About six years ago, we decided we wanted to try our hands at owning and managing rental properties. So, after a lot of research, pinching pennies and perusing the market, we found this beauty (aka “Knappalicious” since it resides on Knapp street):
Built in 1942, it has four small, 2 bedroom/1 bath units and loads of vintage charm. Piece of cake, right? Holy heck, we’ve learned so much in the past six years from landlord/tenant laws to the nuances of owning an older home. And in the process, we’ve discovered we really enjoy it for the most part. So much that three years ago we decided to buy another…
Meet our second rental baby, affectionately named DQ because it’s right across the street from a Dairy Queen (it’s a good thing I don’t live there ;)). DQ was built in 1902 and turned into a 4-plex in the 1950s. We have worked our tails off on this bad boy. For awhile we even called it the “red-headed step-child” because there were so many kinks to work out from maintenance to tenant issues.
Yes, there have been times when we wished our rentals accidentally burned down (with no one inside of course) and they’re definitely not making us rich overnight, but all in all they have been a good investment and invaluable learning tools. We have saved a lot of money doing most of the work ourselves, but with that comes more responsibilities. Adam’s handy skills have been one of our saving graces in this whole endeavor, but hey, it’s a labor of love.
Each experience is different, but here are some of the cornerstones to our success in the rental market thus far (please note, we’re not dispensing legal advice, just a few ideas that have worked well for us):
- Do your homework; research the neighborhood, the rental market, the schools, spend some time in the area if you can. Location is key!
- Work with an agent who specializes in multi-family properties.
- Look closely at the financials. Request as much as information as needed. Ultimately it should pencil out making at least a few hundred dollars per month. We chose to buy 4-plexes because they generally make more money than single dwellings and for rental security (it is very unlikely that all four units will be vacant at the same time).
- Find that magic number. We like to make roughly $1000 per month on each rental after the mortgage, taxes, insurance and utility bills are paid. We save a lot of the extra money, so that when we need to do improvements (i.e. kitchen re-dos, new gutters, etc…) we have the funds.
- Look into the property taxes. When we bought our second property, we were stoked because the taxes were low, but come to find out, a year later they raised them by 60% because the previous owners had done some obvious renovations.
- Inspect, inspect, inspect! Unless you buy your property with cash you will most likely be obligated to get an inspection. Make sure it’s a reputable company and one you trust. Our inspector missed some mold issues, which cost us a lot to remediate.
- Find out what you can write off on your yearly taxes and work with an experienced real estate accountant if you can.
- Make sure you have experts on your side. We use this organization: http://www.multifamilynw.org. They have everything from legal rental forms, to seasoned landlord advice to property management seminars. Check your local government pages for the chapter in your area.
- Do a thorough background check on your applicants. We use a third party and always ask that they review their rental history, credit score, verify employment and make sure their criminal record is clean of any major charges (we let traffic violations slide).
- Keep a list of reputable services such as plumbers, electricians, contractors, etc…
I could go on, but I digress… Stay tuned for upcoming rental projects, tutorials and adventures featured right here!