I don't understand this viewpoint at all. I own multiple properties and the only "work" I do is stuff that I like (minor repairs and renovations). I hire someone else to do all the stuff I don't like or don't have the skillset to do myself. I don't chase tenants down for missing checks because I only buy B class properties and I require all tenants to pass a background check, credit check, and to pay their rent via recurring direct deposit.

If having to fix a clogged toilet at midnight once a year is the sacrifice I have to make to retire early, so be it.

I think it's easy to understand that even though you enjoy responding to calls about fixing a leak at 10pm on a Tuesday that not everyone would. And for many it would be a significant drawback to owning property.

How often does that realistically happen though if you've just got 1-2 properties?

I've been thinking a lot about buy an investment property, but the mixed workload reviews makes me hesitant

I have a total of four rental units. In the past year, I've been called out to fix something three times. Each issue took about 15 minutes to resolve. I could have hired a handyman for these jobs but it was cheaper and quicker to do it myself.

Most people are afraid of rental properties because it's out of their comfort zone.

Working a W2 job, socking money away in a 401k, and retiring at 65 = normal, safe, responsible, respectable.

Working a W2 job, slowing accumulating rental properties, fixing a toilet once in a while, and retiring at 45 or younger = deviant, risky, naughty.

Here is the way I do it and it takes all the workload out of it. I buy Home Warranty, not just for the purpose of reducing the cost, but the convenience, once something break, I don't have to find a proper contractor and do all the work. I just go their website, fill a form and put my tenant number in there. nothing else for me to do.

I haven't been to my property in 2 years(probably not the greatest idea though)

Over the course of 20 years, you will have modest years that seem pretty reasonable, and you will have ridiculous years that tip the whole balance negative.

My partner had been renting her house out for about 5 years with the usual annoyances, when the newest tenants left a cabinet on a cord that after a few months started an electrical fire that torched the place. No one was injured and it was (mostly) covered by insurance, but it was still 6+ months of dealing with all the claims and repairs and getting it back into shape. And to top it off, the tenants took her to small claims court for the security deposit! (They lost.)

Property management companies can take care of this headache for a small % of rental income.

Use a Property Manager

Tried that. Unless you have a lot of properties or can get one who is also an REA, they aren’t nearly as motivated as your more “proactive” tenants will demand.

And forget about evicting an unwieldy tenant on any reasonable schedule in California. I have friends who’ve been foreclosed upon while trying to get unpaid tenants evicted.

If you’re willing to do this as a second job, go for it! Personally I would (with the benefit of hindsight) invest in a multi-unit income property or a vacation home with rental potential if I were going to buy investment properties, but that’s just me.

This -1000x. Get a property manager. Mine takes 8% and does everything. I enjoy a monthly direct deposit. Every once in a while something breaks (just got a new oven), I send them a check, they do everything.

While I agree with this direction, it does make me begin to question why I don't just abstract the entire thing away with a REIT or other similar investment vehicle.

8% off the top depending on your particular scenario could get you pretty close to the same net returns at the end of the day. If you went with a few REITs, management would take maybe a few hours a month even for a massive portfolio. This also has the benefit of being much more diversified than a single investor directly owning various properties could possibly manage.

Granted, using REITs is a tradeoff in granularity of asset allocation and potential upside, so there is always that zone of opportunity to exploit. It just takes a delicate evaluation of the value of your time vs the opportunity itself relative to other competing strategies.

> why I don't just abstract the entire thing away with a REIT or other similar investment vehicle

Because REITs don't allow you to invest in one house via improvements at your discretion.

At least in the Bay Area, buying a somewhat run-down / older property, renting it out for a number of years, then renovating/upgrading it right before you sell has been a very profitable strategy for homeowners who have some project management skill.

In the Bay Area, buying whatever property, doing nothing with it, and selling after a few years has been a very profitable strategy. Will it continue to be so from now on?

I thought it would tank in 2001, then again in 2008, and yet again in the current bubble. It seems like the environs get hit, but SF and SV itself seem to be immune.

Los Angeles (where we were) is a bit more volatile (ie it actually goes down now and then). If I had bought property in the Bay Area in, say, 1999-2000, I’m quite certain I’d be more willing to put up with tenant bullshit in exchange for nearly endless appreciation.

YMMV!

It depends on the property manager. The one I had let the tenants stay 3 weeks beyond their lease end date rent free, pre-dated the move-out inspection and didn't even bother itemizing the damage the caused to the unit (which was well beyond their security deposit). They didn't get a forwarding address from them and there's no way to collect additional damages.

Sounds like a terrible property manager. Thankfully it is usually very easy to fire them and get a new one. At least where I am, there are a lot of them and competition is strong, so it's not hard to find a good one.

Yes! This seems to be the turd in the punch bowl. If you can find a good property manager and a good tenant, it’s not bad. Bad either can get ugly quickly (in CA).

Have you sold any of the managed properties? That seems to be where problems arise. A fellow landlord friend ended up having to dump his property manager and bring in a REA who whipped the place into shape for sale.

8% is not bad if the goal is income properties. However I would invest in a multi unit property if I were going to be a landlord again. Less concern about one bad tenant potentially leading to foreclosure if you get crunched from all sides. (Which seems to be how it usually happens)

It really depends on where you are. In many european countries it's traditional for the tenant to fix the problems. Washing machine broke? Get a replacement yourself. Pipes clogged? Call a plumber.

I recommend thinking about this probabilistically:

X% of tenants are reasonable and handle the repairs they are contractually required to handle smoothly.

(1-X)% of tenants are a massive headache, and call the landlord for every lightbulb that needs changing, threaten to sue you all the time, smash your property to pieces etc etc.

Compute the expected value, and compare with other forms of investment. In my experience, renting out a single property is not worth the expected reward, vis-a-vis other forms of investment. This changes if you can reap economies of scale from renting out multiple properties. (Cut-off point depends on ambient legal system, tax, your own background (e.g. if you are a lawyer, you can handle legal disputes yourself) etc.)

Hello fellow statistician (whether by training or habit). For everyone else, note that this approach is not limited to landlording.

Excellent exposition!

>(1-X)% of tenants

You mean (100-X)% ?

I would say that it depends. Regular maintenance of course is on the tenant, if the washing machine is not mine and it brakes down I would not repair it without first discussing it with the landlord. If it broke down because of my misuse I'm fine paying, but it is just regular wear why should I ? I'm paying a premium for a furnished house after all.

Of course the best is to make it clear at the moment you rent, not when the issue arise.

Same thing in South America.

Edit: I find it insane that most people in the US don’t see the advantages of renting. When you rent here, your housing cost is fixed for at least a year. Anything breaks, you call the landlord or leasing office and it gets fixed at zero cost to you.

I really miss renting. Now that I own a condo, I keep having to deal with unexpected expenses - fridge breaks, something comes off the drywall, microwave breaks, plumbing issues, etc. Plus, I don’t have the option anymore of moving closer to my kid’s school when she transitions to middle and high school (and those are quite far compared to her elementary school). I mean, I do, but selling a place and buying a new one is a monumental hassle compared to switching apartment leases.

I would go back to renting if I could.

I agree with you on this more than the original response. From my time renting — houses and apartments — the former has always been more of an “as-is” type rental. In a house rental, the landlords tend to usually only be responsible for the big ticket items (hot water tank, septic tank, foundation/exterior issues, etc.) while you were left to deal with moderate homeowner fixes. Apartments on the other hand, especially a complex, we’re held responsible for every repair. Pilot light out? Maintenance. Broken window? call the office. Your water pressure suddenly got cut off at 3:30am? Hello, 24/7 maintenance line.

Why would you rent then?

Most people can't afford to buy. Buying a house/apartment generally requires a 20% down payment, inspections, lawyer fees, realtor fees, and a shit ton of paperwork, and that's assuming a bank will even loan you money at a reasonable rate.

Plus, home ownership also reduces your mobility. With rent I have a lease I can typically sublet or end. If not, I'm at most liable for the remainder of the lease. If you ever want or need to move, you have the liability of selling your home, managing a mortgage plus rent, etc. on-top of finding a new position, moving, and everything surrounding the act.

The obvious downside is you'll never get any ROI beyond having a place to live like you may with property ownership. Homes are great when you have financial stability and freedom but can become a big shackle if you don't.

Not in Uk

Which European countries?

Germany, for sure - tenants usually own their own washing machines and most of the time, their own kitchens, including all appliances, cabinets and the proverbial kitchen sink. Tenants are essentially paying for the right to occupy the dwelling, and that’s about it.

Therefore rental price to purchase price ratios have historically been lower, as well as home ownership rates. Rents in desirable cities are going up faster than they had been, though, and Berlin has quickly gone from being one of the cheapest cities in the country to one of the most expensive.

In Eastern Europe it's often the case. Worth mentioning however that plumbing services are much cheaper then in States, and there are usually no legal/insurance nuances which reapairing may bring in the US. So it's simply easier to call a plumber and have trouble solved then include a landlord into equation. Broken washing machine, or expensive furniture in most cases are on landlord, though.

I'll counter with a family anecdote. My sister and her husband own a rental home in the DC suburbs. It's within easy commute of the Pentagon and another army base. They've been able to rent exclusively to officers or senior enlisted. Price-wise, the army housing allowance is at the top of the market of the size/style of home (mid-sized 3-bed townhome). The tenants are mostly price insensitive - as long as the house is priced within their allowance and meets their needs. Their theory is a career military tenant more likely to be a good tenant than some random person. So far it's held true, but small sample size (10 years of rentals, 4 or 5 tenants).

Anyway, point being, this is like any other investment, you have to do the work up front to ensure the risk and payout are balanced. In their case, it was a no-brainer to keep the house when they moved into something larger. Almost zero chance of the home being unoccupied, better than average chance at a good tenant, etc. But, they're also financial well-off and could afford to keep a relatively expensive house in a nice area - obviously not an option for many in the middle-class.