Why not buy a Rental?

I have read some forum posts on Permies regarding strategies for financial security during a recession and depression, and the consensus seems to be the following:

- Buy land
- Grow trees like black locust, 60ft pines suitable for electric poles, fruit/nut trees
- Buy depreciated, quality machinery
- Cultivate trades that will be needed during recessions/depressions
- Buy silver, gold, or bitcoin

Buying stocks doesn't seem to be too popular... I guess since most of the companies are unethical... and a good few here seem to think the world is coming to an end so there's no use in buying now anyways.

These strategies I understand, however what seems to be the least popular is buying a run down house, fixing it up, renting it out, and letting it appreciate over time.

I guess I understand why... because the people buying these houses are using bank credit lines indefinitely to buy more rentals, and causing the housing shortage we have, as well as driving up the cost.

Though I am finding myself in a lucky opportunity where I have no debt, am 26, live rent free with my father, and am sitting on a lot of cash during the brink of an economic collapse.

In my opinion there will be many foreclosures in the coming year or two, and it seems like the smarter thing to do is to capitalize on this misfortune, as dismal as it may sound. I apologize for coming off this way, I don't know how else to put it.

I've heard stories of airBnB "superhosts" having over 10 properties with 10 mortgages tied to them, all with vacancies. It's crazy that banks allow people to do this.

Sure I could buy land right now, but I would have to continue to work off site and take time away from my land. I would much rather put all my money in a cash flow stream now, and buy property later when have an income stream to give me more freedom to work on my land. But if I go with the latter, I would have to wait another 5 years or so to buy land.

So I guess what I'm asking is for other peoples advice on what they would do in my position. Also, if you don't support the idea of buying a rental property, why? I should add that I am experienced in several woodworking trades.
Should I just buy land and begin my dream of having a multifaceted homestead right now? Or invest my money now so I can have more freedom when I buy my land?

P.S.
I don't believe much in meritocracy. I am one of the lucky ones.

Hi Conor, great job being debt free with cash saved up!

Buying a rental is definitely an option.  And getting a fixer-upper to boot is even better.  I don't do rentals but I know a guy who has several.  He pays cash for them, fixes them up a bit and gets them rented.  Then they can accumulate cash faster for the next one.  He's a few away from being able to retire in his 40s.  

I think the hard parts of that business are:

knowing how much to fix them up - ie just enough to make them decent

figuring out how to be a landlord

I would personally fix them up to my standards (way too nice and expensive) and then I'm afraid I wouldn't be good enough at landlording.  

But give it a try.  Maybe get one now that's cheap and see how it goes so that in a year when the foreclosures really hit you can get another.  That way you can apply everything you learned while making mistakes on the first cheap one.

Good questions.

A few more for you.

Who will be renting these rentals? What source of income do your prospective renters have that are secure from the cascading dominos of unemployment and peak prosperity and ungrowth?

Given that interest rates are still at their lows, what does that imply about current pricing levels?

Where in the world will be most insulated from the geopolitical maelstrom that is unfolding? What countries can a real estate investment secure you residency?

What is a woofer? What is an intentional community? Who could work your land while you are still working?

You have a decent idea there.
I knew a guy who owned a rental,  but kept the detached garage as an office/ workshop.
You could grow whatever you want on the property, it could be a good place for a tree nursery.

Of course being a landlord is a job in and of itself.
A tenant that won't wreck your place,  isn't needy or demanding, and pays well and on time will probably want a very nice house in a nice part of town.
Less nice houses in crappy parts of town attract the other kind of tenant.

Maybe buy your land,  set up utilities and put a 5th wheel or three on it.
Used 5th wheels are super cheap and easily removed or repurposed when you are done renting them out.
Someone smarter than me can tell you if the improvements to the land could be written off your taxes, because they are part of establishing  a commercial enterprise .
Then again ,  if you  lease spots to tiny house owners,  you might attract  people with more money, plus they are responsible for their own homes.
Either way,  you can make the leases end when you are ready.
Investing time and money on the  infrastructure you really want,  and making money off of it would be awesome.
Lots of possibilities.

In this video, Geoff Lawton talks about buying properties to permaculturize.  These could be rentals or flip sales.

I’d be cautious - the reason being even though I know a bit about renovation, I don’t know enough to prevent costs balooning: I’ve heard stories of people buying a house to fix up, then running out of cash halfway through the reno and being foreclosed it on in turn. If you have the knowledge, or know a really really good housing inspector, and double any estimate you come up with you can hopefully avoid this pitfall.
Also to watch out for: the house we bought was bought as a foreclosure by the previous owner. She told us that when she took possession, the house had been vandalized - people are often pretty bitter about losing their property, and that can happen after the inspection and assessment.

I'd like to offer a few things that I think need consideration when getting into renting properties to other people. There are a lot of good, honest people out there that need a place to live that can't afford to buy something, and then there are less savory people that, sometimes, are looking to get something for nothing. Some people will rent a place, then slip and fall, or have some injury and sue the landlord and settle out of court for a sum and move on to the next. It's deplorable, but it happens. I think it's important for landlords to carry a liability policy just for those kind of events, and an insurance policy is another expense. As William noted, having renters steadily pay on time may not always happen. Here in Tennessee there is a process, and if someone stops paying rent, the landlord can't just kick them out next weekend. What I've seen happen in Nashville is some renters ride out that process, staying in a place for free for the maximum legal amount of time, and then the day before eviction they move out and take things like appliances and cabinets and leave the place trashed, with any money made from this tenant being lost to repairs. This type of scenario doesn't happen all the time to everyone, but these kind of renters are out there.

I don't mean to be a downer. I just think it's important to consider worst case scenarios from a tenant and decide if it is something that a property owner is willing to deal with.

Only buy property if you can do so with cash. If you can pay cash, do it. If not, don't. It'll sink you like it did the Airbnb super hosts.

FWIW....
The best investment I can think of is a trailer court. Specifically an R.V. court.
You own the property and charge anywhere from $150 (low rent old trailers allowed, jammed in cheek to jowl) to  $900 ($30.00 per night next to a scenic attraction) monthly.
Don't own the trailers, if a disaster occurs the offending mess is hauled off and Ta-Da you have an open space to rent. Most of the infrastructure is underground and hard to damage. Classic cars are torn apart and abandoned that you can sell for parts, on the high end happy campers offer you beer when you come around to mow the grass.
After that is storage sheds, for R.V.s, boats,
Then storage sheds, storage sheds are the death rattle of a community, people abandon heirlooms all the time after making a flying trip for employment ....... whose return was less than adequate.
Pawn shops and Gun Stores, both require significant investment but the returns are excellent...if your heartless and discriminating (pawn shops) and enthusiastic and knowledgeable (gun shops).

Thank you all for the suggestions and ideas.

I live in a very good area for starting a family and one that I think will prosper even more once/if we come out of this epidemic. Lot’s of tech jobs here, and given there will be a shift in more people working from home, this area will be even more appealing since it is in semi/rural land 40 minutes from Atlanta. Lots of amazing international restaurants that are supported by these tech jobs too. Here and the surrounding cities has one of the lowest crime rates in the US, and an excellent education. Lots of Indian immigrants working these tech jobs, would make an ideal tenant.

Everything has become crazy expensive here though. The once quiet town I grew up near only had 4 restaurants 10 years ago. Now there are easily 30, a brewery, bars, music venues, a biannual singer/songwriter music festival with 4 stages.  I would have to go at least 30 minutes further north in order to afford to buy a fixer upper in cash. But we’ll see if that changes.

I imagine a growing number of people needing a cheap place to live. An RV/camper/trailer/tiny house park seems like it will grow in popularity. Especially since the retiring baby boomer generation has a meager social security income, and not much retirement savings. Though I’ve heard government zoning laws make this type of operation prohibitive. And I imagine I would be crazy with all those dwellings.

The Pep Talk:

Your plan can work. But there are lots of plans that can work.

What do you bring to this particular project that gives you an advantage compared with the wannabees and sharks that are already cruising there?

I'm not being snide. You _need_ and edge to invest (gamble) responsibly.  Unless you want to be just another in the crowd that takes what they get - running hard as they can all the way.

A quick and dirty way to say the same thing is ask yourself: Why does this (apparent) opportunity exist? Why hasn't it been scarfed up, down to the last shiny penny? What is it that makes me smarter than all those other people who have _not_ swallowed this opportunity? Make no mistake, "all those other people" exist and they are not sitting around. This is THE question. If you can't come up with something at least plausible, maybe cool your jets. This is not rocket science. In the end it could be as simple as "I don't give a damn, I'll eat shit and die if I have to  because I want to do this."  Believe it or not, that can be huge advantage because 1) You have made a decision and commitment; 2) (the implication is) You have no way out, you're like a cornered rat and we all know about cornering a rat;  3) A Big Problem can focus the mind marvelously. But you better have plenty of toothpaste and not melt into a puddle of grief when you  need to use it every night.

Regarding real estate investing.

It's full of people. Sellers, buyers, contractors, bankers, suppliers, tenants, managers, lawyers, sheriffs... Are you ok with that? Sounds like a silly question, but a lot of people are _not_ ok with people. As a real estate investor you need to work with these people at _least_ adequately and do it all the time, year round. Because even after you have got your property rented out and are feeling fat, tenants call with problems, trees fall, ya-di-ya.

You can make money when you buy, when you lease or when you sell. Or all three, but that takes real moxy and luck. (Making money when you buy is when you get property you can sell w/in a week for $100k for which you pay $35k. The others are clear, I think. )

I rent out a couple units and for a few years I looked into the prospects of flipping other properties. My own experience and _all_ the successful real estate people I talked with said any of it was WORK, no matter which angle you took. Solid, 50+ hours a week work for the first 5 years and usually for a lot longer. I passed on that for a number or reasons. I have some advantages which apply to a particular piece of real estate. My sister lives very near the rental property and is a cracker jack people person and moderates tenant issues quickly. I also know residential wood frame building front-back-up-down and can perform the work of most trades. I'm also lucky with good tenants - no other way to put it - lucky. It would be _far_ better if I had a 3 or 4 unit building from the point of view of profit. As it is, I barely make one and _part_ of the is because I'm a lazy landlord. The other part is because any property has some minimum hard carrying costs which accrue whether you've got two units or 20. You want more income streams for the same cost foot print. A four unit is close to ideal in terms of work required for an owner live-in vs. income.

Tenants break things. There is one door knob on the bath that a tiny polite neat-nik lady manages to pull off  _every_  frikken YEAR. I may have nailed that one this time (heh,heh), but TBD. So the land lord or the agent must be available to respond w/in hours to problem calls. Anything else, you're making more trouble for yourself. Failing to perform maintenance will cost you unless you're just a criminal - and maybe even then.

But real estate is a good place to park money (compared with banks or financial markets) and sometimes it can be a good investment. It's almost always an  _active_ investment, though , unless it's bare land or you want to give away the cream to some management company. I don't have close knowledge of "parks" of various types. I know people who say they're gold mines, but the ones they're talking about have a minimum of 75 spaces; the "real" ones have over 200. That sounds like a _lot_ of work to me.
'
You don't need to be superman. You don't need to go by the book. You maybe better acknowledge that there is a LOT involved and it can turn very challenging very quickly. If  you have no direct experience with real estate and being a land lord, it may be worth taking a time-out and talking to a lot of people involved, doing some extra hard research, maybe taking some jobs in the biz. Before sinking a great deal of money into something mostly known just by it's promises.


Regards,
Rufus

I like your thinking.  Rental property is a fantastic investment.  My parents had rentals and those rentals have allowed them to retire with a nice nest egg that they need now that Dad is in a nursing home.

We bought our rental in 2000, so we are 20 years into a 30 year mortgage.  In all that time, we've only had it unrented for 2 months total.  That's unusual, but we've had a series of great renters and never a bounced check or a late check.  Our location is ideal (close to a major evangelical Seminary, so we have always rented to young couples looking to go into the ministry).  

The key: do your homework and carefully screen your renters.  It's better to leave it empty for a month or three than to put someone sketchy in there and regret it when they stop paying and you can't get them out.

If you only break even in the first year, that's fine.  Every year, you'll bump the rent to keep up with the cost of living and keeping it market competitive.  But with each passing year, someone else is paying the mortgage on an asset that you own, and any appreciation of the property is yours as well.  Our property is more than doubled in value in the past 20 years, and there is now enough cash flow coming in that we've been able to replace doors and windows, upgrade the air-conditioning, and do a number of other fixes that increase the value of the property.  We clear about $500-600 a month even after reinvesting a lot of the rent back into property improvements.  It helps if you can fix stuff yourself and not pay someone else to unclog a toilet or fix a window screen.

Conor,

I have done the rental thing, and (this is embarassing) pretty much ALL the bad stuff people have mentioned happened to us. It is gambling and if you guess wrong, eviction is often long and tenants can be ruthless. We sold a house for 12k after four years of no rent, serial vandalism, and then insolvency. Never again.

I would look at finding a person who is doing good permaculture practices but could use more space- and buy a lot next to them. Lease it to them or figure out a way to assist/invest in upgrading the productivity of the property. I am looking at getting some acreage >30 min from my house, next to a friend who has some acreage but not enough to make it full time Greg Judy style. With double the acreage he could. Then maybe we get another lot close by (or lease on a long-term) and work on the economy of scale. Let me tell you right now people who raise pasture pigs and other animals are getting the opposite of crazy looks.

I have also invested in a tiny whole house solar array not including batteries- not installed, just bought. This is currently a highly subsidized product sold below cost- even cost in China. I suspect the prices will triple, especially the good inverters and charge controllers.The batteries degrade over time used or not and I don't think the prices are subsidized much. Check out this guy for recommendations.

Tj Jefferson wrote:I have done the rental thing, and (this is embarassing) pretty much ALL the bad stuff people have mentioned happened to us. It is gambling and if you guess wrong, eviction is often long and tenants can be ruthless. We sold a house for 12k after four years of no rent, serial vandalism, and then insolvency. Never again.

There are some rental properties around me that sell in the $15-30k range, and even with five years experience as a landlord I wouldn't touch them with a 10-foot pole. While the rate of return on them can be eye-popping, it takes a special kind of landlord to make them work.

Y'all are great, really. I appreciate this feedback. Glad to see other permies with similar sentiments.

Something I should've mentioned earlier. For the past 5 months I have become the handyman for my dad's rental. Basic stuff - toilets, faucets, water heater/ furnace issues, pest control, shelving, landscaping... I find it rewarding for now. My dad bought a rental a year ago. He has no idea what he's doing. I find that I'm having to take over for a lot of things because he is not quick at resolving the issue - he never had to fix anything in his life because he makes good money in business. My sister and her two friends are renting it out from him. Any little problem she comes screaming at me to fix. So I'm starting to understand what the headache is about. But it feels good to fix things. And my dad isn't even paying me. But I'm not paying rent living with him so I can't complain.

Another idea I had that I forgot to share -

I work in a small woodworking shop building custom stairs. It's just me, my coworker, and my boss. My boss pays rent and it's expensive, so it got me thinking that maybe I should buy land and build my own shop. I would become partners in the business, or have him pay me rent at a lower rate and continue with my hourly rate... though the latter might just be a horrible idea. lol.

Conor Haley wrote:I would become partners in the business, or have him pay me rent at a lower rate and continue with my hourly rate... though the latter might just be a horrible idea. lol.

A wise man once said "The only ship that won't sail is a partnership".  

I'm sure there are plenty of good partnerships but be sure to have a contract or something to fall back on.  If I were him, I'd never rent space from an employee.  Then I couldn't fire the lazy bum without risking loss of my work space.

Conor

Good experience  you're getting all around. Try to be REALLY good at it. This is like school: You only go through once and there's _soooo_ much to learn. And believe me, it's lots easier now than later and the payback is better. Don't hold back, work your ass off. <g>  You'll screw up. Just try not to sink the ship!

>handyman

IMHO, any technical skills you garner there are "nice", icing. But the _real_ meat is developing your chops in making the system work for yourself and everybody. IOW, making it pay w/out doing bad things and so you're kinda OK with it and so is everybody else. That means:

- getting the fixes in quickly, and well _enough_ so they don't hurt you again for a few years. That's not just or even mostly technical skill. The real meat is learning how to size up the problem, cut to the right fix for that time and place and move on it. And sometimes that means bailing and calling the cavalry.
- Putting together an "official" face for yourself that keeps all of you, your tenants and any subcontractors, city officials etc you need, in line, on track and behaving.
- Collecting rent on time and if it's late, taking steps so it never happens again. This one might be the hardest. It's very important.
- Doing this w/out becoming something nobody wants to be around.

_This_ is what you want to learn. It takes judgment,  toughness  (you'll make some really painful mistakes),  humility (unless you want to double your mistake problems, you go hat in hand to the victims apologizing, promising to make everything better than right. And then you _make_ it Better than right, because that's how you keep people in your court, respecting you, even on your side. _That_ you're going to need.), mercy and compassion (you might be in their shoes one day), clear eyed honesty (with yourself - can't make good decisions 'less you see clearly).

You do this well and honestly and you can laugh at any PhD, millionaires, bigshots around. You might be one of them or you might not. Doesn't matter. They'll have nothing on you. Oh, and thank your folks for their part to get you here!

I could envy your position. 'Ceptin' I know how much work you'll be puttin' in if you gonna chase your dreams... <G>

Oh, and for sure, DON"T make "unusual" deals with your current boss.   The stair job could have  lots of  potential in some ways, but that idea is a quick way to buy big trouble cheap.

Best luck.
Rufus

I have to ask why you feel most companies are unethical when you stated this"the smarter thing to do is to capitalise on this misfortune'
Anyway, apart from that I have been a landlord for 45 years, I am a builder, as well.

I found the best way to manage the rental is to have good tenants and make sure the property is as good as you would want if you stayed there.
Also, I give my tenants a wish list once a year for them to make suggestions on improvements.
I make appointments to have a coffee and I keep the posted about what I am doing.

Choosing tenants can be tricky, I actually interview property managers to find one that has my ethics, then use them to field the prospective tenants.
I do have me own predudices gleaned over the years of stereotypes that have caused me trouble.
But I can say I have only had about 4 bad ones because of the selection process.

I really wish I had never become a landlord. The stories about That Tenant who withheld rent because something didn’t work, then wouldn’t let anyone in to fix it?  My story. Then dragged out the eviction process and got to stay in the end, only to do it all again?  My tenant. Finally got rid of her, and the next ones weren’t any better. I sold that property (2-family) 3 months ago at a big loss just to be rid of it.

I had a somewhat similar experience with a single family home.  Rented to a friend. Nightmare.

I’m still part owner of a six-family in another state. Why?  I moved away to pursue my dream in Vermont. So you pay a property manager, and suddenly there’s no margin for repairs, the water heaters break, someone’s heat quits in winter, and there’s a pandemic so the rents dwindle. I’m retired and I have to pay 50% of these expenses.

It worked well when I lived nearby, managed the property myself, and screened tenants face to face. Now the tax consequences of selling are terrible. So now it doesn’t work well, and it’s very hard to get out of it.

I found the website MrLandlord.com to be very useful. And I read every book I could find on the subject before I bought. My first property, the two-family, was a foreclosure that I fixed up. It was all rosy for many years. Learn everything you can before you start. Your state laws governing landlord-tenant interactions, tax laws, requirements for subsidized rental property. And try to buy in that neighborhood with the seminary!  Don’t fool yourself into thinking the neighborhood will be up-and-coming.

I’m sorry to be such a pessimist. I’m trapped with this property and we are headed into a recession. I’m probably going to end up going back to work to support it.

I only took tenants that were working, had references and agreed to catch up with me from time to time by arrangements.
Management fees are 7% in Australia.
I dont understand why you had no cash for repairs.
I always put money aside for urgent repairs.
I always looked after the garden because most tenants did not and they were told the rent was adjusted to suit.
I never had anybody complain about that.

I should have added that with my 6-family we re-financed to a 15-year mortgage, so the margin became slim.  We've been very frugal, but the management fees (10% in the US), huge snowstorms one year, city-required changes to the water system, ever-increasing insurance costs, and other issues that came all at once depleted our reserves.  We recently had to put over $4,500 into an apartment during turnover that was completely trashed.  It rents for $950.00.

Our property managers are under strict instructions to rent only to tenants who have jobs.  But they also have lives, sometimes turbulent, that result in loss of those jobs, divorce, unexpected pregnancies, and now this pandemic.  

My point to the OP was that there is labor, skill, research/knowledge, legal issues, and luck involved in being successful in this business.  When I managed my two-family by myself, I had good tenants and managed several huge repairs (major asbestos removal, incredibly expensive) without breaking into my personal savings.  But with outside management, the quality and personal relationships with the tenants disappeared, the two-year saga of "withheld" rent occurred, and the property became a serious liability.  Like any business, risk is involved.  The ability to buy in cash decreases the risk, but when your tenant (accidentally) sets fire to the kitchen, owning a rental property is a bigger problem than you encounter in many businesses.  I have no mortgage on my personal home now, and it's certainly lower stress!

Its good to read you have had good experiences as well.
Having the place trashed is not nice, and it seems to be representative of particular people.
I have never had that trouble, but I saw  NEW home, damaged badly by people who just did not care.
I am not sure how you can avoid that type, but I had a really good Rental manager who chose well.

Its nice to see you did have contact with the good tenants, I am sure that helps.

Anne

Very sorry to hear you had such bad experiences. Absentee landlording is very problematic when done on a small scale. I've done it.

But there seems to be some consistency with your problems. Recurring issues, of any kind, point to the person responsible repeatedly not responding effectively. They either are not capable, they are negligent... Whatever, but they are simply not doing their job. From what you say, your manager is hurting you badly. Managers are never nice soft hearted people - their job precludes that. But they can and should be direct, consistent, workmanlike, conscientious and competent , for the price. Their area of competency includes finding and vetting tenants  and then keeping good tenants paid up and adequately satisfied w/in reason and legality.

It's true, "Good help is hard to find". It can take lots of work and time to find a decent workman, of any type. Ancient problem. Heard my grandmother moaning about lawn people when I was 7 or 8. It's costly, troublesome and unpleasant to dismiss one company or person and find another. Sometimes it's so very difficult, even unlikely, that it comes down to balancing the bad against the worse. However, _usually_ separating from what is clearly bad as soon as it demonstrates it's a problem (and you double check once or twice about what's really going on) - is the least expensive, safest course over the medium/long run. Meaning over a year+. Usually even over 6 months.

For many, many years I've acted on the view that "the way it begins is the way it's surely going to repeatedly play out". That is one reason I talk with 6 to 12 contractors when beginning work that I don't already have the right people for. The vetting starts with the first contact -- or lack of it. If there is a deficiency of any kind, at any point while both sides are still hoping this meeting will solve their problem and are on good behavior... Well, it's down hill from there. What I'm trying to say is, don't disregard bad signs, hoping they will go away, OR, that that is The Way It Has To Be. Wrong. It doesn't have to be that way. As annoying and stressful and yes, costly, as it is to face directly the failure of yet another hoped-for solution, not doing inevitably seems to lead to worse.

I'm going on about this because a six unit investment property is a good size, a good "form factor" for the small investor. And you have put money into the building and it is likely in halfway decent shape. Your carrying costs are probably not that far out of line if the refinance was moderately reasonable. You said you read much good info on the business, so you know the various scenarios and "systems" and methods, at least theoretically. If I understand correctly, these problems with that building predate the covid mess. 10% off the top is a BIG bite, that's true. But with decent management for that money you should still have shown some profit each month. Even if it just went into the slush fund. Your capitol improvements should be adding up to fewer and fewer problems and expenses.

I'm really not an expert and right now everybody is playing with funny-money and rumor anyway. But one of the things about "property" is that it's a slow moving train. Whether it's a wreck or whether it's getting up momentum, it does it over at least several years. >covid, "this too will pass". And it's no excuse for what sounds like slack and care-less management which itself promotes tenant problems. Perhaps if you stand back and evaluate the situation from the beginning, looking at what you _do_ have which is good and valuable, the then honestly mark out what it needs now and will take to make it viable and sensible, and then how you can do that, starting from where  you are right now...

Possibly it may not look so bad. As I beat Connor over the head, I'll repeat: It's most definitely Work. But, hopefully, you can do certain things which will allow you to see the train slowly gaining speed again.


Best luck.
Rufus

Re the "landlording" part, the legalities and all that, Nolo press at https://www.nolo.com/ (self help legal stuff since like the 1970s or decades and decades anyhow) has excellent resources, general and state specific. All you need for reasonable prices, print and/or digital. Or check your local library (if they're open in virus times) as they may have or can get Nolo press publications.

That said, one needs certain social and emotional skills and awarenesses that aren't available from books or videos to be a capable landlord. If you are gullible, easily manipulated or intimidated, a 'dorrmat', or on the flip side harsh and judgmental and insensitive, you will have assorted challenges managing a rental property. You will get taken advantage of, or you will get sued, and so on.

Do a bunch of thoughtful and protracted observation (& research on what it takes) before jumping into managing rental properties.

It's possible to provide quality housing for people and generate some surplus, with integrity. It's certainly possible to be a slumlord, OR, to be a local high quality small operator alternative to your local slumlord.

I think your ideas have a lot of merit. I am just going to share my personal experience though. I own a farm in Missouri but I am now working in Australia. I never intended to have to rent out my farm so it is a bit different. I now have my second set of renters in the home and thus far my experiences are this:

1. Finding people to rent the farm has been difficult, resulting in stretches of several months with the home/land being empty.
2. It is exceptionally time consuming.
3. It has cost me significantly more to have renters in my home than it would have been to leave the property vacant. At this point my only reason for keeping renter is to prevent someone from squatting on my property in my absence.
4. The damages to my home have been extensive but just low enough that it is not worth going after the previous tenants who caused the damages due to the legal fees involved.

This does not mean that it will not work for you. I just suggest you very carefully look over every angle, research going rental rates, etc. My home was never meant to be a rental, and I can honestly say that I am worried about the damages my food forest and established perennial vegetable beds will incur far more than what happens to the house/out buildings themselves. Good luck though and well done on being debt free and having accrued good savings!!!

I have been a landlord for 45 years.
Through it all, I found if I treat the tenant with respect, keep in touch with hem and be reasonable it usually works,
I always tell them I will look after the garden, then it looks good, and they dont get despondent because they let it go.
I always had coffee with them and asked if they wanted anything done. I would then think about it.
I always interviewed any agent I used and I never saw the agents fees as an expense.
They can provide good vetting skills, and that is what you pay for.

I maintained the homes as if I was living in them.

I love all the tips and stories here on being a landlord. I plan on starting to look at properties next year to rent unless something on my street comes up at a good price.

So my first piece of advise on the house is get a good home inspection or two, the second one could be from a contractor or handy man so you can know what it would cost to fix up. That can help when making an offer if the seller says that it will only take 1k to fix the roof and you have two guys saying 5-7k get it in writing that it will be fixed.

Since you live with your father and have not bought in the past you should qualify as a first time home buyer. Buy it as your house and get room mates (unless you hate the idea) later you could move out and rent your room also.
If you plan on doing that I would talk to a tax/real state  lawyer and see if it would benefit you more to hold it as your house with roommates or a rental property that you rent to yourself/others since a business has other expenses they can duct from income.

There is a very nice house in the town our school is at in pre-forclosure. We are looking at snapping it up. We know the people who bought it and they were fixing it up nicely before they hit financial straits. We love the land around it too.

I am not aware iof the laws about taxation and business in North America.
BUT, I had room mates for about 40 years, I always took cash with a receipt and made no claims
of expenses.
I used to rent to live on and paid my mortgage from my salary.

William Bronson wrote:Of course being a landlord is a job in and of itself.  A tenant that won't wreck your place,  isn't needy or demanding, and pays well and on time will probably want a very nice house in a nice part of town.

^^This^^

In our area of the country, laws greatly favor the tenant.  Many know this and take advantage of it, using the law to screw the landlord.  We'll still considering it for the future, though.  If you're going to do it, spend a hundred hours perusing the forums at http://www.biggerpockets.com/.  These are landlords from all over, renting to all different types of people, in different situations.  They'll help you get started -- without those $999 classes.

John C Daley wrote:Having the place trashed is not nice, and it seems to be representative of particular people.

John, in the States, you don't get to choose not to rent to those people (insert whatever characteristic you want there -- who have you had bad experiences with?).  In our area, a landlord must rent to the first qualified applicant, regardless of whether a better applicant applies afterward.  They actually have people who run stings on this, fining the landlords heavily if they don't rent to the first person.

Julie Harris wrote:
John, in the States, you don't get to choose not to rent to those people (insert whatever characteristic you want there -- who have you had bad experiences with?).  In our area, a landlord must rent to the first qualified applicant, regardless of whether a better applicant applies afterward.  

Where do you live?  I've never even heard of this.  And I worked for a pretty huge rental company for a couple of years.

Seattle area, it's new last year (or maybe earlier this year?)  And, of course, "Fair" Housing laws that protect many different classes.

Here's the write-up on it: https://crosscut.com/2019/11/wa-supreme-court-approves-seattle-law-requiring-landlords-accept-first-qualified-applicant (it was 2019)

Trace, I think Julie is referring to anti-discrimination laws which mean you cannot refuse to rent to someone because of the "type" of person they are.  The Fair Housing Act is the federal law, and then states and localities have their own ordinances also. I have some experience in this area of law, and I do not think any of these ordinances say that you must rent first-come-first-serve, just that you CAN'T turn someone down because of their race, gender, disability, national origin, or family status (e.g. cannot refuse to rent to families with kids), or because the person is or is not a veteran or some other criteria set by state law. It is true that HUD (Dept. of Housing and Urban Development) sends out "testers" to inquire about rentals, and if a company, say, to a person of one race that they have no one-bedroom apartments available, but then offers to show a one-bedroom to a person of a different race later in the day, they could be subject to a fair housing lawsuit.

MK, please see the linked article.  Indeed, you must rent to the first qualified applicant here.

I understand the purpose of laws like that, but it would make me own rentals elsewhere. When I owned a business, I did indeed discriminate. I discriminated against people that didn't pay their bills. I discriminated against people that wanted something for nothing. I discriminated against people that thought their time was worth something and mine wasn't. I discriminated against people if I I just didn't like their attitude.  If I had a rental, you bet I want the right to discriminate against people who don't pay their bills or people that had to be evicted from their last place, or wrecked the last three places they lived. Discriminating against people for skin color, gender, race isnt only morally repugnant, it's also poor business. But discriminating against people that are asshats and think they are entitled to a free ride? I reserve that right.

Well put, Trace.  Discriminating against people who show up in filthy cars packed to the hilt, smelling of weed, with bass-heavy music that you can hear from a block away is a good move.  It depends on where you live, but being a landlord here is no longer profitable.  My neighbors took an older person who was going to be homeless into their home at no charge.  When the person starting violating their simple rules (don't smoke weed on my property, don't steal my food, don't be a hoarder), it took them six months to get her out.  And this is in their own home, where they were living.  Ended up having to evict her (with the all the costs that entailed.)  She left the night before the sheriff was due, and caused a lot of "screw you" damage.

I do know one person who's making money here.  He's basically a slumlord.  Says that he only rents to Section 8 with the knowledge that he's going to have to repair everything when they move out, and priced accordingly.  He does the bare minimum.  I wouldn't want to live in one of his properties.  Sucks for everyone, but that's what the rental laws here have done.

Oof this reply was longer than I planned. But I'm glad you started this thread. I think buying rental properties is a great strategy for making money in permaculture and it is my personal strategy for generating passive income and eventually retiring early. As with any money making opportunity, it is not fool proof, otherwise every fool would be doing it. There are tons of resources online for people interested in real estate investment so I won't repeat too many here. But as you can tell from the other responses, vetting your tenants is critical.

Many permies are dead set on never taking out a loan, and I think that is reasonable. But if you study early retirement and passive income strategies, most literature will recommend the opposite. Spending other people's money is good as long as you are using it make more money for yourself. In my experience its not very difficult to break even with a rental, even early on. After all, rent is often set based in what a mortgage payment would be if you bought that house. But you have to consider the interest on a 30 year loan. If you pay the bare minimum, all of your appreciated value and more goes to the bank. But if you can swing 15 years, while paying extra, you'll be in good shape in most cities.

I'm no expert, but here are some of my personal strategies. I follow the BRRRR method (buy, renovate, rent, refinance, repeat), you'll find plenty of results of you google that.

Buy: I live near Seattle like some other responders. I will not buy within city limits, or even in King County. The rental laws are too strict and the taxes too high. The only way to make money in Seattle is to be a large rental company or a slumlord and I am neither. So look into that before you buy. I look for multi family properties with a decent yard, and as few trees as possible. I want something where I can quickly and cheaply improve both the structure (so I can raise the rent) and the land (I can't improve a mature forest). Your property should serve multiple purposes: income, maybe you live there too, a tree nursery, maybe its a good site for your farm stand, whatever makes sense for you and your area. You want something nearby that you can manage yourself and an excuse to go there often so you can keep a close eye on it and build a relationship with your renters. Also, a good inspector is worth the money, even if you are knowledgeable about what is likely wrong with your house, a detailed inspection report is a good bargaining tool when negotiating the price.

Renovate: A better term would be renter-proof. Assume that your house will be damaged, either maliciously or through regular wear and tear. Improve it accordingly within reason and with durable materials. Is that new hardwood really worth it? Probably not. Fresh paint? Probably yes. Adding square feet or improving the layout is great way to cheaply gain equity (and raise the rent). I don't aim for the highest rent possible, because that limits my renter pool. I look at the median for the area and make my house only slightly better than those. Then, being a permie, you'll probably add some raised bed for your tenants to grow veggies, maybe some expensive cultivar trees where you'll get seed stock and scion wood for your farm. Whatever you are into. That's the fun part.

Now that you've improved the house you can demand higher rent, use that rent as justification to take out a little equity, and use that cash to buy your next property. At least that's the idea.

Keep in mind, buyers don't like trees. By planting chestnuts, walnuts, and hedges on my property, I am feeding myself, my tenants, and the wildlife but I've actually lowered the value of the house. In my opinion, this won't hurt my rent price terribly and I don't ever plan to sell this property so I don't care. But if you're planning to sell this house in 10 years for the gain in equity, this becomes a lot less compatible with permaculture. You'll either have to cut all those things out before you sell (maybe for timber?) or sell at a lower price and shed a few tears when the new owner does it for you.

To address some of your other points, as far as the world ending... yeah... I tend to agree. That idea kept me from buying for years and I really regret it. I could have easily gained a few hundred thousand in equity if I just bought 3 years earlier when I first had the cash. But oh well, you live, you learn. There is a saying among stock traders, "Markets can stay irrational longer than you can stay solvent." So for now, I am living on the idea that even if things go bad in my lifetime, I still have time to make some money before that happens. And I've added one more permaculture property to the world in the meantime. If you've set up an LLC that pays you, you can still make money from your rental properties, then come the end times lose all those mortgaged properties to the bank and still keep your bug out farm assuming you've paid it off

In the short term, with respect to an economic crisis, we'll see. So far housing has only gone up around me. People in quarantine really started to question the value of their shoebox apartment in the city once they started working from home. On top of that, Washington has imposed a moratorium on evictions which has propped up prices as well. Also, democratic presidencies tend to bring fiscal stimulus. I am sitting on my cash for now to see if prices come down before I buy the next property, but I'm skeptical they will come down. Like I said, we'll see.

As far as the housing shortage thing, yeah, I can see why some people think it is immoral to own multiple properties. I don't personally agree. Investing is fickle that way. My 401k probably includes oil companies which I find immoral. But I am not interested in being my own fund manager, so that's the way it is for now. Isn't there some quote about principles being a luxury or something like that? Which leads to my final point.

To me, a permaculture based rental company makes a ton of sense. A trust could buy up property and ensure they are managed ethically. It could provide food right in the city, reducing carbon emissions and food miles. Permies without gobs of cash or real estate knowledge could invest in something that they know fits their ethics. Maybe they could even rent from the company and part of their rent goes towards equity in the company. It gives renters a chance to practice and learn about permaculture. Risk is spread out across multiple investors and properties so we're not all out on our own and we don't lose our butts if things go belly up. At that scale you can get better prices on labor, materials, plants. There is also more opportunity to buy up adjacent properties and design larger systems.

Its probably time I stopped day dreaming about this idea and do it myself...

I have rented out property twice. Both times it has been a disaster.  I do know others with a far better history of success.  I have no idea what their secret is.