Anybody own a rental property? Pros and cons?
9 years ago
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A rental cottage on your own property???
Comments (6)I have an apartment in my primary residence, it is part of the house, not a separate cottage (wish it was separate). I have rented it for nearly 8 years. At first it was "illegal", and then I discovered the town had a special permit for "an additional dwelling unit in a single family home" and I applied for the permit. This required a building inspection as well as Board of Health review, and I had to install a 2nd egress to the exterior, and install smoke and carbon monoxide detectors, to comply with state fire code. But the apartment is now fully legal in every sense. Even before the apartment became legal, I claimed the income on my taxes (think it's schedule E?) and deducted expenses pertaining to the apartment which is calculated as 20% of the living space of the house. For example, the utilities are included in the rent, but I write off 20% of electric, oil, and water bills. The homeowner's insurance also lists the home as having two kitchens. If the cottage is legal rental, then that's great, but even if it wasn't that wouldn't stop me from renting it out anyway (discretely) AND filing the income and expenses on your taxes. I would make sure that the cottage is well-maintained - tip top condition - and that it complies with state fire code, to minimize liability. You really don't want to get in trouble with the IRS or get sued. This situation works out great (most of the time, I did have one whacko tenant). The rental income helps to pay the mortgage. I also own other rental property and have to say that maintaining a rental unit and monitoring a tenant on an owner-occupied property is much easier than maintaining rental property that is at another location....See MoreCertificate- Secured Loans Pros & Cons?
Comments (11)dave_donhoff - I'm just brainstorming again! LOL We have a house with a 2nd mortgage. We bot in 2003, and the 2nd is at 8%. Orig (for 2nd) was about $26,800. 30yrs due in 15. Have paid on this for 7 yrs as of Sept 2010. We've been making pymts of about $240.00/mo, + we made 2 or 3 extra annual pymts. (Min Due = approx $196.00) So it should be paid off at the 15 yr mark. We owe just about (or 'just over') $10k. Will take another 8 yrs to pay off 2nd. I don't want to wait 8 more years. We cannot re-fi. Bought for $134,000 in Southern California, and NO equity (obviously). We owe about $108k btwn 1st & 2nd. Zillow shows valued at $105K this month, but has been down to $90K AND I KNOW that Zillow, Trulia, Cyberhomes are just guestimates. However, we have nothing fancy, and bought with none of those updates or remodeling. (we have green & blue sinks, toilets, tubs; tiled counters & orig cabinetry in kitchen & bathroons. Basically the same as was built in the '70's.) My mind is all over the place & I've been wondering about this for awhile now. Some days I say "NO WAY", other days I wonder. I want that 2nd paid off. Yet, I want to keep what little liquid assets I have. (AND, I DO understand that my 'Liquid Assets' would be tied up if I were to consider this type of loan until paid in full.) I am also getting close to receiving an inheritance by years' end. LOL, I know, don't count your chickens... Well, I'm gonna say I'll be LUCKY if I get 5k! Most likely more, but...one never knows. (I'm thinking about at least 10k, so settling for 5). HOWEVER, all this came about regardless of the stupid inheritance! I was just thinking / pondering. The rate of the 2nd on our home is 8%. We cannot re-fi. (negative equity, PLUS it 'costs' to re-fi) Balance due approx 10k (maybe a bit more, but not a problem) Dividend Rates on C.D.'s so low it's crazy - nothing to spit at nor blink twice about. I was just wondering: Open a 'share cert' for 10k for 60 months, borrow 100% against it, (still get the dividend paid on my cert???), pay the 10k 2nd mortgage off with the loan, and pay myself back??????? (and, if I default, I still have enough to cover...B-4 any inheritance) Does ANY of this make any sense? I'm tired. HOWEVER, I ALSO WAS WONDERING ABOUNT ANY NEGITIVES TO TAKING OUT SUCH SECURED LOAN...when I have a very long history of good credit....See MoreShare the story of how you acquired your first rental property
Comments (20)I bought a condo before getting married. I bought my first condo (2bed/2bath) with the intention of getting a roommate to help with the mortgage. When we married, my husband already had a house, so I moved into the house, and we turned the condo into a rental. We had about $100 per month negative cash flow in the beginning. Many years prior to that, my then single husband bought a house in a suburb. Hated it, and bought another in the city and turned the suburban house into a rental. But, he remodeled the new house, ran out of money, rented out the house and he himself rented a small room to save money.... When he finally moved back into the newly remodeled home, he had many roommates to help with the finances. When we were first married, we built a mother in law apartment in the basement and rented that out. That helped with our expenses. We did not ask her to leave until my son was 2 years old. We then reclaimed the basement for ourselves. (You asked for stories and sacrifices...) We now have enough cash flow so not having rental income for a few months is not a big deal. This gives us the luxury of picking "good" tenants. We only pick tenants who are professionals with good jobs and stellar credit and rental record. The longest we have had vacant rental is about 3 months. We are also in an urban environment where many young professionals cannot afford to buy due to the housing price. Most houses in a suburban subdivision do not make a good rental, unless you can make the rent 1/3 or less than the monthly mortgage of buying the property. (now days, that may not be true because of the downpayment requirements have gone up for buying a home...) Like most everything else in real estate, it's location, location, location that determines the rentability, the amount of rent, the type of tenant etc. We have never needed to go to section 8 route. My condo is very close to the University and Medical school. We almost always have medical residents as tenants(currently dental student and the working spouse). We don't rent to undergrads. They have "no income" and do not qualify in our minds. Our suburban house is near many tech firms in the area, and we tend to get techies with well paying jobs living in the house. melle sacto, not only do you need to have enough money to get through prolonged vacancy, you need to be able to deal with unforseen emergencies quickly. These rentals are your investments. You don't want to do anything to devalue that investment. For example, we had a leak in a very old bathroom. We decided that it was a good time to update the bathroom rather than "patch" fix the bathroom when the tenants moved out. The tenants move out when they want to not when you have the money to fix the bathroom. Like any other business, you need to have available capital when you need it. In order to rent the property quickly, you need to make it look fresh with regular painting, yard maintenance, deep cleaning, etc etc. The most recent tenant turn over uncovered very old sliding glass doors that were not closing property due to age and settling etc. It was noticeable enough and would have detracted from the house from the potential tenants point of view. Again, we had to spend a few thousand $ to get them replaced. This is a regular part of being a landlord. We will probably get one more rental, either a duplex or a quadplex. (our next door neighbor probably has 10 houses/buildings or more) Anything larger than that, we are not willing to manage ourselves. We call trades people for just about everything that needs to be done. It is not worth doing it ourselves at this point. Initially, you will have to do everything yourselves, ie painting, yard work, cleaning, etc. If you and your husband are handy, you will spend less money versus calling someone in. Again, this is not on your schedule but the house's schedule. My brother has a dulplex that he rents out and also the house my parents willed to him. He too had to spend money when things happen. (both of our rentals needed new blower for the furnace this last winter.) We just laugh when these things happen.... Unlike calliope, I consider the risk I take with the rentals as a controlled risk. I actually think it is much less of risk than money I put in the stock market. However, a rental has little potential for huge growth as would in some stocks. To be a successful landlord, you also need to learn your market. In some markets, it is not a feasible business model. For example, I would not buy a rental in a rural area with high unemployment. But I would buy a rental in an urban environment with a large number of transient well paid professionals. Rental properties are a part of our entire portfolio along with other more and less risky things....See MoreBusiness License For Rental Property - Alameda County
Comments (11)You are not in the leasing business. You do not find tenants for hire for other property owners. Sounds like a little 'creative' interpretation Uh, no.....I think it is you with the creative interpretation. ;-) Most municipalities require landlords to obtain business licenses. Now, some municipalities have different thresholds and exempt "small" landlords. For example, where I live in Montgomery County, MD, every landlord needs a license unless the property is also owner-occupied and the owner is only renting out a room or two in his own house. However, if you rent out three rooms then you must obtain a license to be a landlord. I'm not going to bother to google California real estate law, but I have no doubt that if the OP has two distinct single family rental properties, then a license would be required. I only hope for his sake that he has been claiming the income on Schedule E of his Federal 1040, because Alameda County may have reported him to either the state or IRS for possible income tax evasion since they already know that he has been surreptitiously (either knowingly or unknowingly) operating as a landlord and has evaded paying county fees....See More- 9 years ago
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