Rental property, which I had owned since I was 24 and thought was the ticket to an early retirement, I am now declaring to no longer be a valid investment. The reason is simple:
Americans are no longer reliable enough to rent out something valuable like property to them, let alone are worth the legal risk. You throw in the general deterioration of your pool of renters as well as the market being flooded with people who bought more house than they could afford, not to mention every local government now jacking up your taxes to pay for their pet green projects, and it isn't worth it any more.
Instead, I suggest buying storage properties.
You see, physical items cannot sue. They cannot complain that there's mold in the basement, or when you paint with Killz to kill said mold, it smells chemically. Physical items do not cause damage, do not freeze nor burst in winter, and for the most part are easier to deal with than live humans that rent from you.
So take the Captain's advice. No more rental property.
"REMEMBER: You can NOT turn a renter down based on: Race, Religion, Color, Sex, National Origin, Familial Status, Disability, Marital Status, Status with regard to Public Assistance or Sexual Orientation – if this statement makes you nervous, you may want to stay out of the rental business. They monitor this stuff very closely and are always on the lookout to make an example of someone. The most recent one I heard was in LaCrosse, WI where property owner was hit with a $10,000 or $15,000 fine for turning down a single mom because the owner felt there was too much snow removal for her to handle.
ReplyDeleteSpecial Requirements for Handicapped Tenants. The ADA covers:..."
What the hell?
Given the difficulty involved in removing bad tenants, why on earth would anybody choose to be a landlord? If you want to rent something from me, I'm going to consider a lot of factors but ultimately my reason for turning someone down is nobody's business but mine.
What these rules are saying is that people can be forced to rent property to certain people if the government doesn't approve of their decision making criteria. I suppose the same BS rules are in place for hiring decisions as well.
I have friend who rents out apartments and after hearing some of the situations he's gotten into, I wouldn't do it. But his properties tend to pull in very low income renters.
ReplyDeleteOne thing that CK doesn't mention is that the type of renters you get is related to the amount of rent a property gets. In short, if you buy property which has rents high enough, you don't get the bottom-feeders and riff-raff and undesirables because they can't afford them.
I like the idea of rental storage - the downside is dealing with property (usually junk) left behind when renters either move out or abandon the storage units.
If you don't like managing storage, you could buy stock in Public Storage.
So what has happened to you now?
ReplyDeleteWhat an awesome spreadsheet!
ReplyDeleteI see a point being made here Captain, but even storage space is subject to legal agreements for things like security, access and fees in a business setting. My stuff stored at your spot gets damaged through your negligence, I get reimbursed. To a certain amount, under certain conditions.
ReplyDeleteI'm thinking you're glad that a storage unit cannot sue you for sexual harassment these days.
I'll go one better. I thought about storage, then I thought parking lots even better. Much lower maintenance.
ReplyDeleteCouldn't agree more. The day I got rid of my rental property was the day I stopped feeling like I had an 800 pound broke gorilla sitting on my shoulders. I'm renting a storage unit right now where I keep some of my pest control business' equipment. The folks running that place have nearly 400 units rented out at an average of $85/month. Most of the units are not climate controlled, so their biggest utility bill is probably just the electricity bill for the lights and security system on the grounds. Someone stops paying? No problem. They slap a second lock on the door of their unit and cancel their gate code. After enough time does by, they sell off whatever is in the unit that can be sold and rent it out to the next person. Right now they have zero vacant units, too, so it doesn't take long to get someone new in there when a space opens up.
ReplyDeleteMan, you guys seem to be having horrible times with your renters. I own several rental residential properties and all I have to do is get someone to mow the grass on them and collect the checks. Maybe make a few repairs here and there.
ReplyDeleteThe trick to avoiding legal problems is to have a *GOOD* contract with the renter.
So I have to disagree. Residential is fine as long as you filter in the right kind of people. Remember, there will *always* be people who cannot afford a house, and they need a place to live.
"the downside is dealing with property (usually junk) left behind when renters either move out or abandon the storage units."
ReplyDeleteHire a couple of day laborers to take it all to the dump. Problem solved!
I honestly do not understand why people keep stuff in storage. Rental rapidly exceeds the economic value of anything you put in there, even if it's a small unit.
"Rental rapidly exceeds the economic value of anything you put in there, even if it's a small unit."
ReplyDeleteAnd I'm willing to take their $. FWIW, did the rental thing for about 15 years w/12 properties. The entire thing went wonky early in the past decade w/the regulatory insanity, so I did get into the storage business. Easy, crisis free, and light hours, and profitable.
Agree.
ReplyDeleteI have an acqaintance, an experienced landlord with multiple properties, who had to evict a deadbeat. Practically took an act of congress to get the law man to haul her fat ass out. Multiple trips to court, and an experienced real estate attorney on his side. Judge let the bitch remain in the premises for nearly three months, rent free. Screw that.
I do own some good rental real estate - as in, farm ground rented to guys that grow corn/soybeans/wheat. Utterly trouble free. One invoice, one rent check each year. They pay immediately. And no whining about appliances that they abused and broke.
HR Lincoln - Ag land is on the gravy train right now. What will happen when the subsidies are pulled out and ag-land comes crashing down? Google Agriculture Land Values and there are some pretty good charts showing that bubble is much larger than the housing bubble. Just a heads up.
ReplyDeleteYou are correct on the eviction process - you have to play your cards right. If you accept any "partial" payment the process starts all over... I suspect that is what happened to your friend.
ooo, good point. I'll go with the parking lots, the problem is that if you're in parking lots you're near the country's tallest buildings which means you're dealing with liberal city council members.
ReplyDeleteI'd rather in boring white-bred suburbia with storage than the commie city with flatness.