Add lawyer fees when you get a squatter. Not worth the aggravation. Been there ... done that.

It is a pain in the arse. I would not... Tenants can be hell on a property; however, I know a few that own them and do well on their rentals.

It's not bad. The insurance is less than that, the rent might be more, your maintenance won't be near that much most years. Property taxes may be more. You can always talk yourself out of making money. I generally wouldn't suggest financing one.

I had a friend at work that tried it. Divorce in the rent house. Squat. And squat ended up pouring sackcreat down all the toilets.

It’s all about the renters. I’m an insurance adjuster and see the bad side of renting. People that can’t make rent and destroy property like it’s the homeowners fault. Also the law somehow seems to side with tenants over homeowners and eviction can take forever. But if you find good renters it can be a great deal.

I had a coworker rent out his Seattle house while he worked overseas for a couple of years. He had an agency do the background checks and collect the rent. The renter was eventually busted for making meth in the house. He had to strip the house clean, have it professionally tested and certified, repainted the interior and recarpeted before he could sell it. He hasn’t rented out anything since then.

That gives new meaning to the phrase "He shixt a brick".

Interesting points. For property insurance, as an owner, I suppose I would only have to insure the building and it would be up to the Renters / Lessee to insure their contents. I know my taxes will be higher since none of my exemptions /homestead, over 65 would apply.

Guy told me the only people he rents to are illegals. Says they pay cash and are never late very rarely do they complain. They just want to stay under the radar. Makes a lot of sense really.

Just mulling this over in my head. Is this a bucket of worms or a lucrative income generator? You would have to buy say a $200K home 3 or 4 bedrooms in good shape. Zillow says on average you should get $1750/mo. rent for this. So like $21K in rent you would receive for the year. Roughly $5K for taxes subtracted leaves $16K. Subtract $1500 for insurance on the house leaves $14,500. Subtract $4500 for a "maintenance fund". Leaves $10K yr. That is $833 per month income.

Am I missing anything in this equation? Anyone else do this?

Just go to Fair park in Dallas or Stop Six area in Fort Worth. Pick up a house for 20K, put 20K in it and then get it set up for Section 8 housing.

They take good care of the property since they are getting free housing, and don't want to loose their vouchers

Or you could just give the $200k to Steez and make an easy $50k/year return.

You're leaving out interest, unless you plan to do this as a cash purchase. Even then, you should allow yourself an interest factor for the use of your cash - when it's tied up in the house, nobody is paying you for using that money. Here's a handy amortization calculator that I like to use:

https://www.bankrate.com/calculators/mortgages/loan-calculator.aspx

Assuming for the sake of argument a 30 year $200K mortgage at 5% interest and no down payment (and ignoring any PMI/MIP that might normally be charged), the payment is about $1,073. The interest is over $800 per month for several years.

Termite service contract, lawn care ... if the tenant is supposed to mow the lawn, just wait for the notice from the city that you're being cited for an overgrown yard. If a realtor brings the tenant, you're almost certainly going to pay a commission or finders fee.

With all that said, if you can purchase a house for the right price, then renting makes alot of sense. Also remember to appropriately value your time spent on the property. One good rule of thumb someone taught me long ago is that your cost of insurance and property taxes should not be more than 1/3rd of your rent. So the example numbers you're giving would make sense.

Rental property worked out great for me. Bought the house for $65k cash in terrible shape. Gutted it and fixed it up on my days off spending a little shy of $40k. Rented it for 4 years without any major issues @ $1150/month. Sold it 3 months ago for $205k to fund another property purchase. I know there are horror stories, but it does work out sometimes.
I also think it helps a lot if you can do the work yourself. I worked for a land lord in Lubbock while going to school doing make ready and flipping homes and learned a ton. Good luck!

Meet with a gentleman weekly for breakfast. He owns 26 rentals in the $40-$80K range. Most of his homes are 2-1 or 3-1 and around 1100 square feet. He started with one house 11 years ago and when he had equity bought another. 12 of his houses are paid off and next year 2 more will be. He is always looking for new investment properties. His latest idea is a tiny home subdivision in a rural setting.

It works but there are issues that sometimes arise. He buys when he can make 10-20% on his investment, anything less than 10% return he will pass. I've learned alot from him but currently own only 1 rental.

I'm currently looking at VRBO or AirBnB type homes. Something I can lease to corporations or insurance companies for extended periods.

Just go to Fair park in Dallas or Stop Six area in Fort Worth. Pick up a house for 20K, put 20K in it and then get it set up for Section 8 housing.

They take good care of the property since they are getting free housing, and don't want to loose their vouchers

You have to think outside the box. A 225k house in Alabama, property taxes would cost you around $700 a year.

One tenant of mine is a school teacher, one a lawyer, one a retired colonel. Average time in house almost 3 years. I think if you get correct people renting and invest your money in decent areas that are desirable and growing you are gonna be fine. It's like any investment, there is some risk and reward. Go to stop six, get a property for nothing and then by some miracle find a good tenant you can make a nice return but like junk bonds or speculative stock you can get burned. Stick to quality areas and be highly selective on who you rent to and your percentages go down but things are alot more stable and predictable. If someone poured cement down the drains or cooked meth in your house you did it all wrong.

Back in the 80's we had 66 rental units, all leveraged to the hilt and had 80% LTV loans. It was a negative cash flow but we were looking for the high appreciation in value TX was experiencing at the time. The economy went south and we lost them all.
Spend some time learning the market in the area you plan to buy in. Buy an under valued house, fix it up, refill and rent it. Make sure your tenants understand your recourse if the dont pay on time, and it's not bad.

I have seen quite the opposite, they will move many into a house and basically destroy it. If you have a ghetto rent house then they may be a good fit.

I can do a lot of work myself, electrical, plumbing,etc. I worked for a housing contractor (uncle) for my teen years building new houses. But, I don't want to spend my retirement days working on them Good info though, thanks.

I was thinking instead of having $200K sitting in a savings account making 1.90% annualy, invest in buying a rental property. For income generation the return is higher on a rental property but from what everyone seems to be saying is that it is still a dice roll with headaches of bad tenants, etc. Thanks.

It's not bad. The insurance is less than that, the rent might be more, your maintenance won't be near that much most years. Property taxes may be more. You can always talk yourself out of making money. I generally wouldn't suggest financing one.

Good points Zeek, but I was thinking instead of having $200K sitting in a savings account making 1.90% annualy, invest in buying a rental property. For income generation the return is higher on a rental property but from what everyone seems to be saying is that it is still a dice roll with headaches of bad tenants, etc. Thanks.

It's all about how much you pay for the house and what kind of renters you get. Buy the house cheap and get good renters, and you can do really well.

Personally I wouldn't pay $200k for a rental. The folks I know who have done well paid much less than that. My old boss just retired a few years ago at 52. Has 40+ rental houses and his rule for years was to never pay more than $25k. He spends a bunch fighting renters that don't pay and you can't get anything for that price now, but he's retired at 52, goes on at least one vacation a month, and hasn't touched his 401k or pension.

Now I don't think that's ideal either. My wife and I just got into this. Spent $79k on a house, put $9k into it, and getting $1100/month with really good renters. I'd try to find something in the $100k-$125k range. $2000/month rent may not hold up very well if the economy goes south, but $1000/month will hold up for much longer. At least that's my theory. Lots of folks are doing well in the $2000/month, and the closer you get into the metroplex that might be fine, but we're out the outskirts of the suburbs and I wouldn't take those risks here.

I'm not knocking cheap rentals, I have one and its is the worst performing property I have, I bought for 80k, put 12k in it. Rents for 950. It has been rented all but 3 months for the 4 years i have owned it. First problem is these type houses dont really go up in value like the current, nicer new homes, if I sold it I would get maybe what I have in it back, currently I would make 50k each in appreciation on my nice rentals. Next is you do deal with a different type of tenant, I mentioned earlier I have a lawyer and a retired colonel in mine. I sleep well knowing the properties are in good hands. 3rd and a biggie is that the repairs eat up all the money on a 1000 dollar a month house. A hot water heater is basically the same price no matter the house, one you get 2k plus one you get 1k, one or 2 issues a year really kill your return. One of the more wealthy friend I have bought 3 new properties in a desirable area for 600k each, rents them for 5k a month and they are all ways rented, executive types. Now even at that rate with the property taxes the return isnt good, but after 3 years those houses would all sell close to 900k each putting 900k in his pocket. My point being there are different ways of looking at things.

Are you including HOA dues in the equation. Every house we have in our HOA is a Pain in the rear. None of them water or maintain the yard, they violate every rule we have. All we can do is send notices to the owner who really don't care.

I've thought long and hard about it a bunch of times. I always end up deciding not to do it. Just too many horror stories with renters. When you start to factor in your time managing the people and the maintenance issues that 4.4% you think you are making shrinks very quickly. Easier ways to make similar of better returns with far less work. (Like just about any deep discount index fund from Vanguard).

It's all about how much you pay for the house and what kind of renters you get. Buy the house cheap and get good renters, and you can do really well.

Personally I wouldn't pay $200k for a rental. The folks I know who have done well paid much less than that. My old boss just retired a few years ago at 52. Has 40+ rental houses and his rule for years was to never pay more than $25k. He spends a bunch fighting renters that don't pay and you can't get anything for that price now, but he's retired at 52, goes on at least one vacation a month, and hasn't touched his 401k or pension.

Now I don't think that's ideal either. My wife and I just got into this. Spent $79k on a house, put $9k into it, and getting $1100/month with really good renters. I'd try to find something in the $100k-$125k range. $2000/month rent may not hold up very well if the economy goes south, but $1000/month will hold up for much longer. At least that's my theory. Lots of folks are doing well in the $2000/month, and the closer you get into the metroplex that might be fine, but we're out the outskirts of the suburbs and I wouldn't take those risks here.

I have rented three properties out when I moved to another state due to my job. They all worked out because we got good renters who built up the equity for me and when I sold, I made a good chunk of change from each of them.

Then I bought a house in California on a double short sale who had a renter in it and I quickly learned the other side of the coin when he refused to vacate. He had a child in the house and in Cali., that was as good as gold because he could not be removed from the house. As long as he was paying $20.00/month on the $2,500.00/month rental agreement, nothing could be done on a legal basis. It took one crazy SOB to stop by one night and threaten him with all kinds of bodily damage to get him to leave so I could close on the house. Two days later, he cleared the house but did some damage on his way out that the bank had to eat (they were the 'Owners'). That was the last time I would ever consider a rental property for income purposes.

My business partner and I have quite a few rentals. Buy new! I know it sounds nuts, we have several in a new development that ranged from $189-$249. They rent from $1800-$2700 a month we use a property management company. Also when we have them built we do not go crazy with granite and such. There is not enough nice 4/2/3 houses in the Texas rental market. Our goal is 40 by 2030, he owns a mobile home park which is where the money is. Problem is the county is always on his backside

With rates as low as they are, I don't think paying cash for a house makes much sense. I have a few rentals. I put 20% down on all of them. Let the bank take the risk. Get a good lawyer, insurance agent, and real estate agent, and put the properties in an LLC.
I would buy somewhere with a college and hospitals. This doesn't mean you're renting to college students, but it does help with demand. At the end of the day, the key is good tenants and a good lease.

A friend of mine bought a house on Broken Bow in Oklahoma and rents it out through VRBO or AirBnB for $400 per night. He reserves it for him and his family when they want to use it and has an agent handle it the rest of the time. Seems to be a good situation, albeit your initial investment is higher than a typical rent house.