Im just getting started in rentals and feel like im learning a good amount from listening to all your experiences. The chirpiness you deliver your videos with make them a joy to watch. Please keep em coming! Congrats on what hopefully finishes to be a pretty profitable year!
I'm planning to become a landlord within the next few years and just stumbled on to one of your videos a couple of days ago. I decided to start watching all your videos in chronological order from the from the first video. Your videos are interesting and useful and I'm really enjoying them. I subscribed, liked and watched all of your videos so far up to this one. This is my take so far, so correct me if I'm wrong: It seems to me that if you only look at your rental properties as a group by themselves (excluding the owner-financed properties) the rents are barely covering expenses. I'm not sure the profit from these is even enough for a landlord to live on. Since you lump all the income from BOTH sources together and then subtract expenses, it appears that you're making a profit when really your "income" seems to come from selling off your assets (the owner-financed homes). Is this about right? Are the rentals even pulling their own weight? I understand that the homes were gifted to you. If you had to purchase them with a loan, would they even turn a profit after you pay the mortgage? It seems to me that you should be charging full market rates (which should cover a mortgage, property taxes and all expenses) and that maybe you're not doing that. Should a landlord lower the rent when the mortgage is paid off because the expenses dropped? See my point?
You are right about everything you are saying but it is slightly more complicated than that. So I basically own 17 houses that are 50-60 years old and have never been remodeled. The seven that we bought at the beginning of 2020 were especially neglected. I've had to do a lot of major repairs like roof replacements and exterior paint. The cool part is that the rents have actually covered all these expenses and I haven't had to dip into my own savings at all. It's kind of like if you were to buy a house that needs a lot of work, you would likely have to put your own money into the house and then you hope that you get good tenants and make a good return on your initial investment - in that scenario you probably wouldn't profit for several years depending on the extent of the remodel. But your property value would have increased. I do realize a lot of people will remodel and then refinance so they get their money back out faster that way - but personally I prefer to avoid the debt if I can. I knew going into this that we wouldn't see a profit for at least a year or two, considering the amount of work the houses needed and I was ok with that because I look at real estate as more of a long-term investment. While we may not be profiting much right now, the houses have all at least doubled in value over the last two years. Another thing worth considering, is that I am paying my mom a little over $33k per year. Right now this is a repayment for the money she loaned me, however one of the reasons I wanted to keep the houses was to help my parents - so I plan to continue paying her that amount even once the loan is paid off. So it's kinda neat that the houses are able to cover all the high expenses plus at least an additional $33k a year. And we actually bought another foreclosure about a year and a half ago without any personal money as well (I have since owner financed that property for $40k more than I had in it at 5% interest). Sometimes I do the math on how much money I'm missing out on by not increasing my rents to market. I will admit that it is a hard number to look at. But I have to consider that if I were to raise rents, I would inevitably have tenants move or possibly stop paying rent altogether (if they really can't afford it they may feel like they don't have another option). I think for the most part I'm really lucky that all my tenants pay and most of them treat the properties really well. Even during the eviction ban, all my tenants continued to pay on time. They are also really understanding even when repairs sometimes take longer than I would like for them too. Another thing that I do consider as well is that many of my tenants have lived in the properties for over ten years - at that point they have paid more in rent than I or my dad paid for the house. Recently I had a tenant of 20 years pass away. 20 years of rent, paid for the property, all the expenses over the 20 years, and the complete remodel. If you look at it that way, the property really didn't make much cash above those expenses over the 20 year period. But now I have a house worth over 100k, that has completely paid for itself, renting for $660 to a tenant that is super sweet and takes very good care of the house. I just struggle to raise the rent when the tenants have literally paid for the house and all expenses associated with it. On the flip side, I do realize this isn't how life works - even a homeowner with a fixed mortgage would have increased expenses associated with the home over time. Technically each year I rent a house without increasing the rent, I'm making less and less money on that house. Sometimes I think not increasing rent can even lead to a "slumlord" situation. If the landlord can't afford to do repairs and updates, the property will slowly fall apart. But also most people don't receive free houses from their parents. I do have a lot to be thankful for and I think it's only right to pass some of that on to my tenants. Hopefully you don't judge everything I say in these videos too hard. I've learned a lot since most of them were made and probably changed my opinion on a few things too.
@@ItsMandy It sounds like you're on top of it. To my mind, a tenant isn't all that great if they're not paying market rates 😅. If they love you as much as they say they do, I doubt they'll move - well, maybe a couple might. But in a really hot market you should be able to find good replacement tenants in only a few days or weeks and you'll be better off in the long run. It seems like you're almost too nice to be a landlord and people are taking advantage of you. I'm glad you're in a position to afford it though. "Another thing that I do consider as well is that many of my tenants have lived in the properties for over ten years - at that point they have paid more in rent than I or my dad paid for the house." It may seem that way on paper just going by the numbers, but the value of the dollar drops greatly over time and that would need to be factored in. He might have paid $40K for the house a decade ago, but in today's money that might have been the equivalent of $400K back in the day, and if you're factoring in worthless recent dollars the picture sours. "I just struggle to raise the rent when the tenants have literally paid for the house and all expenses associated with it." Maybe you can find a way for "the computer" to do it like you did with the late fees, lol. "Hopefully you don't judge everything I say in these videos too hard. I've learned a lot since most of them were made and probably changed my opinion on a few things too." I was just curious about some things based on what I've seen so far. I look forward to watching your more recent videos over the next few days. You took over the management from your dad, made it work and even took it to the next level with management software. I'm impressed and thankful that you took the time to post these, as I'm actually learning from them. I was initially planning to buy individual rental homes like you but I watched a video the other day where an investor said that buying a small apartment building is a much better way to go. It's supposedly a lot easier to deal with since there's only one property tax bill, one insurance bill, one property to maintain, no running all over town to deal with tenants, IRS taxes are simplified (especially if you're depreciating), even your accounting fees should be less, etc. I'm now leaning toward buying a 4-plex or something. Do you think it might be easier to own a 17-unit apartment building rather than 17 individual houses?
Yes, I definitely think an apartment complex should be a better investment from a cash flow perspective. I think there have been times when apartments didn't appreciate as much as single family, but in this market I don't think that is true. A lot of people are looking to get into commercial real estate. A few negatives to consider: 1. You will be responsible for trash and lawn care and possibly snow removal - these are expenses that I don't have with single family. 2. If the meters aren't separate, that complicates things a little. Personally I would avoid including electricity in the rent at all costs and I would prefer not to include water if at all possible. 3. You might have to deal with tenants not getting along (being loud, smoking, etc.) . The lower the rental class the more of this you will likely have to deal with. 4. If you decide to sell, it might be harder. I really don't think this is true at the moment. But I can see an argument for single family being easier to sell. 5. This is almost a silly thing to mention, but in every apartment complex I have lived in no matter how nice. People always dump large items by the dumpster. Mattresses, couches, etc. So you will need a plan for dealing with this. My current apartment has camera's installed and supposedly they bill anyone who dumps large items - it hasn't eliminated the issue though.
@@ItsMandy Those are all great points. Fortunately I'm just looking at managing a few units. I can't even imagine managing 17 homes like you do. I find that incredible. Thank you for your input!
Im just getting started in rentals and feel like im learning a good amount from listening to all your experiences. The chirpiness you deliver your videos with make them a joy to watch. Please keep em coming! Congrats on what hopefully finishes to be a pretty profitable year!
Thank you!
Life happens! It's totally okay that you are behind on making videos but it's great that you are coming back into it
Good update! Dang plumbing is expensive!
Yes it is! I think I've fixed my fair share of plumbing issues this year, so I'm refusing to have anymore!
thank you for these videos
Great video, very thorough. Congratulations on the profit getting bigger YTD!
Way to go on your profit!! That's awesome!
Mandy sounds like you’re gonna have to find yourself another A/C guy!
I think you are right!
I'm planning to become a landlord within the next few years and just stumbled on to one of your videos a couple of days ago. I decided to start watching all your videos in chronological order from the from the first video. Your videos are interesting and useful and I'm really enjoying them. I subscribed, liked and watched all of your videos so far up to this one.
This is my take so far, so correct me if I'm wrong:
It seems to me that if you only look at your rental properties as a group by themselves (excluding the owner-financed properties) the rents are barely covering expenses. I'm not sure the profit from these is even enough for a landlord to live on.
Since you lump all the income from BOTH sources together and then subtract expenses, it appears that you're making a profit when really your "income" seems to come from selling off your assets (the owner-financed homes). Is this about right? Are the rentals even pulling their own weight?
I understand that the homes were gifted to you. If you had to purchase them with a loan, would they even turn a profit after you pay the mortgage? It seems to me that you should be charging full market rates (which should cover a mortgage, property taxes and all expenses) and that maybe you're not doing that.
Should a landlord lower the rent when the mortgage is paid off because the expenses dropped? See my point?
You are right about everything you are saying but it is slightly more complicated than that. So I basically own 17 houses that are 50-60 years old and have never been remodeled. The seven that we bought at the beginning of 2020 were especially neglected. I've had to do a lot of major repairs like roof replacements and exterior paint. The cool part is that the rents have actually covered all these expenses and I haven't had to dip into my own savings at all.
It's kind of like if you were to buy a house that needs a lot of work, you would likely have to put your own money into the house and then you hope that you get good tenants and make a good return on your initial investment - in that scenario you probably wouldn't profit for several years depending on the extent of the remodel. But your property value would have increased. I do realize a lot of people will remodel and then refinance so they get their money back out faster that way - but personally I prefer to avoid the debt if I can.
I knew going into this that we wouldn't see a profit for at least a year or two, considering the amount of work the houses needed and I was ok with that because I look at real estate as more of a long-term investment. While we may not be profiting much right now, the houses have all at least doubled in value over the last two years.
Another thing worth considering, is that I am paying my mom a little over $33k per year. Right now this is a repayment for the money she loaned me, however one of the reasons I wanted to keep the houses was to help my parents - so I plan to continue paying her that amount even once the loan is paid off. So it's kinda neat that the houses are able to cover all the high expenses plus at least an additional $33k a year. And we actually bought another foreclosure about a year and a half ago without any personal money as well (I have since owner financed that property for $40k more than I had in it at 5% interest).
Sometimes I do the math on how much money I'm missing out on by not increasing my rents to market. I will admit that it is a hard number to look at. But I have to consider that if I were to raise rents, I would inevitably have tenants move or possibly stop paying rent altogether (if they really can't afford it they may feel like they don't have another option). I think for the most part I'm really lucky that all my tenants pay and most of them treat the properties really well. Even during the eviction ban, all my tenants continued to pay on time. They are also really understanding even when repairs sometimes take longer than I would like for them too.
Another thing that I do consider as well is that many of my tenants have lived in the properties for over ten years - at that point they have paid more in rent than I or my dad paid for the house. Recently I had a tenant of 20 years pass away. 20 years of rent, paid for the property, all the expenses over the 20 years, and the complete remodel. If you look at it that way, the property really didn't make much cash above those expenses over the 20 year period. But now I have a house worth over 100k, that has completely paid for itself, renting for $660 to a tenant that is super sweet and takes very good care of the house. I just struggle to raise the rent when the tenants have literally paid for the house and all expenses associated with it.
On the flip side, I do realize this isn't how life works - even a homeowner with a fixed mortgage would have increased expenses associated with the home over time. Technically each year I rent a house without increasing the rent, I'm making less and less money on that house. Sometimes I think not increasing rent can even lead to a "slumlord" situation. If the landlord can't afford to do repairs and updates, the property will slowly fall apart.
But also most people don't receive free houses from their parents. I do have a lot to be thankful for and I think it's only right to pass some of that on to my tenants.
Hopefully you don't judge everything I say in these videos too hard. I've learned a lot since most of them were made and probably changed my opinion on a few things too.
@@ItsMandy It sounds like you're on top of it.
To my mind, a tenant isn't all that great if they're not paying market rates 😅. If they love you as much as they say they do, I doubt they'll move - well, maybe a couple might. But in a really hot market you should be able to find good replacement tenants in only a few days or weeks and you'll be better off in the long run. It seems like you're almost too nice to be a landlord and people are taking advantage of you. I'm glad you're in a position to afford it though.
"Another thing that I do consider as well is that many of my tenants have lived in the properties for over ten years - at that point they have paid more in rent than I or my dad paid for the house."
It may seem that way on paper just going by the numbers, but the value of the dollar drops greatly over time and that would need to be factored in. He might have paid $40K for the house a decade ago, but in today's money that might have been the equivalent of $400K back in the day, and if you're factoring in worthless recent dollars the picture sours.
"I just struggle to raise the rent when the tenants have literally paid for the house and all expenses associated with it."
Maybe you can find a way for "the computer" to do it like you did with the late fees, lol.
"Hopefully you don't judge everything I say in these videos too hard. I've learned a lot since most of them were made and probably changed my opinion on a few things too."
I was just curious about some things based on what I've seen so far. I look forward to watching your more recent videos over the next few days. You took over the management from your dad, made it work and even took it to the next level with management software. I'm impressed and thankful that you took the time to post these, as I'm actually learning from them.
I was initially planning to buy individual rental homes like you but I watched a video the other day where an investor said that buying a small apartment building is a much better way to go. It's supposedly a lot easier to deal with since there's only one property tax bill, one insurance bill, one property to maintain, no running all over town to deal with tenants, IRS taxes are simplified (especially if you're depreciating), even your accounting fees should be less, etc. I'm now leaning toward buying a 4-plex or something.
Do you think it might be easier to own a 17-unit apartment building rather than 17 individual houses?
Yes, I definitely think an apartment complex should be a better investment from a cash flow perspective. I think there have been times when apartments didn't appreciate as much as single family, but in this market I don't think that is true. A lot of people are looking to get into commercial real estate.
A few negatives to consider:
1. You will be responsible for trash and lawn care and possibly snow removal - these are expenses that I don't have with single family.
2. If the meters aren't separate, that complicates things a little. Personally I would avoid including electricity in the rent at all costs and I would prefer not to include water if at all possible.
3. You might have to deal with tenants not getting along (being loud, smoking, etc.) . The lower the rental class the more of this you will likely have to deal with.
4. If you decide to sell, it might be harder. I really don't think this is true at the moment. But I can see an argument for single family being easier to sell.
5. This is almost a silly thing to mention, but in every apartment complex I have lived in no matter how nice. People always dump large items by the dumpster. Mattresses, couches, etc. So you will need a plan for dealing with this. My current apartment has camera's installed and supposedly they bill anyone who dumps large items - it hasn't eliminated the issue though.
@@ItsMandy Those are all great points. Fortunately I'm just looking at managing a few units. I can't even imagine managing 17 homes like you do. I find that incredible. Thank you for your input!
I'll trade you my A/C guys info for your insurance agents info lol.
Congratulations! You're making a profit!
lol, I think my insurance is just low because I'm not actually covered for anything! But I use State Farm.
Use an insurance broker! Will save you tons of money.
@@-Silly-Willy-0 definitely use a broker, they can shop various companies on your behalf.
Oh yeah, and your tree guy. I have one that's beyond dead that I need taken down.
I could trade you my lawn guys info? 😀
I will message you!
Just use the guy for electric and never call him for HVAC. He obviously can't do it. Ugh.