t have to deal with people who aren’t going to pay. The cashflow isn’t as good as if you can get a good SFH, just because of the higher costs with a condo (HOA/etc)…But, the SFH is a bigger pain in the ass for me, because especially if prices get really high, tenants expect the world from you, but fortunately it’s in a decent place of professionals, so there is less of a problem with people not paying.

Some people here have claim that there isbetter cash flowing property in other areas, areas that I would consider to have a much bigger PITA factor than I am comfortable with, so I’m not interested. So as long as your honest with yourself as to the level of “pain in the ass” you’re willing to deal with, it’s all good. That level might be 0% for some people, which is fine.

The other thing that helps out a lot is if you use a trustworthy property manager. Sure it costs money, but it saves you a lot time and saves you a lot in the PITA factor too.

sdrealtor has been great for helping find good properties and spotting opportunity. He’s been a great friend and advisor. For that, I am thankful for the opportunities I have now.

urbanrealtor has been great for helping me manage the condo that I don’t want to deal with logistically. And I am thankful that I don’t have to go deal with everything that breaks or needs attention down south.

[Hatfield]

Have two rental units in OB. Overall it’s been a very good experience but I’ve been very very picky when screening tenants, and I always charge a premium but then never raise the rent. So my tenants stick around a long time (typically 6-8 years) as a result, which is great. You never make money on turnover.

The tax benefits are outstanding – you have a property that’s appreciating, but on paper the dwelling is losing value. I can’t believe it’s legal, lol.

On the other hand, your mutual fund will never call you on a Friday night and tell you the water heater is broken.

[Coronita]

[quote=Hatfield]
On the other hand, your mutual fund will never call you on a Friday night and tell you the water heater is broken.[/quote]

True, but you usually won’t log into your account holding your rental income and seeing it down by 15-20% in a week because of some analyst downgraded you and/or some hedge fund went heavy into a short position and spends considerable amount of time trashing the company on PR newswire. Ever since I see how some of these hedge fund companies play, I really don’t like buying individual stocks anymore.

[gzz]

I think the bigger costs/hassle of renting a SFH may be offset by the better appreciation. The number of SFHs on non-shared lots goes down every single year in central and coastal San Diego as multi-family slowly replaces them.

[Coronita]

[quote=gzz]I think the bigger costs/hassle of renting a SFH may be offset by the better appreciation. The number of SFHs on non-shared lots goes down every single year in central and coastal San Diego as multi-family slowly replaces them.[/quote]

Definitely true.

[Hatfield]

Yep. There was a big wave of multi-unit condo conversions in OB a few years back. I haven’t noticed so many in the past year or so, but maybe I just haven’t been paying attention.

[gzz]

Fun to reread this thread. I think I might know the complex EP refers to, on Cape May Ave. How many four two-bed cottage complexes on 7000sf lots could there be on a beach block in OB?

Small 2/1 fully detached on shared lots in OB now are more like $2600 with basic interior and no parking to more like $3000 with an off-street space and fully renovated with granite kitchen etc.

Sounds like EP’s bud was undercharging even then, and market was $2200, and is now about $2800 after 6 years, so rent growth of about 5% a year.

My large rental house has had the same tenant and rent for 5 years now. I am OK with getting less than market rent for a zero-stress experience with a tenant who keeps up the place.

My other OB rental also is below market but stress free. I just had to replace the 50 year old oven the condo was built with. It was a split separate range and oven setup that looked really cool, but would have cost $4000 to replace, so I went with a normal combined oven and range.

The chip shortage has even hit the oven market meaning I had to pay nearly full retail price with little selection, but it still looks and functions great and was a free delivery and painless install from Home Depot. It has a built-in air fryer, which is cool and work very well according to the tenant, who helped me pick it out.

I was bummed the one I wanted more, a GE in a brushed brown metal slate color, was not only sold out, but back ordered for 3+ months minimum. It looks more modern and understated than stainless IMO:

https://www.geappliances.com/ge-appliances/kitchen/refrigerators/?Color=Slate

[trex]

Yes but…. the S&P 500 returned 17,316% over the same 40 years when dividends were reinvested, with no tenant issues, weekend calls, or any of that…

[sdrealtor]

[quote=trex]Yes but…. the S&P 500 returned 17,316% over the same 40 years when dividends were reinvested, with no tenant issues, weekend calls, or any of that…[/quote]

Leverage and preferential tax treatment

[gzz]

Were there ultra low fee index funds in 1981, which automatically reinvested dividends?

Also, to be a true apples to apples comparison, the excess rent over expense would also need to be “reinvested.” Otherwise you are giving the S&P 40 years of compound interest but no interest whatsoever counted in favor of the housing investment.

[XBoxBoy]

[quote=gzz]
Also, to be a true apples to apples comparison, the excess rent over expense would also need to be “reinvested.” [/quote]

If some of the excess rent was used as down payments on new properties, then it was reinvested. And if you’re doing your own property management, you’d want to include a cost based on that time. So doing an apples to apples is pretty darn near impossible given all the little details that add up. (I’m sure there are even more details that I haven’t thought of.)

[Author]

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