Buying an Apartment Building

[NAMOR]

my dad owns several apartment buildings and he seems to enjoy it. He knows how to fix **** which comes in handy alllll thhhe time. on the flipside, he doesnt even know how to turn on a computer so I have to post his rentals online. he has to find a new tenant about every 4-6 months which means, cleaning, repairs, background checks, etc. There must be some threshold where it becomes worth the time and effort

 

[FunLovinStyle]

I've looked into this a little bit. There seem to be two ways to go:

1. Buy a duplex, triplex, or quad... and then live in one of the units. The only way to make the finances work is to do all of the management and maintenance yourself. This is not a bad strategy as long as you don't mind living in a (small) apartment building, but it's a lot of work.
2. Buy a large number of units that can support the expense of a manager and other people to do repairs and maintenance.

You gotta do the math. If you have three units rented out at $600 a month, that's $1,800 a month. Not a lot of revenue. Will it cover the mortgage, taxes, insurance, and maintenance costs, and provide an income to you? Doubtful. However, if you have a day job and manage the apartments on the side, perhaps the rents are sufficient to pay the mortgage, in which case you effectively have a free place to live.

Before the meltdown, the prevailing theory was that you could accumulate a lot of units quickly via real estate appreciation and using that equity as a down payment for another property. Those days seem to be gone in most locales.

Don't overlook the liabilities of being a landlord. In some places (I'm looking at you, Hartford, CT), it is nearly impossible to evict a tenant, even a tenant who isn't paying rent... because tenants have statutory rights. You'll need to make an assumption that some percentage of your tenants won't be paying rent... and that a certain percentage of your units are vacant.

There are forums dedicated to the joys of being a landlord, and tons of books on the subject.

 

[brokencycle]

There are some spreadsheets and web forms where you can enter all the estimated variables and find out if it will be profitable. I've been thinking about doing it - starting with a triplex or something. It seems by using a management service will allow minimal profits but also eliminate most of the headache, and in the meantime you are building equity. I guess it all depends on what you need for an ROI timeframe.

A previous poster was right. If you are a fourplex or under you are exempt from many of the anti-discrimination laws. One of my coworkers who rents out a former house told me she just required potential tenants to pay for the credit check and that weeded out most people right away.

 

[kaihulee]

agree.every excuse under the sun for why they are late on their rent. thank you

 

[Ace_Face]



There are some spreadsheets and web forms where you can enter all the estimated variables and find out if it will be profitable. I've been thinking about doing it - starting with a triplex or something. It seems by using a management service will allow minimal profits but also eliminate most of the headache, and in the meantime you are building equity. I guess it all depends on what you need for an ROI timeframe.

A previous poster was right. If you are a fourplex or under you are exempt from many of the anti-discrimination laws. One of my coworkers who rents out a former house told me she just required potential tenants to pay for the credit check and that weeded out most people right away.

Requiring potential tenants to pay for the background check is a good way to screen. I have a number of clients who I call "gentleman landlords". Usually they got into it because they thought it would be easy money or they couldn't sell their old house when they moved into their new one so they decided to "just rent it". Invariably, things go wrong because they a) didn't screen the tenants well enough and/or b) let them make excuses about not paying rent on time. I tell them that if the tenant isn't paying the rent, then the landlord is paying it. They need to treat it like a business and if the tenant doesn't pay, they need to go. I've had to tell tenants who are single moms with kids that if they aren't gone in a few days, we were going to set their **** out at the curb. I didn't like it, but you have to. And if you don't have the stomach for it, you shouldn't be a landlord.

 

[cashshidao]

good info to me , I could get $800-$1,000 for a 1BR too, which would cover the outrageous property taxes and a few month's worth of mortgage payments.