My husband and I never wanted to be landlords, and somehow it happed accidentally. We found a new house we liked and wanted to keep the old one, so we hired a property management company. Then we bought a ski house with the intention of renovating it, Covid happened, so we hired another property management company to cope with that too. Our third non primary house remains empty, but that too is managed for us. I would never want to deal with the hassles of broken refrigerators and whatnot. Our properties are high end though, so that probably affects the cost value ratio for us.

Aww, it must have been rather sad to sell your Hawaiian condo. It's a very good thing that your son can manage any property you buy because I hear stories all the time of paid property managers doing diddly squat. I know nothing on the subject but would imagine older buildings require quite a bit more upkeep than newer ones. Then again, if you bought one that had electrical, plumbing roofing, etc. redos, it might not be cause for such worries. Good luck in your endeavor, Chisue.

Our DS is capable of handling tenant complaints, so I don't think we'll need to hire management. So far, the capitalization on most of the 2-3 flats is projected to be at least 8%. I don't know if a higher-rent tenant is less likely to be a problem than one paying less. We're looking at 1000 sq ft apartments, renting for the $1500/mo. average in Chicago. I have to remind myself that *I* am not the couple or small family likely to be renting -- different from the Maui condo, where we wanted a place we could enjoy, too.

Owning rental property is not a non-contact sport, it can be very hands on. If not for the owner, then there's the cost of the needed manager and payments to those providing the labor and trade skills to maintain it. Owners who do all this stuff themselves make a lot more money, but there's a price - the time and attention required. Kinda like a franchise business, you're buying yourself a job, if even a part time one.

Ages ago, back when I was in my 30s and the property boom in my area was starting, I bought a condo as an investment. I "managed" it myself for a the first 18 months or so, then tired of how much time and emotional effort was involved and hired a manager. I wound up holding it for about 3 years before selling it, having decided it wasn't for me.

I could have made a lot of money had I stuck with it and added to my holdings. But I don't regret my decision to leave it behind as an investment option, it wasn't something I liked doing.

There are plenty of passive investment options without sinking into what I consider a pit, the residential real estate sector. If you want some real estate for diversification purposes, find a REIT you like.

If I can read this...so can my renters....

Also be careful with older properties and lead paint issues. You cannot discriminate and only rent to folks with no children or older children and if you do rent to folks with children you will have to remediate the lead paint before they move in.

Ack! Nicole, I never thought of things like roaches *here*. On Maui, the condo association contracted for Bug Man to spray quarterly (part of our monthly assessment).

My DM owned and rented out two houses with the only problem being one tenant who was mentally ill and refused to vacate an old farmhouse she was holding for the land value. (She rented it below market with the understanding that the tenant was responsible for all repairs.) This tenant turned on all the gas jets on the stove the night before the sheriff's men were to arrive to evict her. They found her drunk and dazed. The gas leaked out of the old clapboard house.

Right now is a terrible time to be a buyer; super hot market here.

You have me re-thinking two small houses on small lots! Thanks!

If your son has only flipped managing a rental property can be completely different. His time will no longer be his own. Having been there for a short period of time I have to agree with Elmer invest in something else or hire a manager your son's family will appreciate it.

We've been landlords for years and found that condos were easier than single family homes. Yes, the HOA's can bug you with every little non-compliance issue, but we also found it easier than worrying about things like roofing and landscaping. We were fortunate in having lots of trusted contacts we used for any repairs that were our responsibility.

A few years ago we made the decision to sell all our residential properties and invest in commercial real estate. We only considered properties that were a triple net lease making the tenant responsible for taxes, insurance and maintenance. We've actually owned three triple net properties for many years with one being since 2002, so we had something to help with the decision to sell all our residential properties.

ETA - There are some "interesting" tenants, for sure! I don't think having a high- or low-rent tenant insures much of anything. We were pretty lucky, but people can be quirky no matter how much rent they pay.

chisue.....

Just looked it up. Colorado Springs is in the top 5 places trending for HOT real estate, hitting number ONE some months.

The hot market is one reason I feel so stressed. However, we MUST identify property by June 15 and close by the end of October to meet 1031 requirements.

chloebud -- See how little I understand about all this! What are the pitfalls for owning commercial RE, if you have time to explain. How do you find your properties? (This isn't a huge amount of money; maybe we wouldn't qualify.) Just this morning I was also reconsidering condos, for the reasons you mention. The Maui property was easier because we paid for all the exterior stuff in our monthly assessment fees. (OK as long as the Board isn't raking in profits!)

@chisue, the pitfalls of owning triple net lease (NNN) properties can be with rent being fixed for the terms of the lease. That means you're kind of stuck if property value goes up, and NNN lease terms can be long, such as 10 years or more. Also, you have the risk of a tenant defaulting that obviously can mean losses. That's why we were very careful with choosing tenants/businesses that are well vetted. So far we've been really lucky, as with the property I mentioned we've had since 2002. We literally have sat back and done nothing but collect the monthly rent. BTW, we didn't purchase that one. It was owned by my MIL and went to us when she passed away in 2002.

We have a great realtor who pretty much deals with just commercial properties. DH also did a ton of research. He knows waaaaay more than I do about this stuff. We sold 14 residential properties here in SoCal in order to purchase the new commercial properties that were done as 1031 exchanges.

ETA - Just wanted to add tenants, in general, aren't usually thrilled about a NNN lease due to the costs I mentioned. However, NNN leases often feature less base rent than tenants get with more traditional leases. Also, I mentioned landlords being stuck if property values increase. DH reminded me that NNN leases can include annual increases while others don't increase until the end of the lease. There's a lot to consider but all's worked very well for us.

Thank you VERY much, chloebud! I'll research further. I'd hoped the Intermediary or Exchange would also know of options.

You're welcome! Good luck with the property searching. One thing I know from experience is owning real estate can be a very good thing.

This is probably beyond the scale of what you are looking for but we (and 4 other partners) owned a large professional building in a suburb of Philadelphia for 20 years. The tenants were all medical offices with long term leases and the management company handled everything. It turned out to be a better investment than residential property.

Thank you, maire_cate. Yes, that's too big a 'leap' for our little 'pot'. I can see how that was both easy and lucrative for you and your partners!

To be quite honest..."IF" we were old enough to get social security...I'd sell ALL my rentals and just live my life. No responsibility .....the feeling of freedom. Capitol gains would hurt...but only for a moment.

Nicole....I agree. We had three single family rental homes and I couldn't wait to sell them. After renting them out for at least a dozen years, we sold two and if it were my decision alone, I would sell the third one. Maybe it's my quest for peace, but it was so freeing to not have to deal with it all.

Chisue...purchasing a multi-family home would make more sense to me. You would have one insurance payment, one real estate tax bill, one location to deal with. It has its pros and cons as nicole mentioned earlier. Good luck...you will find what is best for you.