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Who on here own’s rental property?? Would you do it again, and would you buy in a vacation destination or urban areas?? Thanks

Have owned office buildings, houses, and apartments.
There has to be a certain economy of scale to make it worthwhile, unless you intend to do the management/maintenance/contracting as a part time job. No matter what what the IRS says, real estate is not a passive investment. Until you have 6 or so tenants, a single vacancy can make you feed the investment for the month out of your pocket.

30 or 40 years ago, a very successful local developer told me two points to keep in mind.
First, when you buy a property, you should have 3 possible ways for it to be profitable. You should be able to rent it for a positive rate of return on your investment; you should be in an area that you expect it to appreciate so you can sell it at a profit; and you should have a plan to redevelop it for a profit. That way, you should have at least one way to survive if things go sideways. In truth, 3 is hard, but at least be able to hold it and make money if the market drops

Second, if you can't afford it by yourself, you can't afford a partner. Differing expectations, differing appetite for risk, and differing abilities to absorb expenses will often sour a relationship.

I'd point out that the management companies at resort/beach areas tend to charge multiples of typical management companies. Tenants are daily or weekly at best, and you generally supply linens, cookware, etc. In my view beach property rental is a reasonable way to counterbalance the cost of ownership, but is not generally profitable.


Long term, we seem to be headed into an inflationary period, and buying rental property with appreciating rents may be a good plan. The only question to my mind is whether we are going to see a pullback in the short term, before long term inflationary appreciation kicks in. Right now, houses on the market, properly priced and professionally marketed, are selling in a matter of a few days, often at above asking price. I'm hearing about homeowners buying the new house, and holding the old one "for just a few more months" because they are making so much money on the appreciation of both of them. That kind of leverage can turn on a dime.

I asked a friend of mine how his group had weathered the '08-'09 downturn, and he replied " We did OK. We were never smart enough to borrow 90%, so when values dropped by 20%, we were still above water." Good thing to keep in mind.
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Lastly, you make your money by buying low, not selling high. If you buy below the market, you can always get out at market.

Great advice!! Thank you

That is really good input. Also, be super picky on tenants. It's worth eating a months worth of rent vs signing up for a problem for a year if you're looking residential.

Mobile mansion parks for the cash flow.

I got out of the residential rental game a few years ago. The landlord/tenant laws definitely favor the tenants and I don't see that changing. There are people living in rentals right now who haven't made a payment since June and the covid relief laws have made it tough to evict them, but it's not impossible if you can prove they're able to actually make the payments. It seems like the government is going to continue favoring the poor little tenants moving forward so I got out for that reason.

Commercial rentals are somewhat less risky but with so many businesses now transitioning to a work-from-home work arrangement I'm seeing lots of office spaces sitting vacant that wouldn't have been 2 years ago.

I think the vacation rental is a pretty good option, even if it's not at the beach. I have friends who are killing it in Tuscaloosa by renting houses out to people coming into town to visit campus. You get a credit card on file in case there's any damage. The tenant basically pays for the cleaning costs but they also can tear stuff up without you realizing it. Still not as bad as a tenant who's in a house for a year

Storage rentals are also a solid way to go but they are popping up all over the place and a lot of the people running them don't have much business sense and they've run the costs way down.

As others have said, inflation is crazy right now. Whatever you buy, buy it in a part of town where you think the values will continue to go up. My mom's $149,900 house 4 years ago is worth $210-220k today because of where she bought it. You could buy a rental and hold onto to it for at least 2 years (to avoid the capital gains tax) and then sell it for a decent profit without the risk of doing a quick flip renovation...

Everybody and their plumber is buying rental property right now.

I’ve had rental houses since 2008. I’m trying my damndest to get rid of my last one currently.

Rent to own mobile homes are much better for cash flow and short term profit from my experience. I have a few of those and I’ll continue to buy those.

I got my tenants out the day before corona lockdown, had I not they would probably still be there tearing up the place rent free. still made money on appreciation though. Knew one landlord that in another state was forced to pay the tenants overdue water bill or go to jail. freeloading is even more in style now. if you can deal with that stuff without causing yourself health issues then go for it.

I have been in the rental business since 2006. It's all about how you deal with stress like any business. Good tenants, great business. Bad tenants can be a headache. There is a government program for those cant pay their rent right now. They have to sign up. Most of mine are paying, some have never missed a month. You make money when you buy it. Keep costs as low as you can without sacrificing repairs to house. Most of my tenants don't move and I have people calling all the time wanting my houses. Longest tenant has been there 13 years. I try to make my houses bullet proof before any one moves in which limits repairs.

Very good advice.

With vacation rental, you’re correct that it takes much more involvement. But, you’re wrong about the money aspect. ROI is generally much better than single family residential. And I’m not simply referring to the beach. The best numbers I’ve seen are actually weekend getaway cabins around Chattanooga.

Keep in mind that costs for repairs/upgrades are generally the same across the spectrum. If you buy a couple of really cheap houses, renting for a few hundred a month, a HW heater, roof, floor refinish, HVAC repair, carpet cleaning/refresh paint, etc is the same as the house in the neighborhood you rent for $1250/month (or the Mentone cabin for $1,250/week). OTOH, a home builder I worked with liked some of the neighborhoods where EVERYBODY rents. He said "I've got elderly people who've been there for over 20 years. They think of it as THEIR house, and take care of it." That worked for him. Of course, as a builder, he either did repair work himself, or had contractors on speed dial.

That's another aspect to keep in mind. If you aren't big enough to appear on their radar, it's hard to get electricians, plumbers, cabinet installers, etc, to even return your phone calls, much less make you a priority, especially as busy as everyone is right now. You need to be organized, have time and personnel available to deal with problems. Frictional vacancy is inevitable, but if you don't stay on top of it, a couple of weeks turn time can balloon. And critical problems will appear, and need to be dealt with in the middle of your other life.

Oh and remember, when you finally sell it, you need to factor in all the recaptured depreciation you're gonna see as income on the sale.

I'm not arguing your point with you because you know more about it than me but having sat in our district court and seeing this as an issue in a lot of cases I can say that I think the judges are becoming frustrated a bit with the laws they are forced to follow concerning deadbeat tenants. With this happening the pendulum will eventually swing back towards the middle ground as it always does on laws.

I hope you're right but look at the direction that this country is going. Victim mentality. Blame the "rich" landlords. $15/hour minimum wage. "free healthcare"

Low Wall had it about right. I will say this, beach property is high. Supply and demand right now is toward the sellers.

Don't ever think your time is free. If you work a 9-5 job, and don't have anything you'd rather do on some nights and weekends, then go for it. If you control your billable hours, then you are probably better off working on a Saturday and letting a contractor do the work. Either way, it costs. I had an apartment owner object when I plugged in lawn maintenance as an expense. He said "My teenage son comes over here and mows or rakes it once a week. Costs me nothing". I told him if it was free, then send the kid to my house. An appraiser or buyer is going to recognize the time/expense. So will your wife.

Lastly, be crystal clear about your objectives. If you are buying rental houses, they need to cash flow. If the market happens to appreciate rapidly, good for you. But if you are buying to renovate/flip, then you are in the development game, not the rental game.
People who are successful at either rental or development spend a tremendous amount of time researching deals. A principal at one of the local commercial firms told me they research 50 deals for every 5-10 offers for every one purchase. That means getting very familiar with neighborhood trends, with the exact condition of the building, with market lease rates, and with all expenses. That's a lot of work all by itself, but, if you believe that you make your money by buying cheap, then it has to be done. Buying your aunt's house or the widow's down the street when she goes in a nursing home, before it hits the market, is luck, not a business plan.

Have an acquaintance whose very good with tile work whose ex brother in law is an electritian. Both work 4 days a week and literally are covered up with folks calling,texting,emailing "Come look at this" if I were getting into rentals I'd want that sort of crew available when issues arise.

The current house ive lived in for 25 yrs is paid off and im thinking of using it for a rental. Sub 1000 sq ft homes like mine are bringing $800-1000 a month. I cant think of anything else that would bring me in that kind of income for the next 5-10 years and then still have it to sale in the end.