How to rent SFH without landlording question

[xburbx]

How do "gurus" rent SFH with out landlording them.  I know they can use a management company, but is there another way to get that cashflow with out being the landlord.

[blondie777]

If your not in Texas, you can owner finance. =)

[AJ290]

How do "gurus" rent SFH with out landlording them.  I know they can use a management company, but is there another way to get that cashflow with out being the landlord.

Sounds like you want your cake and to eat it, too.  
You can set up your rentals as Rent To Own's.  This way you're dealing with tenant/buyers instead of tenants.  Definitely will bring you a better quality resident.  I can't guarantee you'll never have a problem again, but this will certainly cut down on typical landlording problems.

[xburbx]

rent to own would be the same as a lease option correct?  as far as owner finance, would i be the owner in that situation and what would the advantage be then as opposed to just selling.  

[blondie777]

They would be the owners, you would make the cash flow, with a larger down, and you could charge more monthly.  If your not into the cash flow, then just sell=)

If they default, you can start all over again, and get another down.  Not sure of the processes it would take to get them out.

[propertymanager]

xburbx,

The answer is that the gurus don't rent without either being a landlord or hiring a management company.  Rent to own, lease option, and land contract are not much better than simply renting.  The gurus claim that it is because they either don't know any better or they don't want to tell the truth because it will hurt seminar sales to newbies.  

A VERY small percentage of "buyers" of rent to own, lease-option, or land contract properties ever buy them.  The reason is that they were never better than renters to start with.  Almost by definition, someone entering into one of these schemes has poor credit.  They are a bad risk.  It is true that you MAY be able to get a lease option premium, but that often comes at the expense of waiting longer to place the "buyer", thereby losing rent in the mean time.  

Another myth about rent to own, lease-option, and land contract deals is that the buyer will do all the maintenance, pay the taxes, etc.  What usually happens is that the tenant can't afford to do the maintenance or does it wrong and unless they are carefully supervised, at some point they'll just stop paying the taxes.  Additionally, with a rent to own or lease option deal, it is illegal in most states to require the tenant to do the maintenance.  Check your state landlord-tenant laws.

So, to answer your question, if you don't want to be a landlord  -  the best solution is not to own rental properties.

Good Luck,

Mike

[xburbx]

Is a property management really not worth the percent they take?  I read one of your posts property manager on it.  If they take 10% over the course of the mortgage and then you sell the homes once the renters have paid them off, wouldnt that be worth it?  I know the margins are slim, but how much time and effort is saved by a management company?

[propertymanager]

xburbx,

It all depends on the numbers.  The vast majority of people who hire out everything (management, maintenance, etc) are losing money on their rentals.  You've got to remember that when you're using a management company, there are additional expenses to consider.  Do they charge to find tenants?  Many charge one month's rent for doing so.  What do they charge for maintenance?  Many charge a small fee for arranging the maintenance - which is also quite expensive.  Does the management company charge extra for evictions?  

Can you use paid management and paid maintenance and still make money?  In most cases - NO.  Should you still invest in rental properties?  Will the loss of cash every month be offset by the paydown of the principal?  Could your money get a better return elsewhere?  That's up to you.

Mike

[xburbx]

off topic - how many rentals do you own propertymanager.  I saw another post of yours saying you have dozens.  over 30?  

[propertymanager]

Yes, I have well over 30 and we are still growing.   That's why I know that this guru nonsense is wrong.  If you only have 1, 2 or 5 rentals......a few rentals, then it's easy to delude yourself into believing that the guru nonsense is correct.  As your portfolio increases, it becomes readily apparent that the guru expense numbers are extremely underestimated.  They either don't know what the real numbers are or they don't want to lose course/seminar sales by telling the truth.  I suspect that many of the "gurus" are not successful at REI, therefore they moved onto marketing their courses and seminars.  Many of the gurus have been bankrupt and many more will be bankrupt.  There are very few that are the real deal.

Take just one example.  What guru do you know of that discusses tenants causing thousands of dollars of damage to your rental?  What guru do you know that includes this damage into their expense figures?  I don't know of a SINGLE guru  -  NOT ONE!  Does this kind of damage occur often?  No, but it does happen.  When you have a cash flow of $100 per month, how often does a tenant have to do $2,000, $3,000, or $4,000 worth of damage to affect your cashflow.  

I hang around with other landlords that have between 25 and 100 rentals.  EVERY SINGLE ONE OF THEM has had this type of damage multiple times.  So far, in the last 3 years, I've had it happen twice.  

Mike    

[xburbx]

good info.  how many hours per week does your business require with all of your rentals?  do you sell your rentals as you go or do you hold them  until they are paid off?

[blondie777]

I managed 200 low income units.  99 percent of our move outs had to have the carpet replaced.  The Luxury communities 99 percent were just as good upon move-out.

[xburbx]

did you work for a management company?

[blondie777]

Yes-I just started my own investing company, but I have managed multi-level communities since 1989.

[xburbx]

with all of your experience, what have you decided to focus your investing in.  low level, mid level, rentals, flipping?